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REG - NextEnergy Solar Fnd - Interim Results for period ended 30 September 2022

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RNS Number : 9812G  NextEnergy Solar Fund Limited  21 November 2022

LEI: 213800ZPHCBDDSQH5447

21 November 2022

NextEnergy Solar Fund Limited

("NESF" or the "Company")

 

Interim Results for period ended 30 September 2022

 

NextEnergy Solar Fund, the specialist solar and energy storage climate impact
fund with a combined installed power capacity of 865MW, is pleased to announce
it has today published its interim results as at 30 September 2022.

 

Financial Highlights

·    +9.4p (c.8.3%) increase in Net Asset Value ("NAV") per ordinary share
to 122.9p over the six-month period (31 March 2022: 113.5p).

·    +£56.2m increase in ordinary shareholders' NAV to £724.7m (31 March
2022: £668.5m).

·    Earnings per ordinary share of 13.1p (30 September 2021: 7.74p).

·    Total Gearing (including preference shares) of 42% (31 March 2022:
42%).

·    Second interim dividend of 1.88p per ordinary share for the quarter
ended 30 September 2022 (30 September 2021: 1.79p).

·    Estimated cash dividend cover of 1.3x - 1.5x for FY22/23 (31 March
2022: 1.2x).

·    Total dividends paid of 3.76p per ordinary share in respect of the
six months ended 30 September 2022 (30 September 2021: 3.58p).

·    Target dividend of 7.52p per ordinary share for the year ended 31
March 2023 (a year-on-year increase of 5%, above the 4.1% calculated Retail
Price Index ("RPI") rise for the 2021 calendar year).

 

ESG Highlights

·    Released first standalone sustainability report, which highlights
NESF's contribution to biodiversity, climate change and ethical supply chains
through its operations.

·   Gained classification under Article 9 of the EU Sustainable Finance
Disclosure Regulation and EU Taxonomy Regulation.

·    Generated 639GWh of clean electricity during the six-month period,
contributing to the avoidance of 266,500 tonnes of CO(2)e emission (30
September 2021: 539GWh, 229,000 tonnes of CO(2)e).  Equivalent to:

o  Powering 354,274 UK homes for the six-month period (30 September 2021:
299,000).  The rough equivalent of powering Manchester and Newcastle
combined.

o  Removing 176,245 cars off the road for the six-month period (30 September
2021: 151,260 cars).

 

Portfolio & Operational Highlights

·    Total installed capacity of 865MW(1) (31 March 2022: 865MW).

·    99(2) fully operating solar assets (31 March 2022: 99).

·    Portfolio generation outperformance of +6.1% against budget for the
period ended 30 September 2022 (30 September 2021: 1.1%), translating into
additional revenues of c.£4.9m (30 September 2021: £0.9m).

·    Secured a £60m increase to its existing £75m Revolving Credit
Facility ("RCF") with AIB Group (UK) p.l.c. & NatWest.

·    Signed a two-year extension to its £70m RCF with Santander UK to
fund the investment pipeline.

 

Footnote:

(1)   Excludes share in private infrastructure solar fund (NextPower III
ESG).  Inclusion of NESF's share of NextPower III would increase capacity by
21.7MW to 886.7MW.

(2)   Newfield, a 0.18MW commercial rooftop solar asset, was removed from
the portfolio following termination of the lease by the landlord during the
period.

 

Energy Storage

·    Advanced our position in the energy storage sector by increasing
NESF's strategic joint venture partnership with energy storage specialist
EelPower to £300m in total via a 75% stake in a new £200m Joint Venture
Partnership vehicle ("JVP2").

·    Started construction on the Company's first 50MW battery storage
project in Fife, Scotland (expected to be energised and grid-connected in the
first half of 2023) through its pre-existing Joint Venture Partnership vehicle
with EelPower ("JVP1").

·    Commenced a co-located battery retrofit programme, identifying
potential sites across NESF's current UK operating solar assets.

 

Private Solar Infrastructure Fund

·    Signed its second international co-investment with NextPower III LP
taking a 13.6% stake in a 210MW solar project currently under construction in
Santarém, Portugal.

 

Solar PV

·    Commenced construction works for Whitecross (36MW) and grid
preparation works for Hatherden (50MW).

·   Secured 15-year Contracts for Difference ("CfDs") for 100% of the
generating capacity of both new-build UK solar projects post-construction.

 

Portfolio & Operational Highlights following the period end

Energy Storage

·    Signed a £32.5m acquisition for the development rights for a
high-quality 250MW lithium-ion battery storage project in the East of England
via Joint Venture Partnership with a strategic partner.

 

Updates to NAV assumptions

The Company has made the following updates to its valuation assumptions for
the 30 September 2022 NAV calculation:

·    The Company has applied a significant discount to the power prices
forecasts provided by its market consultants.  This discount has been applied
to the unhedged generation volumes to account for the possibility of a
significant drop in market prices over the period or of the introduction of
price caps or windfall taxes.

·    An increase to the unlevered discount rate by 0.5% in response to the
increase in the risk-free rate.

Full details are disclosed in the relevant sections below.

 

NAV Movements

The main contributors to the increase in the Company's NAV from 31 March 2022
to 30 September 2022 were an increase in power price forecast assumptions
(+12.0p per ordinary share) driven by an uplift in the short to medium term
power forecasts provided by the Company's three independent advisers and Power
Purchase Agreements ("PPAs"), updated short-term inflation assumptions (+7.5p
per ordinary share), operating result net distributions to fund (+3.0p per
ordinary share) and the upward revaluation of the NextPower III ESG ("NPIII
ESG") investment (+0.9p per ordinary share).

 

31 March 2022 to 30 September 2022, NAV p/share movement:

 NAV p/share at 31 March 2022                113.5p
 Power price forecasts                       +19.5p
 Power price forecasts discount applied      -7.5p
 Discount rate increase                      -3.7p
 Change in short-term inflation              +7.5p
 Operating result net distributions to fund  +3.0p
 RCF drawdown(1)                             -9.1p
 New assets at cost(1)                       +5.1p
 Revaluation of NPIII Investment             +0.9p
 Movements in residual value(2)              -6.3p
 NAV p/share at 30 September 2022            122.9p

 

Footnotes:

(1) RCF drawn to fund milestone payments relating to new assets which are held
at cost, as well as consideration for Project Lion which was drawn before
period end. Considering that the transaction completed shortly after the
period end, cash from the drawdown has been included in NAV.

(2) Includes payment of dividend, provisions, and non-material movements.

 

Inflation Linkage and Updates

c.50% of the Company's revenues are made up of government-backed subsidies via
ROCs and FITs, and this component of revenue increases in-line with RPI,
whilst the remaining revenues in the portfolio are generated through the sale
of budgeted power generation into the market. This portion of revenues
continues to benefit from the sustained high power price environment and
increases the unsubsidised revenue portion of the portfolio.

 

The Company continues to be consistent in its inflation assumption approach,
using third party, independent inflation data from the 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

               30 September 2022  30 June 2022  31 March 2022
 2023          12.40%             11.00%        8.00%
 2024          5.90%              4.20%         3.70%
 2025          3.60%              3.60%         3.30%
 2026          3.40%              3.90%         3.40%
 2027          3.90%              4.10%         3.30%
 2028-2030     3.00%              3.00%         3.00%
 2030 onwards  2.25%              2.25%         2.25%

 

Discount Rate Assumptions

The Bank of England have implemented substantial further increases to the base
rate (1%) following the 0.5% increase between 31 March 2022 and 30 June
2022.  In response to these market conditions, the Company has increased its
unlevered discount rate by 0.5%.  The below table reflects the discount rate
assumptions for the 30 September 2022 NAV calculation:

 

                                  Premium   30 September 2022  31 March 2022
 UK unlevered                     n/a       6.25%              5.75%
 UK levered                       0.7-1.0%  6.95-7.25%         6.45-6.75%
 Italy unlevered (1)              1.5%      7.75%              7.25%
 Subsidy-free (uncontracted) (2)  1.0%      7.25%              6.75%
 Life extensions (3)              1.0%      7.25-8.25%         6.75-7.75%

 

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.

 

Power Price Assumptions

Given the recent volatility in power prices and, at the time of calculating
the NAV, the possibility of a price cap or windfall tax on renewable
generation being implemented by the UK government, the Company discounted the
forward power prices as supplied by its market consultants which it uses in
the calculation of its NAV.  The Company does not consider that the
short-term power price forecasts are a reliable reflection of the power prices
which are likely to be received for future generation, therefore where prices
have not been fixed/hedged, forecast power prices are discounted to capture
this underlying uncertainty and to reduce risk associated with future cash
flows.  The discounts outlined below were applied to the Company's NAV
analysis, leading to a reduction of 7.5p / share in the Company's NAV.

 

 Time period  Discounts applied to unhedged portion of portfolio power prices
 Q4 2022      No discount has been applied
 Q1 2023      50% discount
 FY 2023/24   35% discount
 FY 2024/25   25% discount has been applied in Summer 2024 price, and 20% discount has been
              applied to Winter 2024 prices
 FY 2025/26   10% discount
 FY 2026/27   No discount has been applied

 

Windfall Tax

Following the period end, the UK Government announced initial details of a
windfall tax on low-carbon electricity generators in the UK, as part of its
Autumn Statement on the 17 November 2022.  Full details are expected to be
clarified through the legislative process during December 2022.  Under the
temporary tax, which takes effect from 1 January 2023 and runs to 31 March
2028, low carbon generators will pay a surcharge of 45% on in-scope revenues
exceeding £75/MWh.  The tax will be calculated at group level for each
accounting year, based on aggregated generation and revenues for that year,
less an allowance of £10m.

