TIDMNESF
RNS Number : 5577J
NextEnergy Solar Fund Limited
17 August 2023
LEI: 213800ZPHCBDDSQH5447
17 August 2023
NextEnergy Solar Fund Limited
("NESF" or the "Company")
Unaudited Quarterly Net Asset Value and Operational Update
NextEnergy Solar Fund, the specialist solar+ fund, announces its
unaudited Net Asset Value as at 30 June 2023, and its latest
operational update.
Updates to NAV assumptions
The Company has made the following key updates to its valuation
assumptions for the 30 June 2023 NAV calculation:
-- An increase to the unlevered discount rate of 0.75% in
response to increases to short-term base interest rates, long-term
risk-free rates and macro-economic outlook.
-- Updated inflation assumptions to reflect the latest available
third-party inflation data from HM Treasury Forecasts and long-term
implied rates from the Bank of England for its UK assets. For
international assets, IMF forecasts are used.
-- Updated power price forecasts capturing the latest available
third-party advisor long-term power curves.
The updated NAV assumptions are disclosed in the relevant
sections below.
Key Highlights:
Financial:
-- Net Asset Value ("NAV") per ordinary share of 109.3p (31 March 2023: 114.3p).
-- Ordinary shareholders' NAV of GBP645.1m (31 March 2023: GBP674.4m).
-- Total gearing (including preference shares) of 46% (31 March 2023: 45%).
-- Weighted average cost of capital of 6.2% (31 March 2023: 5.7%).
-- Weighted average discount rate of 8.0% (31 March 2023: 7.3%).
Dividend:
-- First interim dividend of 2.08p per ordinary share for the
quarter ended 30 June 2023 (30 June 2022: 1.88p).
-- Target dividend of 8.35p per ordinary share for the year
ended 31 March 2024 (a year-on-year increase of 11%).
-- Forecasted target dividend cover of c.1.3x - 1.5x for the
financial year ending 31 March 2024.
Portfolio:
-- Portfolio generation outperformance of +3.9% against budget
for three months ended 30 June 2023 (30 June 2022: 4.5%).
-- 99 operating solar assets (31 March 2023: 99).
-- Total installed capacity of 890M W(1) (31 March 2023: 889MW(1) ).
-- Remaining weighted average useful life of 26.1 years (31 March 2023: 26.3 years).
-- Post period, Whitecross, a 36MW solar farm located in Lincolnshire was energised.
Footnote:
(1) Includes 6.21% share in a private solar fund (NextPower III
ESG). As at 30 June 2023, share of NextPower III ESG increases
total installed capacity by 25MW (31 March 2023: 24MW).
Strategic Highlights:
Capital Recycling Programme:
-- The Company continues to progress a competitive sales process
for the selected portfolio of subsidy-free assets. Further updates
will be made to the market in due course.
-- Post period end, Whitecross, a 36MW solar farm in
Lincolnshire, UK, has been energised. The asset is one of the five
subsidy free assets for sale in the Capital Recycling
Programme.
Energy Storage:
-- While the Company is currently focusing on the execution of
the capital recycling programme, it remains committed to formally
seeking shareholder approval for an increase in the Energy Storage
investment limit from 10% to 25% of its Gross Asset Value and
intends to do so in due course.
-- The energisation of the Company's first standalone 50MW
battery storage asset ("Camilla") in Fife, Scotland, is delayed.
This is due to the insolvency of the lead contractor, where market
turbulence has impacted contractors across the renewable energy
construction industry. NextEnergy Capital and EelPower have
appointed an alternative contractor, construction has recommenced,
and Camilla is expected to enter operations in Q1 2024.
-- NextEnergy Capital, the Company's investment adviser has
hired Dario Hernandez as Head of Energy Storage. Dario brings over
14 years of energy storage expertise and will play a crucial role
in delivering NESF's energy storage strategy and pipeline.
ESG and Sustainability:
-- Since the period end, the Company has released its latest
standalone ESG and Sustainability report, available here:
https://www.nextenergysolarfund.com/wp-content/uploads/2023/07/NESF_Sustainability-and-ESG-Report.pdf
Helen Mahy, Chair of NextEnergy Solar Fund Limited,
commented:
"NESF has made steady steps in the first quarter across its
various strategic initiatives and added to its operating solar
portfolio post-period by energising Whitecross, a 36MW solar asset
in Lincolnshire. Progressing the capital recycling programme
remains a key priority for the Company; proceeds will in the first
instance be used to reduce short-term debt in the current
macroeconomic environment. T he Company continues to offer
shareholders a very attractive return with a strong dividend yield,
through the generation of vital renewable electricity. "
Michael Bonte-Friedheim, CEO of NextEnergy Group said:
"NESF's operating portfolio continues to deliver reliable
returns with generation outperformance against budget. NESF has
increased its unlevered UK discount rate by 75bps this quarter
driven mainly by the Bank of England's base rate increases, changes
to long-term UK Gilt yields and the wider macro-economic outlook.
