With a financial year end of 30 June, Bluefield Solar could have been really caught out by the COVID pandemic, having a full quarter of the reporting period held at the height of the crisis. However, Bluefield Partners managing partner James Armstrong explains how it is the way the trust is made up which makes it incredibly resilient in times of stress.
“We have our power contracts sit at the short end, 36 months, so they're trying to capture the forward curve. That means that we’re trying to get as much value as we can from those power contracts. It's a really defensive strategy. It's also incredibly helpful in times of very high volatility so what happened was we didn't have contracts coming in on and off periodically. And so we went into the COVID crisis, with over 90 percent of our contractual contracts fixed.”
Bluefield is one of the main players in the solar space although the trust has recently increased its remit to include some on-shore wind assets as well which will add some diversity to the offering. Unfortunately the secret is out, with some of the titans of asset management holding significant portions of the closed-ended fund, including the likes of BNY Mellon, Newton and the world’s largest manager BlackRock all well represented on the shareholder register.
A quick glance at the numbers indicates how well the fund stood up in what has been an arch typical ‘Black Swan’ market. To increase underlying earnings in this scenario would seem unlikely but the fund did just that, adding over 1p in earnings per share on a year-on-year basis. While the dividend pay out was slightly down on the prior year, it was still a healthy 7.9p per share and in an environment where ‘sure fire’ divi payers had stopped distributions would have heartened investors.
Mr Armstrong explained that when the trust floated in 2013 it was set-up to be an income vehicle and it has proved just that. He joked that they didn’t stress test for a pandemic but given the results, you might not be so sure. It has very high levels of regulated revenue, according to Mr Armstrong, the highest in the sector.
The fund has not been overly active on the acquisition trail in the last few years but this is something management thinks its investors are fine with. With a steady stream of uncorrelated revenue coming in through a set-up that is geared towards not being overly impacted by volatility which is paying you a decent dividend, what else would you want.
