LEI: 213800ZPHCBDDSQH5447
14 August 2024
NextEnergy Solar Fund
Limited
("NESF"
or the "Company")
Unaudited Quarterly Net Asset Value & Operational
Update
NextEnergy Solar Fund, a leading
specialist investor in solar energy and energy storage, announces
its unaudited Q1 Net Asset Value ("NAV") and operational update for
the period ended 30 June 2024.
Key Highlights
Financial:
·
Unaudited NAV per ordinary share
of 101.3p (31 March
2024: 104.7p).
·
Unaudited ordinary shareholders' NAV
of £598.6m (31 March
2024: £618.6m).
·
Unaudited Gross Asset Value ("GAV") of
£1,124m (31 March 2024:
£1,155m).
·
Financial debt gearing (excluding preference
shares) of 29.1% (31 March
2024: 29.3%).
·
Total gearing (including preference shares)
of 46.7% (31 March
2024: 46.4%).
·
Weighted average cost of capital of 6.4% (31 March 2024: 6.4%).
·
Weighted average cost of debt of 4.5% including preference shares (31
March 2024: 4.5%).
·
Weighted average discount rate across the
portfolio of 8.0%
1 (31 March 2024: 8.1% 1).
Dividend:
·
Attractive high dividend yield of c.10%, as at closing share price on 9
August 2024.
· Total dividends
declared of 2.10p per
ordinary share for the Q1 period ended 30 June 2024 (30 June 2023:
2.08p).
·
Target dividend of 8.43p per ordinary share for the year
ending 31 March 2025 (31 March 2024: 8.35p).
·
Forecasted target dividend cover of
between 1.1x-1.3x for
the year ending 31 March 2025.
·
Total ordinary dividends declared since IPO of
£357m.
Portfolio:
·
Portfolio contains 102 1 operating assets
following the planned capital recycling programme sale of
Whitecross, a 36MW operating solar asset (31 March 2024: 103
1).
·
980MW
2,3 of installed capacity
(31 December 2023: 1,015MW 2,3).
·
Remaining weighted asset life of 25.9 4 years (31 March 2024:
26.6 years).
Strategic & Discount Management
Highlights
Capital Recycling Programme Update:
· The Company has
successfully delivered two phases of its Capital Recycling
Programme at attractive premiums.
· As at 30 June
2024 the Capital Recycling Programme has delivered:
o Two
asset sales totalling 95.22MW of installed
capacity.
o Raised £42.2m total
capital.
o Added 1.84pps to
NAV.
o Paid
down £38.8m of the
Company's short-term Revolving Credit Facilities.
· Following the successful completion of the second phase of its
Capital Recycling Programme, subsequent phases
are progressing
positively through exclusive negotiations with selected third-party
bidders. The Company will
provide further
updates as they become available.
· The table below
lists the 245.22MW of subsidy-free assets
comprising the Capital Recycling Programme:
Solar Asset
|
Status
|
Installed
Capacity
|
Asset Type
|
Location
|
Price
|
NAV uplift
|
Premium
|
Unlevered
IRR
|
Hatherden
|
Sold
|
60MW
|
Ready-to-build
|
Hampshire,
UK
|
£15.2m
|
1.27pps
|
100%
|
57%
|
Whitecross
|
Sold
|
35.22MW
|
Operational
|
Lincolnshire,
UK
|
£27.0m5
|
0.57pps5
|
14%5
|
14%5
|
Staughton
|
Third-party process
|
50MW
|
Operational
|
Bedfordshire,
UK
|
n/a
|
n/a
|
n/a
|
n/a
|
The
Grange
|
Third-party process
|
50MW
|
Operational
|
Nottinghamshire, UK
|
n/a
|
n/a
|
n/a
|
n/a
|
South
Lowfield
|
Third-party process
|
50MW
|
Operational
|
Yorkshire,
UK
|
n/a
|
n/a
|
n/a
|
n/a
|
Share Buyback Programme:
· The Board
announced an initial Share Buyback Programme of up to £20m on 18
June 2024.
· As of 13 August
2024, 2,208,090 shares have been purchased and are currently being
held in the Company's treasury account.
Capital Structure:
· The Company's
financial debt (excluding preference shares) is currently
£327m which represents a
gearing of
29.1% of GAV (31
March 2024: 29.3%).
· The Company also
includes non-amortising preference shares as part of the debt
structure and therefore values
the total
gearing of the Company at 46.7% of GAV (31 March 2024:
46.4%).
· Of the Company's total debt 6, 71% remains at a fixed rate of interest
(including the preference shares) and 29%
is a floating
rate at attractive margins (SONIA + 1.20% to 1.50%).
· Breakdown of
total debt (including preference shares) as at 30 June
2024:
Helen Mahy, Chairwoman of NextEnergy
Solar Fund Limited, commented:
"This has been a strong quarter for
NESF as the Company continues to narrow its discount. This
has been achieved through careful management of the portfolio,
including the successful sale of assets as part of our Capital
Recycling Programme, and the initiation of the Company's Share
Buyback Programme. We believe there are tailwinds which will
continue to drive the growth of the UK solar market and that NESF
is well-positioned to capitalise on these to deliver continued
shareholder value."
