TIDMNESF
RNS Number : 1803Z
NextEnergy Solar Fund Limited
12 May 2023
LEI: 213800ZPHCBDDSQH5447
12 May 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 31 March 2023, and its latest
operational update.
Financial Highlights
-- 11% dividend target increase to 8.35p per ordinary share for
the financial year ending 31 March 2024.
-- Forecasted target dividend cover of 1.3x-1.5x for the
financial year ending 31 March 2024 based on high visibility of
future cash flows.
-- Total dividend of 7.52p per ordinary share declared for the
financial year ended 31 March 2023.
-- Total dividends declared since IPO of GBP305.8m or 55.72p per share.
-- Net Asset Value ("NAV") per ordinary share of 114.3p.
-- Ordinary shareholders' NAV of GBP674.4m.
-- Total gearing (including preference shares) of 45 %.
Portfolio & Operational Highlights
-- Total installed capacity of 865MW.
-- 99 operating solar assets.
-- Portfolio generation outperformance of +3.8% against budget
for twelve months ended 31 March 2023, translating into additional
revenues of c.GBP4.8m.
-- Capital Recycling Programme announced on 27 April 2023,
aiming to capture significant value from the divestment of a 236MW
portfolio of subsidy-free UK solar assets, the proceeds from which
will be used to:
o Reduce gearing;
o Invest in future long-term growth opportunities; and
o Buy back shares
Dividend Target
The Board of NESF has approved a dividend target of 8.35p per
ordinary share for the financial year ending 31 March 2024,
representing an 11% increase from the previous year's dividend of
7.52p per ordinary share. The dividend target is forecasted to be
1.3x-1.5x covered, supported by the high degree of visibility of
the Company's revenues. The dividend target increase is not
dependent on completion of the Company's recently announced Capital
Recycling Programme and dividend cover forecasts do not assume
revenues from, or sale proceeds connected with, the Capital
Recycling Programme .
NAV Correction
As part of the Company's continual improvement of internal
systems, the Company identified that the reporting module within
its accounting software included an excess of working capital. This
created an omission of certain VAT payable accounts from the report
which feeds into the calculation of the Company's NAV.
This resulted in an overstatement of NAV of GBP15.9m at 31
December 2022 and the Company has made a correcting adjustment of
(2.7p) per share or (GBP15.9m) to the Company's 31 March 2023
unaudited NAV. This has no impact on the cash flow generated by the
business or on its dividend cover. The Company continues to work
closely with external advisers on its programme to strengthen
controls, processes, and reporting.
The Company has corrected relevant quarterly unaudited NAVs for
the period 31 March 2022 to 31 March 2023 which are included in the
table below.
NAV Correction Table:
The Company has laid out below the changes to the NAVs for the
period 31 March 2022 to 31 March 2023.
As previously reported Correction Difference
NAV (GBPm) NAV (p/share) NAV (GBPm) NAV (p/share) NAV (GBPm) NAV (p/share)
------------ -------------- ----------- -------------- ----------- --------------
31 Mar 22 GBP668.5m 113.5p GBP660.9m 112.2p (GBP7.6m) (1.3p)
------------ -------------- ----------- -------------- ----------- --------------
30 Jun 22 GBP717.2m 121.7p GBP704.3m 119.5p (GBP12.9m) (2.2p)
------------ -------------- ----------- -------------- ----------- --------------
30 Sep 22 GBP724.7m 122.9p GBP711.1m 120.6p (GBP13.6m) (2.3p)
------------ -------------- ----------- -------------- ----------- --------------
31 Dec 22 GBP713.0m 120.9p GBP697.1m 118.2p (GBP15.9m) (2.7p)
------------ -------------- ----------- -------------- ----------- --------------
31 Mar 23 GBP674.4m 114.3p GBP674.4m 114.3p (GBP0m) (0)
------------ -------------- ----------- -------------- ----------- --------------
NAV Bridge
NAV p/share NAV
At 31 December 2022 (as originally 120.9p GBP713.0m
announced)
------------ ---------
Pref shares dividend (0.4p) (2.3m)
------------ ---------
Ordinary shares cash dividend (1.8p) (10.7m)
------------ ---------
Income from investments 3.2p 19.3m
------------ ---------
Change in fair value of investments (7.2p) (42.5m)
------------ ---------
Net operating costs (0.4p) (2.4m)
------------ ---------
At 31 March 2023 114.3p GBP674.4m
------------ ---------
Portfolio Movements
Valuation
At 31 December 2022 (as originally announced) GBP895.7m
---------
New assets at cost 4.8m
---------
RCF drawdown (4.0m)
---------
Operating result 7.3m
---------
I ntercompany transfers(1) (19.3m)
---------
Power price forecasts(2) 15.6m
---------
Change in short-term inflation(3) (19.7m)
---------
Breakdown of other movements in residual value(4) :
* Balance of DCF valuation (8.3m)
---------
* Correction of VAT input error (15.9m)
---------
* FX movements (1.8m)
---------
At 31 March 2023 GBP854.4m
---------
Footnotes:
(1) Intercompany transfers offset the cash generated by the
Company's solar farms that has been distributed to the Fund during
the quarter.
(2) Future power price assumptions have been updated to reflect
an improvement in the long-term power curves provided by the
Company's three independent power curve providers.
