TIDMNESF
RNS Number : 2078U
NextEnergy Solar Fund Limited
22 November 2023
LEI: 213800ZPHCBDDSQH5447
22 November 2023
NextEnergy Solar Fund Limited
("NESF" or the "Company")
Interim Results & Capital Recycling Update
NextEnergy Solar Fund, a leading specialist investor in solar
energy and energy storage, announces it has today published its
interim results for the period ended 30 September 2023.
Key Highlights
Financial:
-- NAV per ordinary share of 108.3p (31 March 2023: 114.3p).
-- Ordinary shareholders' NAV of GBP640m (31 March 2023: GBP674.4m).
-- Earnings per ordinary share of (2.0p)(1) (31 March 2023: 8.2p).
-- Total gearing (including preference shares) of 46.4% (31 March 2023: 44.6%).
-- Financial debt gearing (excluding preference shares) of 29.8% (31 March 2023: 28.4%).
-- Weighted average cost of capital of 6.3% (31 March 2023: 5.7%).
-- Weighted average discount rate of 8.0% (31 March 2023: 7.3%).
Dividend:
-- Dividend of 4.18p per ordinary share for the period ended 30
September 2023 (30 September 2022: 3.76p).
-- 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 remains c.1.3x for the financial year ending 31 March 2024.
-- Total dividends declared since IPO of GBP318m or 63.7p per share.
Portfolio:
-- Energised Whitecross, a 36MW solar farm located in Lincolnshire.
-- 100 operating solar assets (31 March 2023: 99).
-- Total installed capacity of 933M W(2) (31 March 2023: 889MW(1) ).
-- Remaining weighted asset life of 26.4 years (31 March 2023: 26.3 years).
Operational, ESG and Sustainability:
-- Portfolio generation in line with budget for the period ended
30 September 2023 although has been impacted by Distribution
Network Operators ("DNOs")(3) outages which remain elevated due to
backlogs (30 September 2022: 6.1%). Without DNO outages, portfolio
generation for the period would have been c.3.4% above budget.
-- Generated 599GWh of clean electricity during the period,
contributing to the avoidance of 252,500 tonnes of CO (2) e
emission (30 September 2022: 639GWh, 266,500 tonnes of CO (2)
e).
-- Powered an equivalent 334,200 UK homes for one year (30 September 2022: 354,300).
-- The Company released its 2023 standalone ESG and
Sustainability report in the period, available here .
Footnotes:
1. Driven by the net change in fair value of investments for the period.
2. Includes share in private equity vehicle (NextPower III).
NESF's 6.21% share of NextPower III on a look through equivalent
basis has an operational capacity of 33MW (31 March 2023:
24MW).
3. Distribution Network Operators complete rolling programmes of
preventative maintenance and upgrade works. This ensures stability
of the energy supplied to consumers and expansion of the networks,
which contributes to the grids ability to connect more distributed
generation and improve the UKs energy security. In order to keep
their staff safe, they often need to de-energise power lines to
complete these works.
Strategic Highlights
Capital Recycling Programme:
-- Post period end, the Company is pleased to announce the
completion of the first phase of its Capital Recycling Programme by
successfully completing the sale of Hatherden, a 60MW ready to
build solar project, for GBP15.2m, of which GBP8.7m is
consideration for the acquisition and GBP6.5m is the reimbursement
of invested capital (the "Transaction").
-- The Transaction:
o The Transaction is NAV accretive to shareholders and will
generate an estimated uplift of 1.27p, which will be reflected in
the Company's NAV per share as at 31 December 2023. The Transaction
represents a 100% premium to its holding value (2.0x Multiple on
Invested Capital) and an attractive 57% IRR.
o Hatherden, located in Hampshire, UK, was developed as part of
the Company's self-developed project pipeline and consists of a
60MW ready to build solar project and the development rights for a
7MW co-located energy storage project.
o The accretive value of the Transaction demonstrates how the
Company maximised value throughout the development of Hatherden,
including various initiatives ranging from securing an import
connection and associated rights for installation of the 7MW
co-located energy storage project, increasing the installed
capacity of the project from 50MW to 60MW through technical
optimisation, and securing a Contract for Difference ("CfD")
contract under Auction Round 4 for 100% of its generation
capacity.