 

Based on information available at the date of publication, the Company
considers that the methodology used to derive the Company's NAV as at 30
September 2022, and based on the assumptions outlined above, takes account of
the potential impact of the windfall tax levy.

 

The windfall tax will not be applied to the Company's government subsidised
revenues which makes up c.50% of the Company's total revenue profile, it will
also not be applicable to revenues generated from energy storage assets, an
area where the Company is strategically positioned with a secured pipeline to
rapidly expand and diversify its future revenue sources.

 

Power Sales Strategy

To manage the sale of power into the electricity market, NextEnergy Capital
continues to utilise its 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 allowing optimum weighted average
price by 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 and strengthening
dividend cover for the current financial year.

 

In addition to NESF's budgeted revenues from ROCs and FITs (c.50%), the
Company's hedging positions (covering 716MW UK portfolio) as at 10 November
2022 were:

·    2022/23: 93% of UK budgeted generation, (average fix price of
£86MWh)

·    2023/24: 74% of UK budgeted generation, (average fix price of
£73MWh)

·    2024/25: 44% of UK budgeted generation, (average fix price of
£90MWh)

·    2025/26: 13% of UK budgeted generation, (average fix price of
£147MWh)

Future Pipeline

The Company has exclusivity over, or owns the project rights for, the majority
of its immediate pipeline of c.£500m domestic and international assets across
the solar and energy storage space.  This includes ownership of the
development rights for a high-quality 250MW lithium-ion battery storage
project in the East of England via JVP2, which when approved and constructed
will be one of the UK's largest operational standalone battery storage assets.

 

Available Capital

The Company has capital to pursue its immediate pipeline, including bringing
online a secured 50MW battery storage project and completing the construction
of its post-subsidy solar assets.  Out of the total £205m Revolving Credit
Facilities ("RCF") available to the Company, c.£55m remains undrawn and
available for deployment as of the 30 September 2022.  The Company's
investment policy allows a maximum of 50% total debt to Gross Asset Value
limit, which if required would provide the Company with further flexibility of
c.£136m to convert the Company's attractive pipeline into NAV accretive and
cash generating assets to further strengthen and grow the portfolio.

 

ESG

The Company recently released its first, stand-alone sustainability report.
NextEnergy Solar Fund's commitment to ESG and sustainability remains at the
forefront of its strategy and purpose, it is fully integrated into the
Company's operating model and remains a fundamental component of the
investment process.  As the UK accelerates towards its net-zero targets by
2050, the Company's Solar PV and Energy Storage assets will continue to play a
huge part in this transition and ensuring that the correct ESG framework is in
place, is crucial in driving this forward both on the ground, and from an ESG
reporting perspective.

 

 Metric                Units                  30 September 2022 (HY 2023)
 GHG avoided           ktCO2e                 266.5
 NOx avoided           tonnes                 241.5
 Sox avoided           tonnes                 444.5
 PM2,5                 tonnes                 20.8
 PM10                  tonnes                 5.1
 Fossil Fuels avoided  tonnes oil equivalent  117.8
                       million barrels        0.9

 

In June 2022, the Company also published its first TCFD report, which outlines
the risks and opportunities as a result of the physical and economic
consequences of climate change.  The full report, alongside the Company's
first sustainability report can be found on the Company's website.

 

Energy Storage Strategy

The market environment continues to be favourable for the Company to explore
the potential increase in energy storage within the portfolio. Energy Storage
is a complementary hedge to the existing solar portfolio and will provide
additional opportunities around the Company's existing grid connections and
experience in securing import capacity and in realising operational assets.
 Energy Storage will provide the Company with revenue, technology and
geographic diversification, whist offering highly attractive return prospects
from multiple revenue sources. NextEnergy Capital, the Company's investment
adviser, will be continuing to consult investors over the coming weeks to seek
support to increase the Company's investment policy energy storage limit from
10% of GAV to allow the Company to fully capture the energy storage growth
opportunities already backed by a secured strategic pipeline of assets.

 

Market Outlook

Undoubtedly, macro-economic and political events have impacted and will
continue to impact the renewable sector in which the Company operates.
Mitigating risk and increasing visibility of future cash flows remains a
priority for the Company.  In the current economic climate, the Board
continues to closely monitor both macro and micro economic indicators and
governmental information to assess the potential future impact on the
Company's activities.  Against this backdrop, NESF continues to offer strong
diversification and protection for investors in their portfolios, in
conjunction with helping accelerate Net Zero ambitions following COP27 through
the construction of new solar power plants and battery storage assets in the
UK.  The Company's proposed increase in its energy storage investment policy
limit will help contribute to increasing the UK's energy independence, help
further increase the penetration of much needed new renewables across the UK,
and provide additional diversification and returns for shareholders.  For the
current financial year, NESF continues to target an attractive dividend of
7.52p per ordinary share, supported by a strong projected dividend cover.

 

Interim Report and Quarterly Factsheet

The 30 September 2022 interim report and quarterly factsheet are available on
the Company's website.

 

New Website Launched

The Company has launched a new website today providing shareholders and wider
stakeholders with enhanced navigation functionality and easily accessible
information.

 

Interim Results Presentation

There will be a webcast this morning at 9.30am hosted by the investment
adviser:

·    Michael Bonte-Friedheim (CEO and Founding Partner of NextEnergy
Group)

·    Ross Grier (UK Managing Director, NextEnergy Capital)

 

To register for the webcast please use this link: NESF Interim Results
Presentation
(https://www.lsegissuerservices.com/spark/NextEnergySolarFundLtd/events/ef9d1fc7-9e19-4990-9649-f9174a04dfad)

 

The presentation will be followed by a Q&A session for analysts.
Questions may be submitted prior to the presentation via email to
ir@nextenergysolarfund.com or live during the event using the webcast Q&A
function.  We will endeavour to answer submitted questions during the Q&A
section, if this is not possible due to time constraints, we will follow up
shortly after the presentation.

 

A recording of the presentation will also be made available on the Company
website and the London Stock Exchange Spark page shortly after the event.

 

Kevin Lyon, Chairman of NextEnergy Solar Fund commented:

"Against clear residual headwinds from a volatile domestic energy market, NESF
has delivered positive results, generating steady revenue and a reliable and
attractive dividend for its shareholders from generation that supports the
transition to a low cost, low carbon energy system.

 

The Company remains supportive of a UK windfall tax on extraordinary and
excess profits brought about by external factors including the war in
Ukraine.  We believe that investment in renewable energy is key to solving
our nations' current cost of living crisis and long-term energy security,
decarbonisation and cost challenges.  We would therefore make the case for a
consistent approach to the encouragement of reinvestment of proceeds into new
projects through associated tax relief so that equality is created with the
oil and gas sector.  We believe that our NAV valuation approach largely
incorporates the potential impact on the Company of the windfall tax that has
recently been announced.

 

NESF has significantly increased electricity generation to 639GWh, a 19%
increase from the same period last year.  The Group has also successfully
increased its diversification, by making notable strides in energy storage,
having started construction on the Company's first 50MW battery storage
project through JVP1 in Fife, Scotland.  Going forward, energy storage holds
an increasingly important role in NESF's future strategy, providing the
opportunity for both diversification and growth.  The Company is in an
excellent position through its joint venture partnerships with Eelpower, and
its existing co-located battery programme, to unlock value for shareholders.

 

As a Company at the centre of carbon free energy security in the UK, we were
also very pleased to release our first standalone sustainability report, which
highlights NESF's contribution to biodiversity, climate change and ethical
supply chains through its operations.  These issues sit at the heart of what
we do at NESF, and it is a privilege to showcase the hard work that is being
done on these aspects.

 

As we continue to navigate a dynamic and turbulent energy market in the UK, I
am confident that NESF is well equipped, both financially and with the
necessary experience, to execute our strategy to the benefit of our
stakeholders."

 

Michael Bonte-Friedheim, CEO of NextEnergy Group said:

"We have continued to focus on delivering above-budget technical, operational
and financial performance from NESF's portfolio, and are pleased with the
portfolio's continuous outperformance since the Company's IPO in 2014.  In
parallel, strategic expansion was achieved in the energy storage sector and
internationally, positioning NESF for incremental growth in the future.

 

The Company is well-placed to deliver value-enhancing growth, further risk
diversification and expansion beyond the UK's borders, all the while ensuring
the existing asset portfolio continues to perform strongly.

 

ESG remains a key focus of all our activities, and our market leadership in
developing and implementing new initiatives across our sites ensures we
increase our contribution to de-carbonising the power generation sector,
increasing energy security and independence, protect and grow biodiversity
throughout our portfolio and make positive contributions to the communities in
which we are active."

