LEI: 213800ZPHCBDDSQH5447
29 February 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 Q3 Net Asset Value ("NAV") and operational update for
the period ended 31 December 2023, alongside an update to its first
Standalone Energy Storage asset ("Camilla") and its Revolving
Credit Facilities ("RCF").
Key Highlights
Financial:
·
NAV per ordinary share of 107.7p (30 September 2023:
108.3p).
·
Ordinary shareholders' NAV of £636.4m (30 September 2023:
£640m).
·
Total gearing (including preference shares)
of 45.7% (30 September
2023: 46.4%).
·
Financial debt gearing (excluding preference
shares) of 28.8% (30
September 2023: 29.8%).
·
Weighted average cost of capital of 6.4% (30 September 2023:
6.3%).
·
Weighted average discount rate unchanged at
8.0% (30 September 2023:
8.0%).
Dividend:
· Total dividends declared of 6.26p per ordinary share for the nine
months ended 31 December 2023 (31 December 2022: 5.64p).
·
On track to achieve target dividend of
8.35p per ordinary share
for the year ending 31 March 2024.
·
Forecasted target dividend cover
remains c.1.3x for the
year ending 31 March 2024.
·
Total dividends declared since IPO of £333m or 65.7p per share.
Portfolio:
·
100
operating solar assets (30 September 2023:
100).
·
Total installed capacity of 933MW1 (30 September 2023:
933MW1).
·
Remaining weighted asset life of 26.1 years (30 September 2023: 26.4
years).
Footnote:
1. Includes share
in private OECD infrastructure solar fund ("NextPower III").
NESF's 6.21% share of NextPower III on a look-through
equivalent basis has an operational capacity of 33MW.
Strategic Highlights:
Capital Recycling Programme:
· Following the
successful completion of the first phase of its Capital Recycling
Programme via the sale of Hatherden for £15.2m, delivering a 2.0x
multiple on invested capital, the Company is making positive and
steady progress through subsequent phases with selected
third-party
bidders.
·
The Company expects the Capital
Recycling Programme to be completed in two further phases (each
comprising two assets) and further updates will be provided to the
market in due course.
·
The table below lists the 246MW of subsidy-free assets comprising
the Capital Recycling Programme:
Subsidy-free solar asset
|
Installed Capacity
|
Status
|
Location
|
Hatherden (Sold)
|
60MW
|
Ready-to-build
|
Hampshire, UK
|
Whitecross
|
36MW
|
Operational
|
Lincolnshire, UK
|
Staughton
|
50MW
|
Operational
|
Bedfordshire, UK
|
The Grange
|
50MW
|
Operational
|
Nottinghamshire, UK
|
South Lowfield
|
50MW
|
Operational
|
Yorkshire, UK
|
Energy Storage:
·
UK energy storage is an essential component of
delivering Net Zero and the transition to a clean energy system. As
an asset class, it remains highly complementary to the Company's
existing solar portfolio on a standalone and co-located basis and
will provide multiple diversification benefits for
shareholders.
·
The Company's first standalone energy storage
asset in Scotland, known as Camilla, connected to the national grid
in December 2023 and is progressing on-track through the final
phases of commissioning with commercial operations expected to
commence in March 2024. Camilla is a 50MW 1 hour lithium-ion
battery located in Fife which has been pre-configured for
augmentation to 2 hours.
·
On 20 February 2024 National Grid ESO published
the provisional results of its T-1 Capacity Market Auction for
delivery in 2024/25. Camilla has successfully bid and secured
a contract with a clearing price of £35.79/kW. The contract
was secured with a derated capacity of 5.659MW and is expected to
generate £202k (£4k/MW on a total capacity basis) of additional
contracted revenue for the period 1 October 2024 through to the end
of September 2025.
·
The Company expects energy storage assets, such as
Camilla, to deliver high single-digit returns to the portfolio
primarily by accessing the deep wholesale energy and capacity
markets. Ancillary services markets having saturated as expected,
the Company maintains its prudent assumption that its energy
storage assets will not derive revenues from provision of ancillary
services, although recognises that other storage operators may make
different assumptions.
· The Company's
disciplined approach to capital allocation focuses on accretive
investment activity, consistent with the Company's investment
objective of providing ordinary shareholders with attractive
risk-adjusted returns, principally in the form of regular
dividends. Opportunities to create additional value for the
portfolio, including from current and future energy storage
projects such as Project Lion (250MW / 500MWh strategically located
in East Anglia), are rigorously evaluated in line with this
overarching objective.
Capital Structure:
· Total gearing
reduced in the quarter to 45.7% (30 September 2023: 46.4%),
within the stated range of the Company's Investment Policy.
This reduction was driven by the cash proceeds (£15.2m) received
from the sale of Hatherden as part of the Capital Recycling
Programme.
·
The Company is on track to refinance
its RCF in advance of maturity in June 2024 and has been encouraged
by progress in the discussions between existing and new lenders to
provide these facilities to the Company.
· As a result,
The Company expects the RCF to be refinanced on terms similar to
the existing facilities and will provide a further update to the
market in due course.
· From the
Company's total debt2 of £523.1m, 69% remains at a fixed rate of interest
(including the preference shares) and 31% is a floating rate at attractive
margins (SONIA + 1.20% to 1.60%).
·
As at 31 December 2023:
Footnote:
2. Excludes
NextPower III look through debt totalling £13.1m as of 31 December
2023.
Helen Mahy, Chair of NextEnergy
Solar Fund Limited, commented:
"NextEnergy Solar Fund is making
progress against its strategic objectives, whilst maintaining a
strong financial platform in a difficult industry environment. Our
Capital Recycling Programme is proceeding as planned and we expect
to update the market in short order. The Board remains
committed to pay down debt, manage the discount through a potential
share buyback programme, and invest in attractive growth
propositions such as energy storage.