-- Use of proceeds:
o The proceeds from the Transaction will be immediately used to
reduce the Company's drawn short-term debt via its Revolving Credit
Facilities ("RCF").
-- The purchaser:
o The purchaser, NextPower UK ESG Fund, is a 10-year
closed-ended private fund managed by NextEnergy Capital. It is a
private unlevered Fund investing in new-build solar projects in the
UK. NextPower UK HoldCo Limited is under the common control of the
wider NextEnergy Group along with NextEnergy Capital Limited
(Investment Adviser to NESF) and NextEnergy Capital IM Limited
(Investment Manager to NESF) and as such is a related party of the
Company.
o Due to the sale of Hatherden being classified as a smaller
related party transaction under the FCA's Listing Rules, the Board
appointed Deloitte to undertake an independent valuation. The Board
also obtained a written confirmation from the Company's Sponsor
("Cavendish"), that the Transaction was fair and reasonable as afar
as the shareholders are concerned as required under Listing Rule
11.1.10R.
o All related-party disposals are at the Board's discretion and,
in the case of any related party transaction, the FCA's Listing
Rules must be adhered to. There are no exclusivity arrangements in
place between NESF and any member of the NextEnergy Group in
relation to the Transaction or future disposals. The Transaction
constitutes a smaller related party transaction as set out in
Listing Rule 11.1.10R.
-- The Company continues to progress a competitive sales process
for the remaining phases of the Capital Recycling Programme.
Further updates will be made to the market in due course.
Energy Storage:
-- The Company's first standalone 50MW energy storage asset in
Scotland, known as Camilla, is expected to be energised in 2024. As
such, the Company will not consider proposing an amendment to its
investment policy in energy storage from 10% of the Company's Gross
Asset Value until Camilla is energised and generating revenues.
-- The Company regards UK energy storage as a highly
complementary asset class to the existing solar portfolio that will
provide multiple diversification benefits for shareholders over the
medium
term.
-- The Company will continue to maintain its disciplined
approach to capital allocation to ensure investment activity is
accretive and in line with the Company's strategy.
Helen Mahy, Chair of NextEnergy Solar Fund Limited,
commented:
"In my first report since taking over as Chair in August, I am
pleased to announce another period of steady progress in the face
of a series of geopolitical and macroeconomic challenges. In
addition, your Board is taking decisive action to help narrow the
discount that the shares trade on in relation to the value of its
underlying assets, and today we are announcing the first step in
that strategy, with the sale of the Hatherden solar project to
release funds and reduce borrowings. We believe that this and the
successful completion of our overall Capital Recycling Programme
will put NESF in an even stronger condition to deliver long-term
stable returns to shareholders, whilst making a significant
contribution to Britain's decarbonised future."
Michael Bonte-Friedheim, CEO of NextEnergy Group said:
"NextEnergy Solar Fund has built up an excellent portfolio of
high value renewable energy assets. We continue to manage this
portfolio to deliver optimal returns for shareholders, whilst
continuing to look for opportunities to develop it further."
Half Year Report
The Company's Half Year Report is now available on the Reports
& Publications section of the Company's website:
https://www.nextenergysolarfund.com/reports-and-publications/ .
A copy of the Half Year Report has also been submitted to the
FCA's National Storage Mechanism .
Interim Results Presentation
The Company will stream its interim results presentation via the
London Stock Exchange Spark Live platform, where it is accessible
to all investors and analysts.