 

 

 

 For further information:

 NextEnergy Capital Group                    020 3746 0700

 Michael Bonte-Friedheim                     ir@nextenergysolarfund.com
 Aldo Beolchini
 Ross Grier
 Peter Hamid (Investor Relations)

                                             020 7653 4000

 RBC Capital Markets
 Matthew Coakes
 Kathryn Deegan

 Cenkos Securities                           020 7397 8900
 James King
 William Talkington

                                             020 3781 8334

 Camarco
 Owen Roberts
 Eddie Livingstone-Learmonth

                                             014 8174 2642

 Ocorian Administration (Guernsey) Limited
 Kevin Smith

 

Notes to Editors(1):

About NextEnergy Solar Fund

NESF is a specialist solar and energy storage climate impact fund.  The
Company is structured as a 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
infrastructure funds, and 10% in energy storage.

NESF currently has a diversified portfolio comprising of the following:

Solar PV:

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

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

·      A 210MW co-investment into a Portuguese solar project alongside
NextPower III ESG, currently under construction

·      A UK solar project under construction (Whitecross 36MW)

·      A ready-to-build UK solar project (Hatherden 50MW)

·      A $50m commitment into NextPower III ESG (a private solar
infrastructure fund providing exposure to both operating and under
construction, international solar assets)

 

Energy Storage:

Joint Venture Partnership with Eelpower:

·      A 50MW standalone battery storage project in Fife, Scotland,
currently under construction (part of a £300m joint venture with Eelpower)

·      A portfolio of 250MW pre-construction standalone battery storage
projects in the East of England

 

Co-located programme:

 

·    First site identified for a 6MW co-located battery storage project at
North Norfolk Solar Farm and discussions are ongoing with the local
distribution network operator to confirm an energisation date

 

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

As at 30 September 2022, the Company had an unaudited gross asset value of
£1,258m, 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 an unaudited net asset value of £725m.

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 www.nextenergysolarfund.com
(http://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.

Article 9

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 website (nextenergysolarfund.com/esg/
(http://www.nextenergysolarfund.com/esg/) ) & NEC Group website
(nextenergycapital.com/sustainability/transparency-and-reporting/
(https://www.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 multiple
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 350 individual solar plants for a capacity
in excess of 2.4GW across it institutional funds.  www.nextenergycapital.com
(http://www.nextenergycapital.com/)

 ●    NextEnergy Solar Fund ("NESF") is a specialist solar and energy storage
      climate impact fund, which is listed on the premium segment of the London
      Stock Exchange.  It currently has an installed capacity of 865MW spread among
      99 individual operating assets in the UK and Italy, comprising an unaudited
      gross asset value of £1,258m.  NESF is one of the largest listed solar and
      energy storage 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 in
      excess of its 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 is a fund that provides a positive social and
      environmental impact to the countries it has and will invest into.  NPIII
      completed its fundraise with a total of $896m, including an SMA raised.  The
      target of the fund was $750m.
 ●    NextPower UK ESG ("NPUK") is a private unlevered fund investing in greenfield
      subsidy-free solar projects, with PPA's, in the UK.  NPUK ESG recently
      announced its first close at £327 million, which is over 65% of the funds
      target of £500 million.  The UK Infrastructure Bank is the cornerstone
      investor for the fund and plans to invest up to £250 million 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 1.7GW.  WiseEnergy
clients comprise leading banks and equity financiers in the energy and
infrastructure sector.

www.wise-energy.com (http://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.8.3GW
of both green and brownfield project developments across global geographies.

 Notes:

(1:) All financial data is unaudited at 30 September 2022, being the latest
date in respect of which NESF has published financial information

 

Generating a more sustainable future

 

 

Interim Report

for the six months ended 30 September 2022

 

Our Objectives

Investment

To provide ordinary shareholders with attractive risk-adjusted returns,
principally in the form of regular dividends, through a diversified portfolio
of solar energy infrastructure assets with the addition of complementary
technologies, such as energy storage.

Strategic Objectives

Investment

•  Expand and strengthen the portfolio in line with the Company's
Investment Policy.

•  Enhance growth and diversification through the introduction of energy
storage and international solar assets.

Operational

•  Consistently achieve operational outperformance of the portfolio
attributable to active asset management.

•  Pursue continuous improvement in the management of operating costs
associated with the portfolio.

Environmental

•  Contribute towards a net zero sustainable future and help mitigate
climate change.

•  Enhance local biodiversity for the surrounding areas where we operate.

Society

•  Provide a positive social impact.

•  Continue to actively engage with and support the communities located
close to our solar assets.

Governance

•  Act in a manner consistent with our values of integrity, fairness and
transparency.

•  Maintain strong and constructive relationships with our shareholders and
other key stakeholders.

 

Performance Highlights

( )

 Financial Highlights(1)
 NAV per ordinary share

 as at 30 September 2022(1)

 122.9p

 (31 March 2022: 113.5p)

 Ordinary shareholders' NAV

 as at 30 September 2022

 £724.7m

 (31 March 2022: £668.5m)

 Financial Debt Gearing as at 30 September 2022(2)

 27%

 (31 March 2022: 25%)

 Dividends per ordinary share for the period ended 30 September 2022

 3.76p

 (30 September 2021: 3.58p)

 Cash dividend cover (pre-scrip

 dividends) for the period ended

 30 September 2022

 1.8x

 (30 September 2021: 1.0x)

 Total gearing as at 30 September 2022(3)

 42%

 (31 March 2022: 42%)

 NAV total return per ordinary share for the period ended 30 September 2022

 11.6%

 (30 September 2021: 7.9%)

 Ordinary shareholder total return for the period ended 30 September 2022

 11.0%

 (30 September 2021: 3.8%)

 Ordinary shareholder annualised total return since IPO

 7.7%

 (31 March 2022: 6.7%)

 Operational Highlights
 Total capacity installed as at 30 September 2022(5)

 865MW

 (31 March 2022: 865MW)

 Total electricity generation for the period ended 30 September 2022

 639GWh

 (30 September 2021: 539GWh)

 Operating solar assets as at 30 September 2022(6 7)

 99

 (31 March 2022: 99)

 Generation above budget for the period ended 30 September 2022

 6.1%

 (30 September 2021: 1.1%)

 ESG Highlights
 Tonnes of CO2e emissions avoided p.a.(4)

 266,500

 (30 September 2021: 229,000)

 Equivalent UK homes powered for one year(4)

 354,274

 (30 September 2021: 299,000)

 

1    Refer to the Alternative Performance Measures for calculation basis.

2    Financial debt gearing excludes the £200m preference shares.

3    Total gearing is the aggregate of financial debt, look through debt
and £200m of preference shares. The preference shares are equivalent to
non-amortising debt with repayment in shares.

4    www.greeninvestmentgroup.com/green-impact/green-investment-handbook
(http://www.greeninvestmentgroup.com/green-impact/green-investment-handbook) .

5    Excluding share in private equity vehicle (NextPower III). Inclusion
of NESF's 6.21% share of NextPower III on a look through equivalent basis
would increase total capacity by 21.7MW to 887MW.

6    Not including the $50m commitment into private equity vehicle (Next
Power III).

7    Newfield, a 0.18MW commercial rooftop solar asset, was removed from
the portfolio following termination of the lease by the landlord during the
period.

 

 

NextEnergy Solar Fund Overview

 

 

A SPECIALIST SOLAR AND ENERGY STORAGE CLIMATE IMPACT FUND WITH A DIVERSIFIED
HIGH-QUALITY PORTFOLIO, MANDATE FOR GROWTH AND A DIVERSE PIPELINE OF NEW
OPPORTUNITIES

 

 

ATTRACTIVE YIELD, TARGETING A TOTAL DIVIDEND OF 7.52P PER ORDINARY SHARE IN
RESPECT OF THE YEAR ENDING 31 MARCH 2023, PAYABLE QUARTERLY

 

 

MANAGED BY SOLAR SPECIALISTS:

• NEXTENERGY CAPITAL, INVESTMENT MANAGER

• WISEENERGY, ASSET MANAGER

BOTH LEADING MANAGERS IN THE SOLAR ENERGY INFRASTRUCTURE SECTOR

 

 

DIVERSIFIED PORTFOLIO:

• 99 OPERATING SOLAR ASSETS

• 1 INTERNATIONAL PRIVATE EQUITY SOLAR FUND INVESTMENT

• 2 EUROPEAN SOLAR CO-INVESTMENTS

• JOINT VENTURE PARTNERSHIP FOCUSED ON UK STANDALONE ENERGY STORAGE

 

 

POWERING THE EQUIVALENT OF 354,274 UK HOMES (EQUIVALENT TO NEWCASTLE AND
MANCHESTER) WITH RENEWABLE ENERGY FOR THE PERIOD

 

 

CONTINUED ASSET OUTPERFORMANCE SINCE IPO

 

 

Why Invest in NextEnergy Solar Fund?

ABUNDANT CLEAN ENERGY SOURCE

•         Enough solar energy hits the Earth in a single hour to
power the energy needs of the entire human population for a year.

•         Solar is the cheapest form of renewable energy generation
and quickest to construct.

RELIABLE INVESTMENT WITH ATTRACTIVE GROWTH PROSPECTS

•         Provides a regular attractive dividend for income seeking
investors.

•         Offers a natural hedge against inflation with a high
proportion of regulated revenues linked to RPI.

•         Large diversified operating portfolio with incremental
growth prospects through the introduction of complementary technologies, such
as energy storage.