(3) A softening of inflation assumptions from external, third-party data providers.
(4) Other movements in residual value represents the net
movement across a number of accounting categories that influence
the valuation. It includes accounting provisions (e.g. in respect
of expected electricity grid outages), 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 31 March 2023 31 December 2022
2023/24 4.90% 7.00%
------------- ----------------
2024/25 3.40% 4.20%
------------- ----------------
2025/26 3.30% 3.90%
------------- ----------------
2026/27 3.20% 3.80%
------------- ----------------
2027/28 3.70% 3.00%
------------- ----------------
2028/29 -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 for the quarter. The Bank of England implemented
further increases to its base rate during the quarter and, as at 31
March 2023, the base rate was 4.25%. The below table reflects the
discount rate assumptions breakdown used for the 31 March 2023 NAV
calculation:
31 March 2023 31 December 2022
UK unlevered unchanged 6.75%
-------------- ----------------
UK levered unchanged 7.45-7.75%
-------------- ----------------
Italy unlevered (1) unchanged 8.25%
-------------- ----------------
Subsidy-free (uncontracted)
(2) unchanged 7.75%
-------------- ----------------
Life extensions (3) unchanged 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.
Capital Recycling Strategy
The Company announced its Capital Recycling Programme (the
"Programme") on 27 April 2023 to accelerate the next phase of the
Company's growth. Through the Programme, the Company aims to
capture value from the divestment of a 236MW portfolio of
subsidy-free UK solar assets, the proceeds from which will be used
to:
-- Reduce gearing: reduce current drawings of the Company's
revolving credit facilities ("RCF");
-- Invest in future long-term growth opportunities: provide
flexibility to capture higher returning investment opportunities in
the future, such as energy storage; and
-- Buyback shares: establish a share buyback programme in the
future if the share price continues to trade at a material discount
to the Company's net asset value per share.
To capture the significant value of these solar assets, NESF has
initiated this Programme to divest a portfolio of five subsidy-free
assets (Hatherden, Whitecross, Staughton, The Grange, and South
Lowfield) and has launched a sales process to find buyers for these
assets, over the coming months. The Programme will deliver NAV
accretive returns by realising the value generated through these
investments. The Company will retain two operational subsidy-free
assets and remains committed to its remaining subsidy-free solar
pipeline.
Energy Storage Strategy
The Company continues to actively engage with investors around
its ambition to increase the Company's energy storage investment
policy limit from 10% of Gross Asset Value up to 25%, where
conversations remain positive and supportive. A further update will
be provided to the market over the coming months.
Energy storage is a complementary technology to the existing
large solar portfolio. It provides access to additional and
diversified opportunities to derive value delivering attractive
returns. The market environment continues to be favourable for the
Company to increase its allocation to energy storage within the
portfolio. The Company is confident in its ability to successfully
deliver energy storage and continues to benefit from its investment
adviser's experience and track record in securing import capacity
and in realising operational assets and unlocking optionality in
existing solar assets.
Power Sales Strategy
To manage the sale of power into the electricity market, the
Company utilises its investment adviser's specialist 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 underpinning dividend cover for the current financial
year. Given the high degree of contracted revenues in future years,
the Company is confident in its ability to continue to provide
investors with a well-covered dividend going forward.
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 31 March 2023 were:
Financial Year UK budgeted generation Average fix price
hedged
2023/24 88% 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.GBP39m remains undrawn and available
for deployment as at 31 March 2023. The Company also has c.GBP14m
immediate cash balance available at Fund level (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.
Kevin Lyon, Chairman of NextEnergy Solar Fund Limited,
commented:
"This quarter has been one of key strategic importance for the
Company. We announced several value accretive programmes to provide
growth, value, and stability for shareholders. We were the first
fund in the renewable investment company space to announce a
capital recycling programme, aimed at reducing gearing, securing
future growth optionality, and providing flexibility for a share
buyback programme. The Company identified an issue with automated
reports produced by the accounting software which was quickly
addressed and shared with the market today. Transparency remains a
key theme for the Board as we continue to engage and listen to our
shareholders. The Company has an exciting future ahead of it and
offers excellent value to shareholders, evidenced by the Board's
decision to increase the dividend target by 11%, one of the largest
increases in the sector."
Michael Bonte-Friedheim, CEO of NextEnergy Group said:
"NextEnergy Solar Fund has made significant strides this quarter
as it repositions itself for the continued evolution of the
portfolio and its next wave of future growth. 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. This quarter has
seen future inflation assumptions falling significantly, and the
Company's Net Asset Value has reflected this. We believe that the
Company's current inflation assumptions are conservative, with the
latest publicly available HM Treasury and Bank of England estimates
being substantially lower than previous quarters. The Company
remains well placed relative to sector peers to deliver strong
returns to investors. I am particularly pleased that NESF is able
to increase its target dividend by 11%, underpinned by its
projected dividend cover of 1.3x to 1.5x for the financial
year."
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
Camarco 020 3781 8334
Owen Roberts
Eddie Livingstone-Learmonth
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 31 March 2023, the
Company had an unaudited gross asset value of GBP1,218m. 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 $3.3bn. 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 31 March 2023, being the
latest date in respect of which NESF has published financial
information
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