Quarterly Net Asset Value and Operational Update

RNS Number : 9278B

NextEnergy Solar Fund Limited

17 February 2022

 

LEI: 213800ZPHCBDDSQH5447

17 February 2022

NextEnergy Solar Fund Limited

("NESF" or the "Company")

Quarterly Net Asset Value and Operational Update

NextEnergy Solar Fund, the specialist solar power renewable energy investment company, announces its unaudited Net Asset Value ("NAV"), and its latest operational update for the quarter ended 31 December 2021.

The Company continues to outperform while expanding and diversifying into energy storage and international solar assets.  NESF remains well-placed to provide shareholders with an ongoing attractive risk-adjusted return from a diversified portfolio of renewable energy assets, while providing a covered dividend and the opportunity for strong future NAV growth.

Financial highlights

· +1.3p increase in unaudited NAV per ordinary share to 104.4p (30 Sep 2021: 103.1p)

· Increase in unaudited Ordinary shareholders' NAV to £615m (30 Sep 2021: £607m)

· Interim dividend of 1.79p per ordinary share for the quarter ended 31 December 2021

· Ordinary shareholders' unaudited Gross Asset Value ("GAV") of £1,094m (30 September 2021: £1,087m)

· Ordinary shareholder cumulative total return since IPO of 50.0% (30 Sep 2021: 46.4%)

· Gearing (including preference shares) of 44% (30 Sep 2021: 44%)

· Financial debt gearing (excluding preference shares) of 26% (30 Sep 2021: 26%)

Portfolio highlights

· NESF's $50m commitment into NextPower III ESG ("NPIII ESG"), an international private solar fund, is equivalent to a shareholding of 6.2%.  This commitment provides NESF shareholders with immediate exposure to a growing portfolio of both construction and operational international solar assets.  NPIII ESG currently has an installed capacity of 742MW spread across 23 projects and 2 portfolios.  NPIII ESG also recently announced its final close, bringing the total capital raised to $896m, including a separately managed account.  The target of the fund was $750m.

· NESF announced in January 2022 its first co-investment for a 25% stake in a Spanish 50MW utility scale solar project ("Agenor"), an opportunity unlocked by NESF's commitment to NPIII ESG.  The project remains on track to be energised in the first half of 2022 and benefits from a strong credit worthy counterparty for the long-term Power Purchase Agreement in place.

· NESF's maiden 50MW standalone battery project, located in Fife, Scotland, continues to make good progress and is expected to be constructed this year with full energisation early in 2023.  NESF continues to benefit from its 250MW joint venture partnership with Eelpower Limited and is looking forward to announcing additional UK battery energy storage projects shortly.

Operational highlights

· Total installed capacity of 865MW¹

· 99 fully operating solar assets

· Portfolio generation outperformance of +0.4% for current year to date 2021/22, translating into additional revenues of c.£230k

· NEC's electricity sales desk continues to successfully manage risk and opportunistically lock in above forecast power prices in line with NESF's electricity sales strategy; NESF's hedging positions (covering 716MW UK portfolio) as at 16 February 2022 were:

o  2021/22: 99% of budgeted generation hedged

o  2022/23: 79% of budgeted generation hedged

o  2023/24: 74% of budgeted generation hedged

o  2024/25: 27% of budgeted generation hedged

NAV

The Company's latest unaudited NAV per ordinary share as at 31 December 2021 has increased since 30 September 2021 from 103.1p to 104.4p.

The main contributors to the Company's NAV during the quarter were changes to inflation assumptions (+0.8p per ordinary share), power purchase agreements uplift (+0.6p per ordinary share) and an increase in power price forecast assumptions (+0.2p per ordinary share).

There has been no change to the discount rate assumptions used to value the assets.

The latest long-term power price projections from the Company's three independent consultants have indicated that future power price estimates are currently marginally lower than the figures used in September 2021, signalling a slight reduction in the power price consultant estimates from 2027 onwards. 