PROVEN AND STABLE TECHNOLOGY

•         Reliable and predictable source of electricity due to high
consistency in yearly irradiation and minimal moving parts.

•         Long useful life (25-40 years) with high proportion of
contracted cash flows from operating solar assets.

COST-EFFECTIVE ELECTRICITY GENERATION

•         Active portfolio management provides prudent cost of
operation, maintenance and replacement of assets.

•         Solar technology has benefited from a significant
reduction in costs, falling over 90% in the last ten years. Subsidy-free solar
assets are economically competitive and provide attractive financial returns.

CLIMATE CHANGE SOLUTION

•         Fundamental to achieving a more sustainable future by
accelerating the transition to clean and sustainable energy.

•         Meaningful contribution to reducing CO(2)e emissions
throughthe generation and storage of clean electricity, reducing reliance on
fossil fuels across the grid.

•         Investment in solar provides significant biodiversity
benefits to the local surrounding areas.

Strategic Report

Chairman's Statement

"The Company is strategically positioned for its next wave of growth and
diversification, with energy storage set to play a very important role within
the portfolio. NESF continues to offer shareholders, both current and
prospective, an attractive investment opportunity.  Recent equity market
conditions, driven by macroeconomic and political events, have created an
attractive share price entry point, trading at a discount to the Net Asset
Value per share.

The Board and I are pleased to report that the Fund continues to outperform on
a technical, financial and operational basis, enhancing dividend cover and
supporting the dividend target of 7.52p per share for the financial year.

The Company's growth strategy aims to contribute to energy security and
independence, drive lower costs for consumers, and reduce the carbon emitted
by the energy sector.  Further capital will be required to fund our growth
trajectory. For this to occur, it will require government regulatory and
policy certainty in order to attract incremental funding for the Company and
the renewable energy sector more broadly.

The Company continues to benefit from the skillset of its Investment Adviser,
NextEnergy Capital, where in the past six months, they have delivered new and
unique opportunities, to ensure the Company adds shareholder value into
the future.

NESF continues to increase ESG transparency and reporting for investors with
the release of the Company's first standalone sustainability report. We are
also immensely proud to be classified as an Article 9 Fund under the EU SFDR
and Taxonomy Regulation, ensuring that the Company's ESG disclosures are
industry‑leading".

 

I am pleased to present the Interim Report for NextEnergy Solar Fund Limited
(the "Company", "Fund" or "NESF") for the six months ended 30 September 2022.

The period under review has continued to experience sustained elevated power
prices, increasing inflation rates, political instability and a cost-of-living
crisis across the UK. Despite these challenges, the current environment
presents a very attractive backdrop for investment in renewables, as
increasing energy supply and independence is essential in the UK and globally,
which will in turn reduce costs for consumers.

Solar and energy storage assets have a critical role to play in terms of
providing energy security and reducing reliance on volatile global power
markets and burning of fossil fuels. In addition, governments around the world
continue to drive forward their net zero targets and ambitions, with the
production of clean energy playing a key role in helping to achieve these.
NESF is in a strong position to provide solutions to the issues caused by
traditional energy sources and to take advantage of the opportunities
associated with the energy transition in the UK and across Europe.

Earlier this month, the Company published its first standalone sustainability
report. The report goes beyond the Company's immediate sustainability
obligations by providing in-depth details on the Company's sustainability
journey, its unique approach to biodiversity, and its industry leading ESG
initiatives, that deliver a real environmental and social impact.

The record high power prices have been driven by increased demand following
the re-opening of economies post-Covid and high gas prices resulting from
restrictions on Russian oil and gas associated with the conflict in Ukraine.
High-power prices are forecast to continue in the short to medium-term and are
a driving factor in the current high inflationary environment.

The Company remains supportive of a UK windfall tax on extraordinary and
excess profits brought about by external factors including the war in
Ukraine.  We believe that investment in renewable energy is key to solving
our nations' current cost of living crisis and long-term energy security,
decarbonisation and cost challenges.  We would therefore make the case for a
consistent approach to the encouragement of reinvestment of proceeds into new
projects through associated tax relief so that equality is created with the
oil and gas sector.  We believe that our NAV valuation approach largely
incorporates the potential impact on the Company of the windfall tax that has
recently been announced.

The Board believes that the Company is in a strong position to provide both an
attractive opportunity for investors and to make an impactful contribution
towards energy security and independence across the UK, through its continued
production of clean electricity and deployment of new clean generation and
storage assets which make a positive impact to the UK economy and underpin
efforts to tackle climate change.

For the period ended 30 September 2022, the Ordinary Shareholder Total Return
was 11.0% (30 September 2021: 3.8%) and the ordinary share Net Asset Value
("NAV") total return was 11.6% (30 September 2021: 7.9%). The Board is
delighted that NESF was promoted to the FTSE 250 index on 16 September 2022.

Since IPO, the NESF portfolio has continued to outperform budgeted generation,
whilst continuing to deliver on its electricity sales hedging strategy to
remove short term price volatility and strengthen the Company's dividend cover
position. Furthermore, NESF continues to play a part in tackling global
climate change and enhancing local biodiversity, as well as helping to reduce
the use of fossil fuels in generating electricity in the UK and further
afield.

Results and Key Events

The Company has made progress towards its growth goals whilst continuing to
offer financial stability during the period. NextEnergy Capital Limited (the
"Investment Adviser"), continues to provide dedicated support to the Company.
During the period ended 30 September 2022, the Company:

•   Achieved dividend cover of 1.8x and expecting to be fully covered with
an estimated dividend cover of between 1.3x - 1.5x for the year ending 31
March 2023;

•   Continued to implement its electricity sales strategy to increase the
certainty of revenue streams by reducing power price volatility;

•   Secured a £60m increase to its existing £75m Revolving Credit
Facility ("RCF") with AIB Group (UK) p.l.c. ("AIB") & NatWest, in addition
to signing a two-year extension to its £70m RCF with Santander UK to fund the
investment pipeline (both at favourable rates);

•   Signed its second international co-investment with NextPower III LP
taking a 13.6% stake in a 210MW solar project currently under construction in
Santarém, Portugal;

•   Commenced a co-located battery retrofit programme, identifying
potential sites across NESF's current UK operating solar assets;

•   Advanced its position in the energy storage sector by increasing its
strategic joint venture partnership with energy storage specialist EelPower
Limited to £300m in total via a 75% stake in a new £200m Joint Venture
Partnership vehicle ("JVP2");

•   Started construction on the Company's first 50MW battery storage
project in Fife, Scotland (expected to be energised and grid connected in the
first half of 2023) through its pre-existing Joint Venture Partnership vehicle
with EelPower Limited ("JVP1");

•   Commenced construction works for Whitecross (36MW) and grid preparation
works for Hatherden (50MW) and secured Contracts for Difference ("CfDs") for
100% of the generating capacity of both new-build UK solar projects; and

•   Gained classification under Article 9 of the EU Sustainable Finance
Disclosure Regulation and EU Taxonomy Regulation.

Following the period end, the Company:

•   Acquired the development rights for a high-quality 250MW lithium-ion
battery storage project in the East of England through JPV2 for £32.5m; and

•   Released its first standalone sustainability report, which highlights
NESF's contribution to biodiversity, climate change and ethical supply chains
through its operations.

Dividend Target

NESF has a progressive annual dividend policy, and when appropriate, the Board
considers increasing the target dividend paid to shareholders. To date the
Board has increased the target dividend at least in line with yearly UK RPI
every year since the Company listed in 2014. In April 2022, the Board of NESF
approved a target dividend of 7.52 pence per ordinary share for the year
ending 31 March 2023, representing a 5.0% increase from the previous year
(compared with 4.1% calculated RPI rise published by the Office for National
Statistics ("ONS") for the 2021 calendar year).

The Company has achieved all annual dividend targets whilst maintaining a
covered dividend since IPO.

Standalone Battery Storage

The Company's first 50MW battery storage project through JVP1 is currently
under construction in Fife, Scotland. The project will initially operate at 1
hour duration. The Company intends to increase the duration of the project to
2 hours and current construction works include the infrastructure necessary
for that extension. In September 2022, the Company announced that it had
advanced its position in the energy storage sector through a new £200m JVP2
with Eelpower Limited ("Eelpower"). JVP2 reflects the successful relationship
built with Eelpower, offering enhanced terms by increasing NESF ownership to
75%, with Eelpower holding the remaining 25%.

Following the period end, the Company announced its first investment through
JVP2. The Company acquired the development rights for a high-quality 250MW
lithium-ion battery storage project in the East of England. The project has
already secured planning permission and further demonstrates the value
delivered through its relationship with Eelpower. Once constructed this will
take the total current announced standalone battery storage projects in the
portfolio to 300MW.

Full construction of the project remains subject to shareholder and FCA
approval as the Company's existing policy is limited to 10% of Gross Asset
Value into energy storage. The Company will be consulting investors over the
coming months to seek support to increase its energy storage limit to allow
the Company to fully capture the energy storage growth opportunities available
to it.

Co-Located Battery Storage

In April 2022, post the year end, NESF announced a new co‑located battery
storage retrofit programme across the Company's 91 UK operating solar farms.
As part of this programme the first site for a co-located battery project was
identified, extending the existing 11MW North Norfolk solar farm to include a
6MWh/12MWh battery system. Planning permission for the co-located battery
system has been secured and the Company is in discussions with the local
distribution network operator to confirm an energisation date. An additional
four potential locations for co-located battery storage systems have been
identified to date and are being progressed into development stage.