Michael Bonte-Friedheim, CEO of
NextEnergy Group said:
"We are pleased with the progress
that has been made during the quarter as NESF continues to
represent an attractive investment opportunity for existing and new
investors, especially with the successful completion of the second
phase of our Capital Recycling Programme. NESF continues to
offer one of the highest yields for shareholders in the FTSE 350
and we are confident that the UK solar and energy storage markets
stand to gain from the election of a new Labour government, which
has prioritised renewable energy as the UK looks to meet its Net
Zero targets."
Updates to Net Asset Value ("NAV")
assumptions
The Company has made the following
updates to its valuation assumptions for the 30 June 2024 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
|
NAV
p/share
|
NAV
|
At
31 March 2024
|
104.7p
|
£618.6m
|
Time value
|
2.5p
|
£14.7m
|
Project actuals
|
(1.7p)
|
(£9.4m)
|
Power price forecasts
|
(1.2p)
|
(£7.0m)
|
Changes in short-term
inflation
|
0.4p
|
£2.5m
|
Sale of Whitecross
|
0.6p
|
£3.3m
|
Revaluation of NextPower III
ESG
|
0.1p
|
£0.3m
|
Cash dividends paid
|
(2.5p)
|
(£14.7m)
|
Capital movements (no net NAV
impact):
|
|
|
- New assets at
cost
|
0.1p
|
£0.9m
|
- Repayment of RCF using
cash on hand
|
3.7p
|
£21.8m
|
- Cash used to fund
investments and repayment of RCF
|
(3.8p)
|
(£22.7m)
|
Other movements in residual
value
|
(1.6p)
|
(£9.7m)
|
At
30 June 2024
|
101.3p
|
£598.6m
|
The movement in the NAV over the
period was driven primarily by the following factors:
· Increase due
to time value, reflecting the change in the valuation as a result
of changing the valuation date, prior to adjusting for any outflows
of the Company. The increase in value is attributable to the
unwinding of the discount applied to cash flows for the period when
calculating the DCF.
· A decrease in
project actuals showing the difference between actual outturn vs
budgeted forecasts, driven by below expected irradiation levels
throughout the quarter.
· Future
near-term power price forecasts reflect recent higher gas prices
(June 2024). Gas prices average 16% higher than the previous
forecast, as stronger LNG demand from Asia over summer months and
various supply outages tightened short-term market balance.
Downward corrections in offshore wind and solar capacity in the
short term also put upward pressure on prices.
·
In the medium-term, the power price forecast is
consistent with previous quarters, with electricity prices falling
as the deployment of renewables, particularly offshore wind,
increases to reach the Government's target of 50GW of offshore
wind, countervailing the upward pressure from higher commodity
prices and electricity demand.
· The trend for
wholesale electricity prices in the long-term remains the same as
previous quarters, with a slow decline expected due to increasing
wind and solar capacities, driven by decarbonisation targets and a
gentle decline in assumed costs.
·
BESS margins have declined in the short-term
(2024-2028) in line with the decrease in wholesale power prices
since Q3'23 (July - September 2023), largely due to declines in gas
and carbon prices. This decline, driven by a well-supplied energy
market following the initial shock from the Russian invasion of
Ukraine, has reduced the size of energy trading opportunities
available for battery storage projects.
·
The valuation incorporates revisions to short-term
inflation forecasts from external third parties.
·
The sale of Whitecross as part of phase II of the
Capital Recycling Programme.
·
The revaluation of NextPower III ESG.
·
The dividends declared and operating costs
incurred during the year, this includes both ordinary and
preference share dividend payments.
· Other movements in residual value include changes in FX rates,
fund operating expenses, and other non-material movements. Included
here is a one-off extraordinary cost associated with the
refinancing of the RCF facilities.
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
June 2024
|
31
March 2024
|
2024/25
|
3.40%
|
3.10%
|
2025/26
|
unchanged
|
2.90%
|
2026/27
|
3.10%
|
2.90%
|
2027/28
|
unchanged
|
3.50%
|
2028/29
|
3.50%
|
3.60%
|
2029/30
|
unchanged
|
3.00%
|
2030/31 onwards
|
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 30 June 2024 was
8.0% 1 (31 March 2024: 8.1%
1). The below table reflects the discount rate
assumptions breakdown used for 30 June 2024 NAV
calculation:
|
|
30
June 2024
|
Movement
|
Solar
|
UK unlevered
|
7.50%
|
unchanged
|
UK levered
|
8.20 - 8.50%
|
unchanged
|
Italy unlevered
7
|
9.00%
|
unchanged
|
Subsidy-free
(uncontracted)8
|
8.50%
|
unchanged
|
Life extensions
9
|
8.50%
|
unchanged
|
Energy
Storage
|
Uncontracted
|
10.00%
|
unchanged
|
Contracted
|
7.00%
|
unchanged
|
Power Curve Assumptions
30 June 2024:
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 ("PPA")
(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.
