LEI: 213800ZPHCBDDSQH5447
15 May 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 Q4 Net Asset Value ("NAV") and operational update for
the period ended 31 March 2024.
Key Highlights
Financial:
·
NAV per ordinary share of 104.7p (31 December 2023:
107.7p).
·
Ordinary shareholders' NAV of £618.6m (31 December 2023:
£636.4m).
·
Total gearing (including preference shares)
of 46.4% (31 December
2023: 45.7%).
·
Financial debt gearing (excluding preference
shares) of 29.3% (31
December 2023: 28.8%).
·
Weighted average cost of capital of 6.4% (31 December 2023:
6.4%).
·
Weighted average cost of debt of 4.5% including preference shares (31
December 2023: 4.4%).
·
Weighted average discount rate across the
portfolio of 8.1%1 (31 December 2023:
8.0%).
Dividend:
·
Total dividends declared of 8.35p per ordinary share for the twelve
months ended 31 March 2024 (31 March 2023: 7.52p).
·
Dividend cover for the twelve months ended 31
March 2024 was 1.3x (31 March 2023: 1.4x).
·
Announced target dividend of 8.43p per ordinary share for the year
ending 31 March 2025.
·
Attractive high dividend yield of c.11%, as at closing share price on 14
May 2024.
·
Forecasted target dividend cover of
between 1.1x-1.3x for
the year ending 31 March 2025.
·
Total ordinary dividends declared since IPO of
£345m or 67.8p per ordinary share.
Portfolio:
·
Maiden 50MW standalone energy storage asset
("Camilla") achieved commercial operation.
·
Energised two international solar co-investments
totalling 260MW2
alongside NextPower III ESG ("Santarém and Agenor").
·
Increased portfolio size to 103 operating assets (31 December 2023:
100).
·
Reached 1GW installed capacity milestone
with 1,015MW3
(31 December 2023: 933MW2).
·
Remaining weighted asset life of 25.94 years (31 December
2023: 26.1 years).
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 energy storage assets, international
co-investments and NextPower III.
Strategic Highlights:
Capital Recycling Programme Update:
·
Following the successful completion of the first
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 246MW of subsidy-free assets
comprising the Capital Recycling Programme:
Solar Asset
|
Status
|
Installed Capacity
|
Asset Type
|
Location
|
Hatherden
|
Complete
|
60MW
|
Ready-to-build
|
Hampshire, UK
|
Whitecross
|
Third-party process
|
36MW
|
Operational
|
Lincolnshire, UK
|
Staughton
|
Third-party process
|
50MW
|
Operational
|
Bedfordshire, UK
|
The Grange
|
Third-party process
|
50MW
|
Operational
|
Nottinghamshire, UK
|
South Lowfield
|
Third-party process
|
50MW
|
Operational
|
Yorkshire, UK
|
Capital Structure:
·
The Company's financial debt is currently £337.9m
which represents a gearing of 29.3% of Gross Asset Value ("GAV") (31
December 2023: 28.8%). The Company also includes
non-amortising preference shares as part of the debt structure and
therefore values the total gearing of the Company at 46.4% of GAV (31 December 2023:
45.7%).
·
Of the Company's total debt5,
68% remains at a fixed rate of interest
(including the preference shares) and 32% is a floating rate at attractive
margins as above (SONIA + 1.20% to 1.50%).
·
From the Company's two short-term Revolving Credit
Facilities ("RCFs"):
o The
Company refinanced its existing £135m RCF with AIB Group and
NatWest which was previously due to expire in June 2024. The
new facility is available until June 2026 and provides two
additional 12-month extension options at the Company's sole
discretion to bring the maturity date up to June 2028. The
RCF continues to benefit from attractive terms with a margin of
120bps over SONIA (Sterling Overnight Index Average). The
banking consortium consists of the Company's existing
counterparties AIB Group and NatWest in addition to a new
counterparty, Lloyds.
o The
Company also extended its existing £70m RCF with Santander
(previously due to expire in June 2024). The £70m RCF with
Santander is now available until June 2025 and benefits from
improved terms with a margin of 150bps over SONIA (previously
160bps over SONIA).
·
The refreshed RCFs demonstrate
the appetite of the Company's banking partners to provide debt to
the Company at attractive terms and underline the Company's belief
that debt remains readily available to it as a leading specialist
in the solar energy and energy storage sector.
·
Breakdown of total debt (including preference
shares) as at 31 March 2024:
Footnote:
5.
Excluding NextPower III look through debt
totalling £12.6m as of 31 March 2024.
Helen Mahy, Chair of NextEnergy
Solar Fund Limited, commented:
"We are pleased to deliver strategic
progress and financial resilience over the period. NextEnergy
Solar Fund reached the significant milestone of increasing total
installed net capacity above 1GW by energising its first standalone
energy storage asset alongside an additional two international
solar co-investments, that added international diversification to
the portfolio. The Board remains committed to managing the
discount, paying down short-term debt, and pursuing attractive
growth opportunities, including potential share
buybacks."