Co-Investments

As a result of being an investor in NextPower III LP ("NPIII", a NextEnergy
Capital managed private equity solar infrastructure fund that invests in OECD
markets globally), NESF benefits from co‑investment opportunities through
direct stakes in solar assets alongside large international institutional
investors on a no fee, no carry basis. This is particularly beneficial as it
provides the Company with access to an attractive new pipeline of potential
international assets not available to other market participants or investors.
Energisation of the Company's first co-investment, a Spanish 50MW solar
project, Agenor Hive S.L.U ("Agenor"), is expected to occur in 2023.

In May 2022, the Company announced a second co-investment in Portugal,
Santarém. The Company acquired a 13.6% stake in the 210MW solar asset in
Portugal for a consideration of €22.5m. Energisation of this project is
expected to take place in 2023. Once energised, Santarém is expected to
benefit from a long-term PPA for the sale of electricity which is currently
being negotiated with a creditworthy counterparty. Co-investments with
NextPower III have thus already amounted to a total of c.€33.5m alongside
the Company's US$50m commitment to NextPower III.

Continued Growth in UK Solar

The Company also commenced construction of Whitecross, a 36MW utility solar
asset, located in Lincolnshire. The original construction date of the asset
was deferred from H2 2021 due to supply chain risks post Covid-19 which have
been sufficiently addressed.  The asset is now expected to be energised
during Q1 2023 and will generate enough renewable electricity each year to
power approximately 10,000 households.

During the period, the Company commenced grid connection works and
construction mobilisation phase at Hatherden, a 50MW subsidy-free solar farm.

The two projects, Whitecross and Hatherden, have been selected to be part of
the fourth CfD Allocation Round (AR4). The CfDs last for 15-years, are index
linked to inflation (CPI) annually, and are scheduled to commence from 31
March 2025 at the AR4 solar PV strike price of £45.99/MWh (set in 2012
equivalent prices).

Whitecross and Hatherden form part of a selection of subsidy-free projects
totaling 150MW and including High Garret (8.4MW), Hall Farm 2 (5.4MW) as well
as Staughton (50MW). The successful selection of the 150MW subsidy-free
portfolio demonstrates the Company's ability to respond efficiently and
effectively to a changing UK solar market through its expertise in identifying
opportunities and maximising risk-adjusted returns.

During the period, NESF also added a 0.18MW commercial rooftop solar asset,
Holiday Inn, to its portfolio. It is part of an agreement made with the
renewable energy developer, Zestec. The asset is located on a Holiday Inn in
Nottinghamshire and benefits from an attractive 25-year power purchase
agreement ("PPA") for 100% of its generated volume.

NAV and Operating Results

At the period end, the ordinary shareholders' NAV was £724.7m equivalent to
122.9p per ordinary share (31 March 2022: £668.5m, 113.5p per ordinary
share). The substantial change in NAV over the six-month period reflects a
large increase in power price forecasts (+12.0p per ordinary share) despite
discounting the power curves for the inherent uncertainty and an upward
revision in short-term inflation forecasts (+7.5p per ordinary share). The
above NAV drivers were offset by a 0.5% discount rate increase to unlevered
operating UK solar assets in the context of increasing UK long-term gilt
yields, driven by the Bank of England ("BoE") base rate increases to +2.25%
during the period (-3.7p per ordinary share).

Profit and comprehensive income for the period was £77.1m (30 September
2021: £45.5m) with earnings per ordinary share of 13.1p (30 September 2021:
7.74p). Cash dividend cover (pre-scrip dividends) was 1.8x (30 September 2021:
1.0x).

As at 30 September 2022, NESF had an annualised Ordinary Shareholder Total
Return since IPO of 7.7% (31 March 2022: 6.7%) and an annualised NAV total
return since IPO of 9.1% (31 March 2022: 8.0%). At the period end, the NESF
share price was 111.0p, which was a 9.7% discount to the NAV per ordinary
share of 122.9p.

Power Prices

The dramatic increases in UK and European wholesale power prices from the
previous year has sustained during the current period. The volatility is
attributable to reduced gas supply following the conflict in Ukraine, which
was exacerbated by pre-existing low levels of gas storage across the EU. UK
electricity prices remain extremely volatile and forecasts estimate power
price approaching £500/MWh for early winter 2023 and prices around £250/MWh
more than one year beyond the valuation date.

Given the recent volatility in power prices and, at the time of calculating
the NAV, the possibility of a price cap or windfall tax on renewable
generation being implemented by the UK government, the Company discounted the
forward power prices as supplied by its market consultants which it uses in
the calculation of its NAV.  The Company does not consider that the
short-term power price forecasts are a reliable reflection of the power prices
which are likely to be received for future generation. Therefore, where prices
have not been fixed/hedged, forecast power prices are discounted to capture
this underlying uncertainty and to reduce risk associated with future cash
flows.  The discounts applied to the Company's NAV analysis lead to a
reduction of 7.5p / share in the Company's NAV.  Further details of the
discounts applied to forecast power prices can be found in the Investment
Adviser's Report.

 

Of the Company's revenues during the period, 51.4% were derived from
government subsidies and long-term PPAs and, at the end of the period, the
average remaining weighted life of the subsidies was 12.5 years.

The remaining 48.6% of the Company's revenues were derived from selling the
electricity generated to carefully selected counterparties in the open market
and, therefore, are exposed to market power price movements until the price
has been locked ('hedged'). The Asset Manager's electricity sales desk is
focused on securing the best terms for NESF's electricity sales. This flexible
approach is designed to protect against adverse short-term price movements
whilst also enabling the Company to secure attractive fixed prices for
specified future time periods which provide increasing certainty on
dividend cover.

Looking forward to the next three financial years, as at 10 November 2022,
the Company has agreed pricing covering 83% of the total portfolio (716MW).

•    93.3% of UK budgeted generation for the 2022/23 financial year
(average fix price of £86.2MWh);

•    74.1% of UK budgeted generation for the 2023/24 financial year
(average fix price of £72.9MWh);

•    44.3% of UK budgeted generation for the 2024/25 financial year
(average fix price of £89.7MWh); and

•    13.0% of UK budgeted generation for the 2025/26 financial year
(average fix price of £147.2MWh).

Portfolio Performance

Energy generated during the period was 639 GWh (30 September 2021: 539GWh) and
the portfolio achieved a generation outperformance of 6.1% (30 September 2021:
1.1%), increasing revenues by an estimated £4.9m against budget (30 September
2021: £0.9m). During the period, solar irradiation across the portfolio was
9.9% above budget (30 September 2021: 2.3%).

The Company's UK portfolio performed above expectations with generation
outperformance of 6.4% (30 September 2021: 1.1%) and the Italian portfolio
performed above expectations with generation outperformance of 1.6% (30
September 2021: 3.3%).

Debt Strategy

At the period end, the Company announced that it had increased the commitments
available under its Revolving Credit Facility ("RCF") with AIB Group (UK)
p.l.c. ("AIB") & NatWest from £75m to £135m. The additional commitments
have been agreed on attractive terms with a margin of 120bps over SONIA
("Sterling Overnight Index Average"), available until June 2024. The Company
also signed a two-year extension to its £70m RCF with Santander UK to fund
the investment pipeline.

As at 30 September 2022, the Company had £200m of preference shares (31 March
2022: £200m). The Company's subsidiaries also had financial debt outstanding
of £336m, inclusive of NextPower III debt of £5.9m (31 March 2022: £283m).

Of the financial debt, £179.6m represented two long-term fully amortising
debt facilities, £150.2m was drawn under two RCFs and £5.9m was the
look-through debt in relation to the US$50m commitment into NextPower III.

At the period end, the Company's subsidiaries had £54.8m (30 September 2021:
£86m) undrawn from two RCFs and the Company had a cash balance of c.£11.7m
(30 September 2021: £4.3m).

The total financial debt represented 27% of Gross Asset Value ("GAV") as at 30
September 2022 (31 March 2022: 26%). At the same reporting date, the total
gearing comprising the total financial debt and the preference shares
represented 42% of GAV (31 March 2022: 42%) within the 50% limit contained
within the investment policy.

Dividends Paid

The Directors have approved a second interim dividend of 1.88p per ordinary
share, which will be paid on 31 December 2022 to ordinary shareholders on the
register as at the close of business on 17 November 2022. Following the
payment of the second interim dividend, the Company will have paid total
dividends of 3.76 per ordinary share in respect of the six months ended 30
September 2022 (30 September 2021: 3.58p).

 Six months ended:  Cash dividends  Scrip dividend  Total distributions
 30 Sept 2022       £20.9m          £0.7m           £21.6m
 30 Sept 2021       £19.6m          £1.3m           £20.9m

The Company continues to offer a scrip dividend alternative as approved by
ordinary shareholders at the 2022 Annual General Meeting ("AGM"), details of
which can be found on the Company's website (nextenergysolarfund.com).

