FSFL delivered a solid Q2 NAV (114.9p +0.2p) and we are constructive for the remainder of 2024 and beyond. In FSFL’s interims (due mid-September) we expect an update regarding fund’s asset disposal programme, capital allocation strategy and investment pipeline. In our opinion, progress on asset disposals (and the associated reduction in the fund’s RCF) will be a key element in driving the fund’s re-rating. We remind investors that FSFL is a deeply discounted, interest-rate sensitive, investment. Our expectation is that as the market builds confidence that the power price forecast volatility has subsided, investors will re-focus on the differential between the fund’s discount rate (c8.0%) and gilt yields (largely sub 4%). Given this environment and the likely trajectory of interest rates, we view the fund’s c26% discount to NAV and c9.5% yield as highly attractive.