Michael Bonte-Friedheim, CEO of
NextEnergy Group said:
"NextEnergy Solar Fund continues to
progress against its strategic objectives whilst maintaining a
disciplined approach to capital allocation. The Capital
Recycling Programme is progressing as planned, following the
successful sale of Hatherden in the first phase, with further
updates to follow in due course. We remain confident in
NextEnergy Solar Fund's diversified and well-placed portfolio to
capitalise on market opportunities and deliver attractive returns
to shareholders."
Updates to Net Asset Value ("NAV")
assumptions
The Company has made the following
updates to its valuation assumptions for the 31 March 2024 NAV
calculation:
·
Introduced new discount rate assumptions to
account for the Company's operating 50MW energy storage asset, in
line with energy storage investment company peers.
· 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 December 2023
|
107.7p
|
£636.4m
|
Time value
|
1.2p
|
£6.8m
|
Project actuals
|
(0.6p)
|
(£3.4m)
|
Power price forecasts
|
(2.7p)
|
(£16.0m)
|
Changes in short-term
inflation
|
0.3p
|
£1.8m
|
Revaluation of new assets
|
1.6p
|
£9.2m
|
Revaluation of NextPower III
ESG
|
0.7p
|
£4.3m
|
Cash dividends paid
|
(2.5p)
|
(£14.7m)
|
Capital movements (no net NAV
impact):
|
|
|
- New assets at
cost
|
0.7p
|
£3.9m
|
- Repayment of RCF using
cash on hand
|
(0.3p)
|
(£1.9m)
|
- Cash used to fund
investments and repayment of RCF
|
(0.4p)
|
(£2.0m)
|
Other movements in residual
value
|
(1.0p)
|
(£5.8m)
|
At
31 March 2024
|
104.7p
|
£618.6m
|
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 short-term (2024-2029) UK power
price forecasts provided by Consultants, mainly as a result of
lower commodity prices (particularly gas, which is down c.30-40%),
influenced by above-average gas storage levels, milder weather
across winter 2023/24 and sustained reductions in
demand.
·
The valuation incorporates revisions to short-term
inflation forecasts from external third parties.
·
The revaluation of new assets accounts for assets
as they become operational and moved from holding them at cost to
fair value. This includes the standalone energy storage asset
and the two international solar co-investments.
·
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.
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
|
31
March 2024
|
31
December 2023
|
2024/25
|
3.10%
|
3.90%
|
2025/26
|
2.90%
|
2.20%
|
2026/27
|
2.90%
|
2.60%
|
2027/28
|
3.50%
|
3.30%
|
2028/29
|
3.60%
|
3.00%
|
2029/30
|
3.00%
|
3.00%
|
2030/31 onwards
|
2.25%
|
2.25%
|
Discount Rate Assumptions
The Company has not made any changes to its
discount rate assumptions across its solar assets during the latest
quarter. The Company has introduced new discount rate
assumptions to capture its first energy storage asset which
commenced commercial operations in March 2024. The Company's
weighted average discount rate at 31 March 2024 therefore increased
slightly to 8.1% (31 December 2023: 8.0%) to reflect
its new operational energy storage asset Camilla. The below
table reflects the discount rate assumptions breakdown used for 31
March 2024 NAV calculation:
|
|
31
March 2024
|
Movement
|
Solar
|
UK unlevered
|
7.50%
|
unchanged
|
UK levered
|
8.20 - 8.50%
|
unchanged
|
Italy
unlevered6
|
9.00%
|
unchanged
|
Subsidy-free
(uncontracted)7
|
8.50%
|
unchanged
|
Life
extensions8
|
8.50%
|
unchanged
|
Energy
Storage
|
Uncontracted
|
10.00%
|
New
|
Contracted
|
7.00%
|
New
|
Footnotes:
6.
Unlevered discount rate for Italian operating
assets implying 1.50% country risk premium to 7.50%.
7.
Unlevered discount rate for subsidy-free
uncontracted operating assets implying 1.0% risk premium to
7.50%.
8.
1.0% risk premium to 7.50% for cash flows after 30
years where leases have been extended.
Power Curve Assumptions
31 March 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
visibility of cash flows.
In addition to NextEnergy Solar
Fund's budgeted revenues from government subsidies ("ROCs and
FITs") which account for c.50% of the Company's revenues, the
remaining c.50% of revenues are actively hedged using short-term
PPAs. The Company's UK hedging covers 80% of the total
portfolio (716MW) as at 10 May 2024.
UK
hedging summary
|
FY2024/25
|
FY2025/26
|
FY2026/27
|
Generation hedged
|
82%
|
29%
|
0%
|
Power price hedged
|
£80.9MWh
|
£101.4MWh
|
n/a
|
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. 100%
of REGOs generated for the 2023-24 compliance year have been sold
at an average price of £2.6/MWh. 92% of expected REGOs for the
2024-25 compliance year have been sold at £3.80/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.£49.3m remains undrawn and
available for deployment as at 31 March 2024. The
Company has c.£8.9m immediate cash balance available at Company
level as at 31 March 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.
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 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.
As at 31 March 2024, the Company had
an unaudited gross asset value of £1,155m. 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 400 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 31 March 2024, being the latest date in respect of
which NextEnergy Solar Fund has published financial
information