Environmental, Social and Governance (ESG)

NESF's commitment to ESG and sustainability remains at the forefront of its
strategy and purpose. The Investment Adviser, NextEnergy Capital, is a
signatory of the United Nations' Principles for Responsible Investments and
integrates ESG principles into all aspects of the NextEnergy Group's
investment and asset management processes. NESF incorporates ESG factors into
all investment decisions by implementing the Investment Adviser's Sustainable
Investment Policy throughout the investment process, from preliminary
screening through to risk management during the ownership phases.

Net Zero Alignment

Aligned with the Company's commitment to support the UK Government's net zero
ambitions presented at COP26, NESF's portfolio, during the period ended 30
September 2022, generated 639 GWh of clean electricity, contributing to the
avoidance of 266,500 tonnes of CO2e emissions (30 September 2021: 229,000,
tonnes CO2e) and equivalent to powering 354,274 UK homes for six months (30
September 2021: 299,000).  This is roughly equivalent to powering a city with
836,087 inhabitants (e.g. Manchester and Newcastle combined) or removing
176,245 cars off the road for six months (30 September 2021: 151,260 cars).
The above data has been calculated by the Green Analytics team of the Green
Investment Group, a third-party climate related data provider.

Biodiversity Net Gain

NESF's 91 UK solar assets provides a great opportunity to achieve biodiversity
net gain ("BNG") across our operational sites through the implementation of
the Universal Biodiversity Management Plan programme. The Investment Manager
is actively engaged with the Department for Environment Food & Rural
Affairs ("Defra") through consultation on the development of the BNG Site
Register and continues to work closely throughout the planning process to
ensure that the development pipeline is compliant with the Environment Act
2021 and any pending secondary legislation for BNG.

The importance of applying mitigation hierarchy is well understood across all
aspects of NESF's investment lifecycle, from mergers and acquisitions, to
planning, development, construction and operational management of the assets.
The Investment Manager is engaged with applying environmental governance to
ensure consistent application of biodiversity controls, which also considers
on-site biodiversity opportunities such as encouraging wildflower meadows,
installing bug hotels, partnering with local beekeepers and other initiatives
to improve the local biodiversity, as well as local community programmes.
Please refer to the Sustainability report on the NESF website:
nextenergysolarfund.com/esg/transparency-and-reporting/.

Supply Chain Management

As detailed in the Company's Sustainability Report, the Investment Adviser's
Head of ESG, Giulia Guidi, chairs the SEUK task group on Responsible Sourcing
and has been at the forefront of a collaborative industry initiative between
SEUK and SPE to promote responsible production in the solar sector's supply
chain since 2021. The Solar Stewardship Initiative (SSI) was launched in
October 2022 with the Investment Adviser acting not only as a sponsor and
supporter, but also playing a key role as a coordinator of the SSI launch for
SEUK. NESF continues to strengthen its supply chain risk management, whereby
the ESG, procurement, construction and investment teams work together to
ensure that contractors and suppliers abide by the adviser's code of conduct
and ESG standards.

Positive Social Contribution

NESF contributes to local growth and development wherever its assets are
located. The Company is dedicated to ensuring best-practice labour standards
are applied by all its contractors. In addition to the ESG activities on
behalf of NESF and other clients, the NextEnergy Group continues to donate at
least 5% of its net profits to the NextEnergy Foundation ("Foundation"), which
was established in 2017. The Board and I are proud that NESF supports the
Foundation. The Foundation participates proactively in the global effort to
reduce carbon emissions, provide clean power sources in regions where they are
not available and contribute to poverty alleviation. To find out more
information please scan the QR code below.

EU Taxonomy and Sustainable Finance Disclosure Regulation

NESF complies with the requirements of the EU Taxonomy and Sustainable Finance
Disclosure Regulation ("SFDR"). The Company's legal adviser has confirmed that
NESF is classified under Article 9 of the SFDR, as the Company is marketed in
the EU and has sustainable investment as its objective. The Company's
sustainable investment objectives arise from its contribution to climate
change mitigation, addressed through its focus on investments in solar assets
and battery storage assets. In addition, the Company has a robust ESG
integrated process which is aligned with the "Do Not do Significant Harm"
(DNSH) criteria of the EU Taxonomy, and implements strong safeguard on social,
community and human right impact across its value chain. In light of this
classification, NextEnergy Group has made the relevant disclosures (SDFR Annex
III and V) for NESF, available on the Company's website
(nextenergysolarfund.com).

Task Force on Climate-Related Financial Disclosures

NESF recognises the importance of reporting on the impacts of climate change
and has been an official supporter of the goals of the Task Force on
Climate-related Financial Disclosures ("TCFD") since September 2019. The
Company has included the Company's full TCFD report on pages 46-51 of 31 March
2022 annual report and has also disclosed the report as a stand-alone document
on its website.

Appreciation

The Board would like to thank the Investment Adviser and its employees for
their hard work, continuing to deliver substantial value to the Company's
ambitions to deliver sustained high performance and significant positive
impact.

Outlook

The Board, Investment Manager and Investment Adviser believe that the market
environment continues to be favourable for the Company and will be consulting
investors over the coming months to seek support to increase its energy
storage limit to allow the Company to fully capture the energy storage growth
opportunities available to the Fund.

Undoubtedly, macro-economic and political events have impacted and will
continue to impact the renewable sector in which the Company operates.
Mitigating risk and increasing visibility of future cash flows remains a
priority for the Fund. The increase in power price volatility during the
calendar year and in forward pricing has underlined the benefit and value of
the Company's hedging strategy through the Investment Adviser's active
electricity trading desk. The price for electricity is driven by several
factors that are inherently difficult to predict but is ultimately dependent
on supply and demand. In the current unstable economic climate, the Board
continues to closely monitor both macro and micro economic indicators and
governmental information to assess the potential future impact on the
Company's activities.

ESG integration continues to be a core part of NESF's business strategy,
ensuring that the Fund not only delivers on climate mitigation (i.e. carbon
emission avoided), but it also contributes to biodiversity, community benefits
and a more transparent supply chain. The implementation of the ESG policy is
integrated into NESF investment decisions and across the whole value chain.
Thanks to an ESG expertise, the Company continues to lead the industry by
example, from its commitment towards biodiversity net gain, its strong
transparency and reporting practices, as well as its extensive engagement with
industry associations, NGOs and experts to advance the sustainable energy
transition. The COP27 climate change conference and upcoming COP15
biodiversity conference will set out ambitious plans on a global stage to take
action towards achieving the world's collective climate goals as agreed under
the 2015 Paris Agreement, and addressing the critical importance of
biodiversity, further supporting the need for robust ESG integration
throughout the Company.

NESF continues to consolidate its leadership position in the growing UK
long-term corporate PPA market, building upon the landmark 100MW Camden
acquisition with PPA off taker AB InBev. This PPA market can provide
long-term, reliable cashflows for the Company, whilst supporting large
corporates' energy needs through their desire to consume renewable green
energy and to help tackle climate change.

NESF is continually monitoring its power price hedging strategies in a
volatile market for the sale of electricity from assets to secure attractive
risk-adjusted returns.

The Company continues to identify additional co-located battery storage
opportunities through its retrofit programme, in addition to its existing
joint ventures with Eelpower for standalone battery storage. Working closely
with leading delivery partners in the UK battery sector, NESF expects that
co-location of battery storage systems alongside the Company's existing solar
portfolio will provide additional asset, technology and revenue
diversification, whilst also accessing the attractive future revenue
opportunities that battery storage systems present.

The Company has a strong pipeline of international growth opportunities on a
direct and co-investment basis, as well as its pipeline of electricity storage
assets in the UK. The pipeline has been composed to complement the existing
portfolio, diversify some asset-specific/market risks, and enhance shareholder
returns.

NESF is aiming to extend the useful life of two further assets during the
current financial year, adding to the 35 UK assets (337MW) which have already
secured extensions since IPO. These extensions will be value accretive by
increasing long-term revenues.

The Company has demonstrated that it can be resilient to the volatility that
the Covid-19 pandemic and Ukraine conflict has posed, and the Company remains
well placed to continue to meet its investment objectives and harness growth
opportunities in the future which are in line with the Company's strategic
goals.

Finally, as demonstrated at last year's COP26 conference, the UK is setting an
example to the rest of the world on how economies can change their energy mix
to tackle climate change. The next six months provide an exciting opportunity
for NESF as it continues to invest in both solar assets and energy storage.
The Board strongly believes that the Company is making a real difference to
the UK energy landscape and looks forward to helping deliver both global net
zero goals and value to our shareholders.

Kevin Lyon,

Chairman

18 November 2022

 

Investment Adviser's Report

NextEnergy Group is a leading specialist solar and energy storage investment
manager and asset manager.  The NextEnergy Group is responsible for the
acquisition and management of the Company's portfolio, including the sourcing
and structuring of new investments and advising on the Company's financing
strategy.  It has c.$2.9bn of assets under management and employs over 250
people worldwide.

 

 

Investment Adviser's Investment Committee

The Investment Adviser's Investment Committee comprises Michael
Bonte-Friedheim, Aldo Beolchini, Giulia Guidi and Ross Grier, who have in
excess of 70 years' combined industry experience.