The Company continues to use a consistent approach when calculating
its Net Asset Value, and where possible, incorporates external,
independent third-party data, ensuring a fair and transparent
approach."
NAV Bridge
NAV p/share NAV
At 31 March 2023 114.3p GBP674.4m
------------ ----------
New assets at cost 0.8p GBP4.7m
------------ ----------
RCF drawdown, used to fund investments (0.3p) (GBP2.0m)
------------ ----------
Cash on hand, used to fund investments (0.5p) (GBP2.7m)
------------ ----------
Time value 2.5p GBP15.2m
------------ ----------
Project actuals 0.1p GBP0.4m
------------ ----------
Power price forecasts, net of EGL (0.3p) (GBP2.0m)
------------ ----------
Changes in short-term inflation 0.7p 3.9m
------------ ----------
Discount rate changes (4.7p) (GBP27.4m)
------------ ----------
Cash dividends paid (2.2p) (GBP13.2m)
------------ ----------
Other movements in residual value(1) (1.1p) (GBP6.2m)
------------ ----------
At 30 June 2023 109.3p GBP645.1m
------------ ----------
Footnotes:
(1) Other movements in residual value includes changes in FX
rates, Fund Opex and other non-material movements.
Inflation Linkage and Updates
The Company continues to take a consistent approach to its
inflation assumptions, using external third-party, independent
inflation data from HM Treasury Forecasts and long-term implied
rates from the Bank of England for its UK assets. For international
assets, IMF forecasts are used.
Inflation Rate (UK RPI) Assumptions
Calendar Year 30 June 2023 31 March 2023
2023/24 6.30% 4.90%
------------ -------------
2024/25 3.50% 3.40%
------------ -------------
2025/26 2.60% 3.30%
------------ -------------
2026/27 3.00% 3.20%
------------ -------------
2027/28 3.40% 3.70%
------------ -------------
2028/29 - 2029/30 unchanged 3.00%
------------ -------------
2030/31 onwards unchanged 2.25%
------------ -------------
Discount Rate Assumptions
The Company has increased its unlevered discount rate assumption
by 0.75% during the quarter to reflect the Bank of England's
implemented increases to its base rate and changes to long-term UK
Gilt yields. The Company's weighted average discount rate at the 30
June 2023 is 8.0%. The below table reflects the discount rate
assumptions breakdown used for the 30 June 2023 NAV
calculation:
30 June 2023 31 March 2023
UK unlevered 7.50% 6.75%
------------ -------------
UK levered 8.20 - 8.50% 7.45 -7.75%
------------ -------------
Italy unlevered (1) 9.00% 8.25%
------------ -------------
Subsidy-free (uncontracted)
(2) 8.50% 7.75%
------------ -------------
Life extensions (3) 8.50% 7.75%
------------ -------------
Footnotes:
(1) Unlevered discount rate for Italian operating assets
implying 1.50% country risk premium.
(2) Unlevered discount rate for subsidy-free uncontracted
operating assets implying 1.0% risk premium.
(3) 1.0% risk premium for cash flows after 30 years where leases
have been extended.
Power Curve Assumptions
30 June 2023:
For the UK portfolio, the Company uses multiple sources for UK
power price forecasts. Where power has been sold at a fixed price
under a Power Purchase Agreement (a hedge), these known prices are
used. For periods where no PPA hedge is in place, short-term market
forward prices are used. After two years, the Company integrates a
rolling blended average of three leading independent energy market
consultants' long-term central case projections. This approach
allows mitigation of any delay in response from the three
independent market forecasters ("Consultants") used by the Company
in publishing quarterly or ad hoc updates following any significant
market development.
For the Italian portfolio, Power Purchase Agreements (hedges)
are used in the forecast where these have been secured. In the
absence of hedges, a leading independent energy market consultant's
long-term projections are used to derive the power curve adopted in
the valuation.
The power price forecasts used also include a 'solar capture'
discount which reflects the difference between the prices available
in the market in the daylight hours of operation of a solar asset
versus the baseload prices included in the power price estimates.
This solar capture discount is provided by the Consultants on the
basis of a typical load profile of a solar asset and is reviewed as
frequently as the baseload power price forecasts. The application
of such a discount is prudent as it results in a lower long-term
price being assumed for the energy generated by NESF's
portfolio.