Electricity sales strategy

Short-term power prices remain high in the UK and NESF has continued its well-established power sales hedging strategy to capture some of these higher prices whilst continuing to provide maximum power price downside protection.  The active management by NEC's Energy Sales Desk continues to demonstrate NESF's ability to strengthen dividend cover, deliver consistent NAV performance and ensure stable future cash flows.

Future acquisition pipeline

In line with its investment policy, the Company continues to advance a significant pipeline with a value in excess of £300m of international solar assets, UK energy storage assets, and possible further co-investment opportunities through NESF's commitment to NPIII.

These investment opportunities aim to achieve robust financial returns in line with our target return profile, increase dividend cover, and add geographical, technological, and revenue diversification to the NESF portfolio. 

Inflation

There remains continued inflationary pressure throughout the UK economy and forecasts suggest this will persist over the coming years.  NESF benefits from a high level of inflation linkage via its government subsidies, making it a strong proposition for investors, especially given the forward dividend cover, expected NAV growth and future pipeline. 

NESF's long term inflation assumption from 2030 have been revised downwards from 2.5% to 2.25%. 

Dividend

The Company recently announced an interim dividend of 1.79 pence per Ordinary Share for the quarter ending 31 December 2021.  The interim dividend of 1.79 pence will be paid on 31 March 2022 to shareholders on the register as at the close of business on 18 February 2022.  The ex-dividend date is 17 February 2022.

The Company will also be offering shareholders a scrip dividend alternative to this interim dividend as detailed in the Scrip Circular dated 12 July 2021, a copy of which can be viewed and / or downloaded from 'Circulars' in the Investor Relations part of the NESF website ( nextenergysolarfund.com ).  The Scrip Share reference price will be announced on 24 February 2022, with elections to be made by 4 March 2022.

Factsheet

The 31 December 2021 factsheet is now available on the Company's website. 

Kevin Lyon, Chairman of NextEnergy Solar Fund commented:

"Energy is at the forefront of society's minds and agendas, and this is anticipated to continue.  Clean energy, solar in particular, is a vital component of the UK's energy mix bringing security of supply, alongside cutting carbon from electricity supplies.  NESF plays an important part in this cycle with its large, and growing, asset base.  It is pleasing, therefore, to see back-to-back increases in NESF's NAV per ordinary share as NESF continues to pursue an exciting growth strategy that is being tangibly executed, providing both short and long term benefits to NESF shareholders.  We believe NESF is well-positioned to take advantage of future investment and expansion opportunities and look forward to what this year and beyond will bring"

Michael Bonte-Friedheim, Group CEO of NextEnergy Capital added:

"It has been a busy quarter for NESF, with its commitment into NextPower III ESG, its first co-investment for a stake in Agenor in Spain, as well as advancing its maiden 50MW standalone battery project in Scotland into the construction phase as part of NESF's joint venture partnership with Eelpower.  These milestones are indicative of the progress NESF has made, and are making, as a fund, which make NESF the unique investment proposition it is."

For further information:

NextEnergy Capital Group	020 3746 0700
Michael Bonte-Friedheim	[e-mail]
Aldo Beolchini
Ross Grier
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
Apex Fund and Corporate Services (Guernsey) Limited	01481 735 827
Nick Robilliard

Notes to Editors²:

About NextEnergy Solar Fund

NESF is a specialist solar power renewable energy investment company listed on the premium segment of the London Stock Exchange that invests in utility-scale solar power plants and energy storage.  The Company may invest up to 30% of its gross asset value in non-UK OECD countries, 15% in solar-focused private equity structures, and 10% in energy storage.

NESF currently has a diversified portfolio comprising of the following:

· 99 operating solar assets across the UK and Italy (primarily on agricultural, industrial, and commercial sites)

· A $50m commitment into NextPower III ESG (a private solar infrastructure fund providing exposure to operating and in-development international solar assets)

· A 50MW co-investment into a Spanish solar project alongside NextPower III ESG, currently in construction

· A 50MW standalone battery storage project in Fife, Scotland, currently in construction (part of a 250MW joint venture with Eelpower)

· Two subsidy free UK solar ready-to-build projects (Hatherden 50MW & Whitecross 35MW)

The NESF portfolio has a combined installed power capacity of 865MW (excluding NextPower III MW on an equivalent look-through basis).

