Update research from QuotedData
NextEnergy Solar Fund - Update research from QuotedData
13th December 2022
Earnings visibility underpins dividend target
It has been a busy few months for NextEnergy Solar Fund (NESF) and the listed renewable energy sector. The share price may have come under pressure from the threat of windfall taxes - see page 6 - and rising discount rates (used to discount NESF's future cash flows into a present-day valuation for its net asset values - NAVs - see page 5), but the picture on these points is clearer, and - as the latest results show - NESF's NAV is still making positive progress.
Strong forecast earnings cover for the dividend and NESF's forward sales of power give the board confidence to maintain its policy of at least matching dividend hikes with inflation. If shareholders give their approval for further expansion in this area, a push into energy storage offers another route to earnings growth.
The discount is wider than its long-term average. However, given the above, we think the shares can move back to trading at a premium to NAV and the fund can get back to raising fresh equity to back its extensive pipeline of revenue accretive investments.
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