Power Sales
To manage the sale of power into the electricity market, the
Company utilises its investment adviser's in-house power sales
desk. This team actively manages the Company's power price
contracting strategy and activities. In the current environment,
the power sales desk has enabled the Company to mitigate market
price volatility whilst incrementally growing weighted average
prices through forward hedging above forecast prices. Aggregating
the amount of revenue derived from subsidies and the power hedges,
the Company has a high degree of comfort around forward revenue
projections.
In addition to NESF's budgeted revenues from ROCs and FITs
(c.50%), the Company's hedging positions (covering its 716MW UK
portfolio) as at 30 June 2023 were:
Financial Year UK budgeted generation Average fix price
hedged
2023/24 89% GBP79MWh
----------------------- ------------------
2024/25 44% GBP91MWh
----------------------- ------------------
2025/26 13% GBP147MWh
----------------------- ------------------
Available Capital
Out of the total GBP205m immediate Revolving Credit Facilities
available to the Company, c.GBP36.7m remains undrawn and available
for deployment as at 30 June 2023. The Company also has c.GBP4.1m
immediate cash balance available at Fund level as at 30 June 2023
(this is separate from the cash currently held at Holdco/SPV
level). In addition, the Company actively assesses capital
deployment options as part of ongoing optimisation of the
composition of the portfolio.
Future Pipeline
The Company has exclusivity over, or owns the project rights
for, the majority of its pipeline of c.GBP500m domestic and
international solar and energy storage assets. This includes
ownership of the development rights for a high-quality 250MW
lithium-ion battery storage project in the East of England, which
when approved and constructed will be one of the UK's largest
operational standalone battery storage assets.
For further information:
NextEnergy Capital 020 3746 0700
Michael Bonte-Friedheim ir@nextenergysolarfund.com
Ross Grier
Stephen Rosser
Peter Hamid (Investor Relations)
RBC Capital Markets 020 7653 4000
Matthew Coakes
Elizabeth Evans
Kathryn Deegan
Cenkos Securities 020 7397 8900
James King
William Talkington
H/Advisors Maitland 020 7379 5151
Neil Bennett
Finlay Donaldson
Ocorian Administration (Guernsey) Limited 014 8174 2642
Kevin Smith
Notes to Editors(1) :
About NextEnergy Solar Fund
NESF is a specialist solar+ fund listed on the premium segment
of the London Stock Exchange and is a constituent of the FTSE 250.
NESF's investment objective is to provide ordinary shareholders
with attractive risk-adjusted returns, principally in the form of
regular dividends, by investing in a diversified portfolio of
utility-scale solar energy and energy storage infrastructure
assets. The majority of NESF's long-term cash flows are
inflation-linked via UK government subsidies.
The NESF portfolio has a combined installed power capacity of
865MW (excluding NextPower III MW on an equivalent look-through
basis). NESF may invest up to 30% of its gross asset value in
non-UK OECD countries, 15% in solar-focused private infrastructure
funds, and 10% in energy storage assets. As at 30 June 2023, the
Company had an unaudited gross asset value of GBP1,190m. For
further information on NESF please visit www.
nextenergysolarfund.com
Article 9 Fund
NESF is classified under Article 9 of the EU Sustainable Finance
Disclosure Regulation and EU Taxonomy Regulation. NESF's
sustainability-related disclosures in the financial services sector
in accordance with Regulation (EU) 2019/2088 can be accessed on the
ESG section of both the NESF & NEC website.
About NextEnergy Group
NESF is managed by NextEnergy Capital, part of the NextEnergy
Group. NextEnergy Group was founded in 2007 to become a leading
market participant in the international solar sector. Since its
inception, it has been active in the development, construction, and
ownership of solar assets across multiple jurisdictions. NextEnergy
Group operates via its three business units: NextEnergy Capital
(Investment Management), WiseEnergy (Operating Asset Management),
and Starlight (Asset Development).
-- NextEnergy Capital: Ha s over 16 years specialist solar
expertise having invested in over 350 individual solar plants
across the world. NextEnergy Capital currently manages four
institutional funds with a total capacity in excess of 2.4GW+ and
has asset under management of $3.7bn. www.nextenergycapital.com
-- WiseEnergy(R): Provides solar asset management, monitoring
and technical due diligence services to over 1,350 utility-scale
solar power plants with an installed capacity in excess of 1.8GW.
WiseEnergy clients comprise leading banks and equity financiers in
the energy and infrastructure sector. www.wise-energy.com
-- Starlight: H as d eveloped over 100 utility-scale projects
internationally and continues to progress a large pipeline of
c.10GW of both green and brownfield project developments across
global geographies.
Notes:
(1:) All financial data is unaudited at 30 June 2023, being the
latest date in respect of which NESF has published financial
information
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