As at 31 December 2021, the Company had a gross asset value of £1,094 million, being the aggregate of the net asset value of the ordinary shares, the fair value of the preference shares and the amount of NESF Group debt outstanding, and a net asset value of £615million.

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 solar energy and energy storage infrastructure assets.  The majority of NESF's long-term cash flows are inflation-linked via UK government subsidies.

For further information on NESF please visit nextenergysolarfund.com

Commitment to ESG

NESF is committed to ESG principles and responsible investment which make a meaningful contribution to reducing CO2 emissions through the generation of clean solar power.  NESF will only select investments that meet the requirements of NEC Group's Sustainable Investment Policy.  Based on this policy, NESF benefits from NEC's rigorous ESG due diligence on each investment.  NESF is committed to reporting on its ESG performance in accordance with the UN Sustainable Development Goals framework and the EU Sustainable Finance Disclosure Regulation.

NESF has been awarded the London Stock Exchange's Green Economy Mark and has been designated a Guernsey Green Fund by the Guernsey Financial Services Commission.

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 website (nextenergysolarfund.com/esg/) & NEC Group website (nextenergycapital.com/sustainability/transparency-and-reporting/).

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 jurisdictions.  NextEnergy Group operates via its three business units: NextEnergy Capital (Investment Management), WiseEnergy (Operating Asset Management) and Starlight (Asset Development).

NextEnergy Capital

NextEnergy Capital comprises the Group's investment management activities.  To date, NEC has invested in over 325 individual solar plants for a capacity in excess of 2.3GW across it institutional funds. 
www.nextenergycapital.com

· NextEnergy Solar Fund ("NESF") is a solar infrastructure investment company focused on the UK and other OECD countries, that is listed on the premium segment of the London Stock Exchange.  It currently owns 865MW spread among 99 individual assets in the UK and Italy, comprising a gross asset value of £1,094m.  NESF is one of the largest listed solar energy investment companies in the world.

· NextPower II ("NPII") a private fund made up of 105 individual operating solar power plants and an installed capacity of 149MW, focused on consolidating the substantial, highly fragmented Italian solar market.  NPII was successfully divested in January 2022, a 2016 vintage vehicle that generated net IRRs to its investors in excess of 25%, versus a gross target of 10-12%.

· NextPower III ESG ("NPIII") is a private fund exclusively focused on the international solar infrastructure sector, principally targeting projects in carefully selected OECD countries, including the US, Portugal, Spain, Chile, Poland and Italy. NPIII ESG is a fund that provides a positive social and environmental impact to the countries it has and will invest into. NPIII has completed its fundraise with a total of $896m, including a SMA raised.  The target of the fund was $750m.

· NextPower UK ESG ("NPUK ESG") is a private unlevered fund investing in greenfield subsidy-free solar projects, with PPA's, in the UK.  NPUK ESG was launched in December 2021.  The UK Infrastructure Bank is providing financing to the initial seed assets of the fund, and plans to invest up to £250m, half of the fund's total target fund size, on a match-funding basis.

WiseEnergy

WiseEnergy® is NextEnergy Capital Group's operating asset manager.  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 1,300 utility-scale solar power plants with an installed capacity in excess of 2.2GW.  WiseEnergy clients comprise leading banks and equity financiers in the energy and infrastructure sector. 

www.wise-energy.com

Starlight

Starlight is NextEnergy Group's development company that is active in the development phase of solar projects.  It has developed over 100 utility-scale projects internationally and continues to progress a large pipeline of c.2.5GW of both green and brownfield project developments across global geographies.

Notes:

^1: Excluding NextPower III MW on an equivalent look-through basis

^2: All financial data is unaudited as at 31 December 2021, being the latest date in respect of which NESF has published financial information

 

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