For the Italian portfolio, PPAs 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.
Power Purchase Agreement
Strategy
NextEnergy Solar Fund continues to
lock in PPAs 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 the
visibility of cash flows.
Forecasted Total Revenue
Breakdown 10,11,12,13:
Renewable Energy Guarantees of
Origin ("REGOs")
The Company sells REGOs bundled with
power sales through existing PPAs as well as unbundled via
bilateral arrangements. Where REGOs have been sold at a fixed
price, these known prices are used in the calculation of NAV. 93%
of REGOs generated for the 2024-25 compliance year have been sold
at an average price of £3.9/MWh. 29% of expected REGOs for the
2025-26 compliance year have been sold at £6.9/MWh. Unbundled,
unsold REGO volumes of up to c.645GWh/annum are reflected in the
NAV in line with third-party advisor forecasts (£5/MWh until March
2028 and then £1.5/MWh for the remaining life of the
asset).
Available Capital
Out of the total £205m immediate
RCFs available to the Company, c.£61.2m remains undrawn and
available for deployment as at 30 June 2024. The
Company has c.£3.8m immediate cash balance available at Company
level as at 30 June 2024 (this is separate from the cash currently
held at Holdco/SPV level).
Future Pipeline
The Company owns the project rights
for, or has exclusivity over, a pipeline of c.£500m domestic and
international solar (>400MW), domestic energy storage assets
(>250MW), and a right of first offer over qualifying projects
developed or sourced by the Investment Manager and Investment
Adviser.
Footnote:
1. Includes energy
storage asset Camilla. Excludes NextPower III (a private
international infrastructure solar fund) and the
international
co-investments.
2. NESF owns 13.6% of
Santarém (210MW in Portugal) and 24.5% of Agenor (50MW in
Spain).
3. On a look-through MW equivalent basis, this includes the
investment in NextPower III where NESF owns 6.21%.
Ownership in the
international co-investments as above, and 70% ownership of the
Company's maiden standalone energy storage asset Camilla through
its joint venture partnership.
4. Excludes international co-investments and NextPower
III.
5. Upon successful completion
of the deferred consideration:
o Price will rise from £27m to £28m.
o NAV
uplift will increase from 0.6p to 0.7p.
o Premium will increase from 14% to 18%.
o Unlevered IRR will increase from 14% to 15%.
6. Excluding NextPower III
look through debt totalling £12.1m as at 30 June 2024.
7. Unlevered discount rate
for Italian operating assets implying 1.50% country risk premium to
7.50%.
8. Unlevered discount rate
for subsidy-free uncontracted operating assets implying 1.0% risk
premium to 7.50%.
9. 1.0% risk premium to 7.50%
for cash flows after 30 years where leases have been
extended.
10. Fixed revenues include subsidy
income.
11. Figures are stated to the
nearest 0.1% which may lead to rounding differences.
12. NextEnergy Solar Fund minimises
its merchant exposure through its active rolling PPA programme. The
programme locks
in PPAs
in the liquid market to ensure maximum contracted revenues are
achieved.
13. Fixed prices (£/MWh) cover 85%
(826 MW) of the total portfolio as at 6 August 2024.
For further information:
NextEnergy Capital
Michael Bonte-Friedheim
|
020 3746 0700
ir@nextenergysolarfund.com
|
Ross Grier
|
|
Stephen Rosser
|
|
Peter Hamid (Investor
Relations)
|
|
RBC Capital Markets
|
020 7653 4000
|
Matthew Coakes
|
|
Elizabeth Evans
Kathryn Deegan
|
|
Cavendish
|
020 7397 1909
|
James King
|
|
William Talkington
|
|
H/Advisors Maitland
|
020 7379 5151
|
Neil Bennett
|
|
Finlay Donaldson
|
|
|
|
Ocorian Administration (Guernsey)
Limited
|
01481 742642
|
Kevin Smith
|
|
Notes to
Editors1:
About NextEnergy Solar
Fund
NextEnergy Solar Fund is a
specialist solar energy and energy storage investment company that
is listed on the Main Market 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.
As at 30 June 2024, the Company had
an unaudited gross asset value of £1,124m. 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 websites.
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: has over 17 years of
specialist solar expertise having invested in over 460 individual
solar plants across the world. NextEnergy Capital currently
manages four institutional funds with a total capacity in excess of
3GW+ and has assets under management of $4.3bn.
More information is available at
www.nextenergycapital.com
· WiseEnergy®:
is a leading specialist operating asset manager in
the solar sector. Since its founding, WiseEnergy has provided
solar asset management, monitoring and technical due diligence
services to over 1,500 utility-scale solar
power plants with an installed capacity in excess of
2.5GW. More
information is available at www.wise-energy.com
· Starlight:
has developed 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. More information is available at www.starlight-energy.com
Notes:
1: All financial data is
unaudited at 30 June 2024, being the latest date in respect of
which NextEnergy Solar Fund has published financial
information