 Michael Bonte-Friedheim is Founding Partner and CEO of NextEnergy Group

 Aldo Beolchini is Managing Partner and Chief Investment Officer of NextEnergy
 Capital

 Giulia Guidi is Head of ESG at NextEnergy Capital

 Ross Grier is UK Managing Director of NextEnergy Capital

 
Results

NextEnergy Capital Limited, the Investment Adviser, continues to provide
dedicated support to the Company through what has been a volatile 6-month
period of high economic and political instability. We are closely monitoring
economic developments and governmental information to assess the potential
future impact on the Company's activities.

As at 30 September 2022, the NAV per ordinary share was 122.9p (31 March 2022:
113.5p). The substantial change in NAV over the six month period reflects a
large increase in power price forecasts (+12.0p per ordinary share) and an
upward revision in short-term inflation forecasts (+7.5p per ordinary share).
The above NAV drivers were offset by a 0.5% discount rate increase to
unlevered operating UK solar assets in the context of increasing UK long-term
gilt yields (-3.7p per ordinary share).

UK power prices have remained at extraordinarily high levels and there is
significant uncertainty that price levels for renewable generation will be
in-line with current forecasts (which are reflecting power prices in excess of
£500/MWh for early parts of 2023, and prices around £300/MWh more than one
year beyond the valuation date). Given the recent volatility in power prices
and, at the time of calculating the NAV, the possibility of a price cap or
windfall tax on renewable generation being implemented by the UK government,
the Company discounted the forward power prices as supplied by its market
consultants which it uses in the calculation of its NAV.  The Company does
not consider that the short-term power price forecasts are a reliable
reflection of the power prices which are likely to be received for future
generation. Therefore, where prices have not been fixed/hedged, forecast power
prices are discounted to capture this underlying uncertainty and to reduce
risk associated with future cash flows.  The discounts applied to the
Company's NAV analysis lead to a reduction of 7.5p / share in the Company's
NAV.  Further details of the discounts applied to forecast power prices can
be found below.

Investment Highlights

In line with the investment policy, the Company continues to advance a
significant pipeline of UK solar assets, international solar assets, UK
battery storage assets as well as international solar co-investment
opportunities through NESF's commitment to NextPower III ("NPIII"). Most
notably, the Company has a $50m commitment ($30.9m currently drawn) into
NPIII, two battery storage Joint Venture Partnerships with Eelpower Limited
(c.300MW) and UK solar investments (86MW).  These, coupled with a substantial
forecasted increase in clean energy investment levels (relative to 2020), as
outlined in the IEA World Energy Outlook 2022 report, provide strong momentum
into the second half of the financial year, where significant progress is
being made in executing additional dividend-enhancing acquisitions.

These investment opportunities aim to achieve robust financial returns,
increase dividend cover and add geographical, technological, and revenue
diversification to the NESF portfolio.  The Company envisages that
realisation of the future pipeline will be funded through a mixture of
drawdowns on existing Revolving Credit Facility ("RCF") facilities and future
equity issuances.

International Solar Co-investments

During the period, the Company has continued to expand into new geographies
through co-investments alongside NPIII. NPIII is a US$806m private equity
solar fund focused on utility scale solar assets in OECD markets with a
portfolio of operational and in-construction solar assets. NESF's US$50m
commitment also unlocks attractive co-investment opportunities on a direct
investment basis alongside NPIII and other limited partners in the NPIII fund,
on a no-fee, no carry basis.

In January 2022, the Company announced its first co-investment consisting of a
24.5% stake in a Spanish 50MW utility scale solar project, Agenor. In May
2022, the Company announced a 13.6% stake in Santarém, its second
co-investment with NPIII, a 210MW solar asset in Portugal. Energisation of the
project is expected to take place in 2023. Once energised, Santarém is
expected to benefit from a long-term PPA for the sale of electricity which is
currently being negotiated with a robust creditworthy counterparty.

These investments will benefit NESF in the following ways:

•    Low revenue risk through entering PPAs with high-credit
counterparties; and

•    Additional geographical diversification.

UK Battery Storage Investments

NESF has continued to diversify its portfolio through expansion into the
energy storage space. NESF has developed a strong relationship with Eelpower
Limited ("Eelpower"), which has provided the Company with access to leading UK
battery storage expertise. The company's first £100m Joint Venture
Partnership vehicle ("JVP1") was announced last year and is owned 70% by NESF
and 30% by Eelpower.

The Company's first 50MW battery storage project through JVP1 is currently
under construction in Fife, Scotland, and is expected to be energised and
grid-connected in the first half of 2023.

In September 2022, NESF entered its second £200m Joint Venture Partnership
vehicle ("JVP2") with Eelpower. JVP2 benefits from enhanced terms by
increasing NESF ownership to 75%, with Eelpower holding the remaining 25%.
Following the period end, the Company announced that it had made its first
acquisition as part of JVP2 for £32.5m. The project includes the development
rights, permits, and initial grid milestones for a 250MW portfolio of
high-quality battery storage projects and grid connections in the East of
England. The project further demonstrates the value delivered through the
relationship with Eelpower, taking the current announced standalone battery
storage projects in the portfolio to 300MW.

Once constructed, the project will provide vital grid balancing services
whilst harnessing excess electricity generation from wind at low import prices
and then exporting electricity at times of low generation and high prices.

The project provides a very attractive return profile for the Company's
portfolio. Battery storage is a highly complementary technology to Solar PV,
and the profiles of both are uncorrelated, providing further diversification
to the Company's portfolio from a technology, revenue and geographic
perspective.

The Directors have concluded that both Joint Venture Partnerships meet the
control requirements of the relative accounting standards and are therefore
accounted for as subsidiaries.

In April 2022, the selection of the first site for a co-located battery
storage project occurred. The project will extend the existing 11MW North
Norfolk solar farm within the NESF portfolio to include a 6MW/12MWh battery
system. Planning permission for the co-located battery system has been secured
and discussions are ongoing with the local distribution network operator to
confirm an energisation date. Implementing co-located batteries across the
portfolio presents an attractive growth opportunity as these assets offer both
synergies with PV assets, as well as offering diversification to portfolio
income.

UK Solar Investments

Starting in 2018, the Company sourced a pipeline of projects to be developed
into operating subsidy-free assets and set a target of c.150MW to add into its
portfolio.

During the period, the Company commenced construction of Whitecross, a 36MW
utility solar asset, located in Lincolnshire. The asset is expected to be
energised during Q1 2023 and will generate electricity for approximately
10,000 households' annual electricity consumption. During the period, the
Company commenced grid connection works and construction mobilisation phase of
Hatherden, a 50MW subsidy-free solar farm in Hampshire.

Alongside three other assets in the NESF portfolio, Whitecross and Hatherden
contribute towards a selection of subsidy-free projects totaling 150MW. The
other three assets being High Garret (8.4MW), Hall Farm 2 (5.4MW) and
Staughton (50MW). The successful selection of the 150MW subsidy-free portfolio
demonstrates the Company's ability to respond efficiently and effectively to a
changing UK solar market.

Furthermore, Whitecross and Hatherden have been selected to be part of the
fourth CfD Allocation Round (AR4). The CfD programme lasts for 15-years and is
annually index linked to inflation (CPI). It is rescheduled to commence from
31 March 2025 at the AR4 solar PV strike price of £45.99/MWh (set in 2012
equivalent prices).

During the period, NESF added a commercial rooftop solar asset to its
portfolio, secured through an existing agreement made with the renewable
energy developer, Zestec. Holiday Inn is a 0.18MW asset is located on a
Holiday Inn in Nottinghamshire and benefits from an attractive 25-year power
purchase agreement ("PPA") for 100% of its generated volume.

The NE Group's Energy Sales desk is responsible for managing the strategy for
the sale of electricity from the subsidy-free operating assets without
long-term contracts. Details on the power price risk management strategy can
be found below and in note 19b of the Financial Statements.

Newfield, a 0.18MW commercial rooftop solar asset, was removed from the
portfolio following termination of the lease by the landlord. The Company has
received appropriate compensation in line with the termination clause in the
lease agreement.

Portfolio Performance

Energy generated during the period was 639 GWh (30 September 2021: 539GWh) and
the portfolio achieved a generation outperformance of 6.1% (30 September 2021:
1.1%), increasing revenues by an estimated £4.9m against budget (30 September
2021: £0.9m). During the period, solar irradiation across the portfolio was
9.9% above budget (2021: 2.3%).

The Asset Manager monitors actual performance versus expectations for assets
operational for at least two months post completion. Similarly, the generation
performance of assets that are yet to pass Preliminary Acceptance Certificate
("PAC") in accordance with the engineering, procurement and construction
("EPC") contract is not reported by the Asset Manager.

Asset Management Alpha

The Asset Management Alpha is an important metric that allows the Company to
identify the "real" outperformance of the portfolio due to effective asset
management and excludes the effect of variation in irradiation. The "nominal"
outperformance is calculated as the GWh generated by the portfolio versus the
GWh expected in the assumptions used at the time of acquisition. This metric
can be used for comparison with other peers in the solar industry.

                  Irradiation (delta vs. budget)  Asset Management Alpha  Generation (delta vs. budget)
 UK portfolio     +10.2%                          (3.8%)                  + 6.4%
 Italy portfolio  +4.0%                           (2.4%)                  + 1.6%
 Total            +9.9%                           (3.8%)                  +6.1%

 

Portfolio Optimisation

The asset manager focusses on implementing technical improvements across the
portfolio, reducing operating costs through the utilising of existing
insurance contracts and re-negotiating contractual terms by entering into new
agreements with suppliers.