In the meantime, our existing
portfolio is performing well and generating the cash to sustain our
stated dividend policy and we continue to see enormous long-term
opportunities for investment in solar energy and energy
storage."
Michael Bonte-Friedheim, CEO of
NextEnergy Group said:
"We are pleased with the overall
progress made by NESF during this period, with positive updates on
the development of our energy storage programme with the
Company's first standalone asset in Scotland now being connected to
the grid and progressing on track through its final commissioning
phase. The development of such assets is expected to be very
complementary to the existing portfolio by allowing access to the
deep wholesale energy and capacity markets rather than saturated
ancillary revenue streams.
We are confident with the
ongoing operational performance of the portfolio and we remain
well-placed to capitalise on future attractive investment
opportunities in the UK solar energy and storage
markets."
Updates to Net Asset Value ("NAV")
assumptions
The Company has made the following
updates to its valuation assumptions for the 31 December 2023 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
30 September 2023
|
108.3p
|
£640.0m
|
Time value
|
2.3p
|
£13.5m
|
Project actuals
|
(0.7p)
|
(£4.4m)
|
Power price forecasts
|
(3.0p)
|
(£17.4m)
|
Changes in short-term
inflation
|
2.6p
|
£15.4m
|
Sale of Hatherden
|
1.3p
|
£7.5m
|
Cash dividends paid
|
(2.5p)
|
(£14.7m)
|
Capital movements (no net NAV
impact):
|
|
|
- New assets at
cost
|
1.4p
|
£8.1m
|
- Repayment of RCF using
cash on hand
|
2.3p
|
£13.5m
|
- Cash used to fund
investments and repayment of RCF
|
(3.7p)
|
(£21.6m)
|
Other movements in residual
value
|
(0.6p)
|
(£3.5m)
|
At
31 December 2023
|
107.7p
|
£636.4m
|
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 (2023-2027) UK power price forecasts provided by
Consultants, mainly as a result of lower gas price futures,
influenced by above-average gas storage levels and milder weather
across winter 23/24.
·
The valuation incorporates the published inflation
figures for 2023 which have been reflected in the ROC price
announced for 2024/25, and revisions to short-term inflation
forecasts from external third parties.
·
Completion of the first phase of the Capital
Recycling Programme through the sale of Hatherden.
·
The dividends declared and operating costs
incurred during the year.
·
Other movements in residual
value include changes in FX rates, Fund Opex, 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
December 2023
|
30 September 2023
|
30 June 2023
|
2023/24
|
9.70%
|
6.80%
|
6.30%
|
2024/25
|
unchanged
|
3.90%
|
3.50%
|
2025/26
|
2.20%
|
2.80%
|
2.60%
|
2026/27
|
2.60%
|
2.70%
|
3.00%
|
2027/28
|
unchanged
|
3.30%
|
3.40%
|
2028/29 - 2029/30
|
unchanged
|
unchanged
|
3.00%
|
2030/31 onwards
|
unchanged
|
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 the 31 December 2023
remains 8.0%. The
below table reflects the discount rate assumptions breakdown used
for the 31 December 2023 NAV calculation:
|
31
December 2023
|
30 September 2023
|
30 June 2023
|
UK unlevered
|
unchanged
|
unchanged
|
7.50%
|
UK levered
|
unchanged
|
unchanged
|
8.20 - 8.50%
|
Italy
unlevered3
|
unchanged
|
unchanged
|
9.00%
|
Subsidy-free
(uncontracted)4
|
unchanged
|
unchanged
|
8.50%
|
Life
extensions5
|
unchanged
|
unchanged
|
8.50%
|
Footnotes:
3. Unlevered
discount rate for Italian operating assets implying 1.50% country
risk premium.
4. Unlevered
discount rate for subsidy-free uncontracted operating assets
implying 1.0% risk premium.
5. 1.0% risk
premium for cash flows after 30 years where leases have been
extended.
Power Curve Assumptions
31 December 2023:
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 (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, Power
Purchase Agreements (hedges) 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 Sales
NESF continues to lock in power
price hedges 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 NESF's budgeted
revenues from ROCs and FITs (c.50% of revenues), the Company's UK
hedging covers 80% of the total portfolio (716MW) as at 20 February
2024.
UK
hedging summary
|
FY2023/24
|
FY2024/25
|
FY2025/26
|
Generation hedged
|
98%
|
74%
|
29%
|
Power price hedged
|
£79.2MWh
|
£84MWh
|
£101.2MWh
|
Renewable Energy Guarantees of
Origin ("REGOs")
The Company sells REGOs bundled with
power sales through existing power purchase agreements 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 £2.5/MWh.
85% of expected REGOs for the 2024/25 compliance year have
been sold at £3.30/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 RCF
available to the Company, c.£41.2m remains undrawn and available
for deployment as at 31 December 2023. Following the completion of
the first phase of its Capital Recycling Programme, the proceeds
were used to reduce the Company's outstanding RCF. The
Company also has c.£2.6m immediate cash balance available at
Company level as at 31 December 2023 (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.
The NextEnergy Solar Fund portfolio
has a combined installed power capacity of 933MW, generating enough
renewable energy to power the equivalent of c.242,000 average UK
home electricity needs for an entire year. The Fund 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 December 2023, the Company
had an unaudited gross asset value of £1,173m. 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 website.
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: Over 16 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 $3.9bn. 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 1,450 utility-scale solar
power plants with an installed capacity in excess of
1.8GW. www.wise-energy.com
· Starlight:
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.
Notes:
1: All financial data is
unaudited at 31 December 2023, being the latest date in respect of
which NextEnergy Solar Fund has published financial
information.