The presentation will be hosted by:
-- Helen Mahy CBE (Chair, NextEnergy Solar Fund)
-- Ross Grier (Chief Operating Officer & Head of UK
Investments, NextEnergy Capital, Investment Adviser)
-- Stephen Rosser (Investment Director & UK Legal Counsel,
NextEnergy Capital, Investment Adviser)
Presentation details:
-- Time: 11:00am (GMT)
-- Date: Wednesday 22 November 2023
-- Registration and Webcast link: NextEnergy Solar Fund Interim Results Presentation
A recording of the presentation will be made available on the
Company's website shortly after the event.
Updates to Net Asset Value ("NAV") assumptions
The Company has made the following updates to its valuation
assumptions for the 30 September 2023 NAV calculation:
-- 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.
NAV Bridge(1)
NAV p/share NAV
At 31 March 2023 114.3p GBP674.4m
------------ ----------
New assets at cost 2.5p GBP14.6m
------------ ----------
RCF drawdown, used to fund investments (1.9p) (GBP11.0m)
------------ ----------
Cash on hand, used to fund investments (0.6p) (GBP3.6m)
------------ ----------
Time value 4.8p GBP28.4m
------------ ----------
Project actuals (0.2p) (GBP1.0m)
------------ ----------
Power price forecasts (2.3p) (GBP12.9m)
------------ ----------
Changes in short-term inflation 1.3p GBP7.6m
------------ ----------
Revaluation of new assets 0.3p GBP1.6m
------------ ----------
Discount rate changes (4.6p) (GBP27.3m)
------------ ----------
Cash dividends paid (4.7p) (GBP27.7m)
------------ ----------
Other movements in residual value(2) (0.6p) (GBP3.1m)
------------ ----------
At 30 September 2023 108.3p GBP640.0m
------------ ----------
Footnotes:
1. The movement in the NAV over the six-month period was driven
primarily by the following factors:
-- The increase in discount rate for unlevered operating UK
solar assets. As announced on 17 August 2023, during the period,
the Company increased the discount rate for unlevered operating UK
solar assets by 0.75% to 7.50% The resulting weighted average
discount rate for the Company's portfolio was 8.0% (31 March 2023:
7.3%).
-- A decrease in short-term (2023-2027) UK power price forecasts
provided by Consultants, being on average 13.2% lower than
assumptions at 31 March 2023.
-- The upward revision in short-term inflation forecasts (see below).
-- Revaluation of new assets in the Company's portfolio.
-- The operating results achieved by the Company's solar assets.
-- The dividends declared and operating costs incurred during the year.
2. 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. Long-term assumptions are aligned
with market consensus including transition to CPI from 2030.
Inflation Rate (UK RPI) Assumptions
Calendar Year 30 September 30 June 2023 31 March 2023
2023
2023/24 6.80% 6.30% 4.90%
------------ ------------ -------------
2024/25 3.90% 3.50% 3.40%
------------ ------------ -------------
2025/26 2.80% 2.60% 3.30%
------------ ------------ -------------
2026/27 2.70% 3.00% 3.20%
------------ ------------ -------------
2027/28 3.30% 3.40% 3.70%
------------ ------------ -------------
2028/29 - 2029/30 unchanged unchanged 3.00%
------------ ------------ -------------
2030/31 onwards unchanged unchanged 2.25%
------------ ------------ -------------
Discount Rate Assumptions
The Company has not made any changes to its discount rate
assumptions during the latest quarter. The Company's weighted
average discount rate at the 30 September 2023 remains 8.0%. The
below table reflects the discount rate assumptions breakdown used
for the 30 September 2023 NAV calculation:
30 September
2023 30 June 2023 31 March 2023
UK unlevered unchanged 7.50% 6.75%
------------- ------------ -------------
UK levered unchanged 8.20 - 8.50% 7.45 -7.75%
------------- ------------ -------------
Italy unlevered (1) unchanged 9.00% 8.25%
------------- ------------ -------------
Subsidy-free (uncontracted)
(2) unchanged 8.50% 7.75%
------------- ------------ -------------
Life extensions (3) unchanged 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 September 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
NESF continues to lock in power price hedges over a rolling
36-month period. This proactive risk mitigation helps secure and
underpin both dividend commitments and dividend cover, whilst
reducing volatility and increasing visibility of cash flows.
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 UK hedging covers 80% of the total portfolio
(716MW) as at 6 November 2023.
UK hedging summary FY2023/24 FY2024/25 FY2025/26
Generation hedged 94% 44% 13%
---------- ---------- ----------
Power price hedged GBP79.2 GBP91.4 GBP147.2
---------- ---------- ----------
Available Capital
Out of the total GBP205m immediate Revolving Credit Facilities
available to the Company, c.GBP27.7m remains undrawn and available
for deployment as at 30 September 2023. The GBP15.2m cash proceeds
from the Hatherden transaction will be used to reduce the Group's
GBP177m of short-term debt levels. The Company also has c.GBP4.8m
immediate cash balance available at Fund level as at 30 September
2023 (this is separate from the cash currently held at Holdco/SPV
level).
Capital Structure
The financial debt, together with the preference shares,
represented a total gearing level of 46.4%
(31 March 2023: 44.6%), which is below the maximum limit of 50%
in the Company's Investment Policy.
% Fixed vs Floating Debt:
NESF Debt Structure Chart:
Total Gearing:
Footnotes:
1. NESF has 326MW under long-term debt financing, 326MW under
short-term debt financing and 250MW without debt financing
(excludes NPIII look through debt).
2. Loan to Value defined as 'Debt outstanding / GAV'.
3. Long-term debt is fully amortised over the period secured
assets receive subsidies (ROCs and others).
4. Applicable rate represents the swap rate.
5. Represents the "real" outstanding debt balance. The "nominal"
outstanding debt balances are included in the debt balances
provided in Note 23b to the interim results financial
statements.
6. The total combined short and long-term debt in relation to
NESF's commitment into NPIII (on a look through equivalent
basis).
At 30 September 2023, the Company's subsidiaries (including
NPIII) had financial debt outstanding of GBP356m (31 March 2023:
GBP345m), on a look-through basis. No covenant breaches have
occurred during the period.
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.
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
C avendish 020 7397 1 909
James King
William Talkington
H/Advisors Maitland 020 7379 5151
Neil Bennett
Finlay Donaldson
Ocorian Administration (Guernsey) Limited 01481 74 2642
Kevin Smith
Notes to Editors(1) :
About NextEnergy Solar Fund
NextEnergy Solar Fund is a specialist solar energy and energy
storage investment company that is listed on the premium segment of
the London Stock Exchange and is a FTSE 250 constituent.
NextEnergy Solar Fund'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 NextEnergy Solar Fund portfolio has a combined installed
power capacity of 933MW (including NextPower III MW on an
equivalent look-through basis) generating enough renewable energy
to power the equivalent of 334,197 average UK home electricity
needs for an entire year. The Fund 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 September 2023, the Company had an unaudited gross asset
value of GBP1,194m. For further information please visit www.
nextenergysolarfund.com
Article 9 Fund
NextEnergy Solar Fund is classified under Article 9 of the EU
Sustainable Finance Disclosure Regulation and EU Taxonomy
Regulation. NextEnergy Solar Fund's sustainability-related
disclosures in the financial services sector are in accordance with
Regulation (EU) 2019/2088 and can be accessed on the ESG section of
both the NextEnergy Solar Fund and NextEnergy Capital website.
About NextEnergy Group
NextEnergy Solar Fund 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 375 individual solar plants
across the world. NextEnergy Capital currently manages four
institutional funds with a total capacity in excess of 2.4GW+ and
funds under management of $3.9bn. www.nextenergycapital.com
-- WiseEnergy(R): Provides solar asset management, monitoring
and technical due diligence services to over 1,300 utility-scale
solar power plants with an installed capacity in excess of 1.6GW.
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 September 2023, being
the latest date in respect of which NextEnergy Solar Fund has
published financial information
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END
IR NKDBNBBDBCDB
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