Asset life extensions

As at 30 September 2022, 35 UK assets (337MW), comprising c.39% of the
Company's portfolio, had secured 5, 10 or 15 year lease extensions. We
continue to work on extending the life of the remaining assets and are
targeting a further two assets for the remainder of the current financial year
to 31 March 2023.

Asset optimisation

During the period, 12 sites entered into new Operating and Maintenance
'O&M' contracts. This has resulted in an overall reduction from £6,622/MW
to £6,585/MW.

During the period, insurance claims were successfully closed out for storm
damages in relation to solar assets North Farm, High Garrett and Balhearty.
The Company received a combined total settlement of £429k.

As at 30 September 2022, eight assets (62 MW) of the Company's portfolio are
equipped with inverters that were supplied by Emerson, a solar PV manufacturer
that exited the market a few years ago. Due to their ageing, the inverters
have been experiencing an increased failure rate, the Company has therefore
decided to replace all the Emerson inverters. The works will start in January
2023 and is expected to be completed by Q4 2023.

 Six months ended 30 September          No. of assets monitored  Solar Irradiation    Asset Management Alpha  Generation (delta vs. budget)
                                                                 (delta vs. budget)
 2018                                   84                       +8.4%                (0.5%)                  +7.9%
 2019                                   85                       +4.8%                +0.2%                   +5.0%
 2020                                   86                       +10.8%               +0.3%                   +11.1%
 2021                                   88                       +2.4%                (1.2%)                  +1.1%
 2022                                   90                       +9.9%                (3.8%)                  +6.1%
 Cumulative from IPO to September 2022  90                       +3.6%                +1.2%                   +4.8%

The investment adviser is reviewing options to make strategic re-investments
across the portfolio to support and enhance long-term asset health

 

Short/medium-term power purchase agreements

NESF continues to lock in power price hedges over a 48-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.

NextEnergy Group's energy trading desk, ensure that the Company's electricity
sales strategy increase the certainty of revenue streams whilst mitigating the
negative impact of short-term fluctuations in the power markets. Secured
pricing comprises fixed price contracts and hedging under the trading
contracts.

 
 UK hedging summary(1)  FY2022/ 23  FY2023/ 24  FY2024/ 25  FY2025/

26
 Generation hedged (%)  93.3%       74.1%       44.3%       13.0%

1    Covers 83% of the total portfolio (716MW) as at 10 November 2022

 

For the six months ended 30 September 2022, the Italian portfolio derived c.
82% of revenues from subsidies (principally FiTs) and c. 12% of revenues
resulted from the sale of electricity under fixed price agreements covering
100% of Italian electricity generation for calendar year 2022 at a weighted
average fixed price of c.€64/MWh (calendar year 2021:€45/MWh). For
calendar year 2023, c.62% of the Italian portfolio has fixed price agreements
in place for H1 2023 at a weighted average fixed price of €91.0/MWh. For H2
2023, 100% of the Italian portfolio has fixed price agreements in place at a
weighted average fixed price of €139.5/MWh.

OFGEM audits

During the period, no material adjustments to the NAV were made as a result of
Office of Gas and Electricity Markets ("OFGEM") audits. Since IPO, the 24
OFGEM audits have been successfully signed-off without impacting ROC
accreditations. The NextEnergy Group has staff who are experienced in dealing
with the ongoing audits. Engagement with OFGEM is through professional
advisers and senior NextEnergy Group staff. The team has identified and mapped
contractual recourse associated with identified risk of loss for completed and
ongoing audits.

Portfolio Valuation
Introduction

The Investment Adviser carries out the fair market valuation of the Company's
underlying investment portfolio in line with its accounting policies. This
valuation is then presented to the Company's Board for review and approval.
The valuation is carried out quarterly (ad hoc valuations may also be
undertaken from time to time, for example in conjunction with an equity fund
raising).

The valuation principles used are based on a discounted cash flow methodology
except for NPIII which is valued using the estimated attributable NAV. Assets
which are not yet operational, or where the completion of the acquisition is
not imminent at the time of valuation, use the acquisition cost as a proxy for
fair value.

The Board reviews the operating and financial assumptions used in the
valuation of the Company's underlying portfolio.

 Portfolio valuation - key assumptions          As at                           As at

30 September 2022
31 March 2022
 UK long-term inflation                         2.25%                           2.25%
 UK short-term inflation                        12.4%                           8.0%

(1 year horizon)
 Weighted average discount rate                 6.8%                            6.3%
 Weighted average asset life                    27.0 years                      27.5 years
 UK short-term power price average (2022-2026)  £139.1/MWh (real 2022)          £105.2/MWh (real 2022)
 UK long-term power price average (2027-2041)   £45.6/MWh (real 2022)           £44.3/MWh (real 2022)
 Italy power price average                      €79.1/MWh (real 2022)           €60.8/MWh (real 2022)

(20 years)
 UK corporation tax rate                        19% until 2023, 25% thereafter  19% until 2023, 25% thereafter

 

Managing NESF's merchant market exposure

 PPA sourcing and structuring                                                                                                  Energy and market risk management                                                                                                                                        Market and pricing analysis
 Run competitive off-taker selection processes through our extensive network in                                                We measure, monitor and manage merchant exposure through selling at spot,                                                                                                NEC provides pricing for NESF projects, supported by multiple independent
 the solar industry                                                                                                            entering into short-term, medium-term and long-term PPAs                                                                                                                 short and long-term third-party power price forecasts

Constant dialogue with investors, banks and off-takers on developing new and innovative structures for risk diversification to enable us to increase portfolio returns

 Quantitative evaluation of the offers in terms of risk and reward and devise                                                                                                                                                                                                                           Undertake rigorous analysis and monitoring of the main drivers for power
 optimal project-specific solutions                                                                                                                                                                                                                                                                     prices in target markets

Individual view of market price risks and opportunities and delivery obligations in order to find the optimal PPA structure
Monitor policy/regulatory developments in the UK and other OECD target markets to obtain an holistic energy market overview

 
Forecast power prices methodology

For the UK portfolio, we use multiple sources for UK power price forecasts.
At the short end (up to three years), where PPAs exist we use the PPA prices
that have been achieved. For periods where there are no PPAs in place, we use
the short-term market forward prices.  After year two we use a rolling
blended average of three leading independent energy market consultants'
long-term central case projections.  This approach allows mitigation of any
delay in response from the three independent market forecasters
("Consultants") used by the Company in publishing periodic (quarterly) or ad
hoc updates following any significant market development.

For the Italian portfolio, a leading independent energy market consultant's
long-term projections are used to derive the power curve adopted in the
valuation.

The power price forecasts used also include a 'solar capture' discount which
reflects the difference between the prices available in the market in the
daylight hours of operation of a solar asset versus the baseload prices
included in the power price estimates. This solar capture discount is provided
by the Consultants on the basis of a typical load profile of a solar asset and
is reviewed as frequently as the baseload power price forecasts. The
application of such a discount results in a lower long-term price being
assumed for the energy generated by NESF's portfolio.

Given the recent volatility in power prices and, at the time of calculating
the NAV, the possibility of a price cap or windfall tax on renewable
generation being implemented by the UK government, the Company discounted the
forward power prices as supplied by its market consultants which it uses in
the calculation of its NAV.  The Company does not consider that the
short-term power price forecasts are a reliable reflection of the power prices
which are likely to be received for future generation.  Therefore, where
prices have not been fixed/hedged, forecast power prices are discounted to
capture this underlying uncertainty and to reduce risk associated with future
cash flows.  The discounts outlined below were applied to the Company's NAV
analysis, leading to a reduction of 7.5p / share in the Company's NAV.

 Time period  Discount applied to unhedged portion of portfolio power prices
 Q4 2022      No discount has been applied
 Q1 2023      50% discount
 FY 2023/24   35% discount
 FY 2024/25   25% discount has been applied to Summer 2024 price and 20% discount has been
              applied to Winter 2024 prices
 FY 2025/26   10% discount
 FY 2026/27   No discount has been applied

 

 Historic - UK power prices

 UK electricity day ahead prices increased from £250.4/MWh in March 2022 to
 £262.6/MWh in September 2022. (Source: N2EX - UK baseload - day ahead).
 Forecast UK power prices (real 2022)

 The Company's current UK 20 year average power price forecast represents an
 increase of 15.9% compared to that used at the end of the previous financial
 period (and 37.2% below the average price used at IPO).
 Historic - Italian power prices

 Italian electricity day ahead prices increased from €308.9/MWh in March 2022
 to €429.9/MWh in September 2022. (Source: Gestore Marcati Energetici -
 purchasing price).
 Forecast Italian power price (real 2022)

 On average, the Company's current Italian long-term power price represents an
 increase of 30.1% compared to that used at the end of the previous financial
 year.

 

Discount rate

During the period, the UK rate of inflation began to increase and the market
started to price in an increase in the base rate of interest. On 3 November
2022 the Bank of England ("BoE") raised UK interest rates by 0.75% to 3.0% in
line with market expectations at the end of the period. In the context of
higher interest rates in response to changes to the BoE base rate, the yield
on UK long-term gilts has also increased, putting upward pressure on discount
rates. Therefore, during the period, the Company has increased the discount
rate for unlevered operating UK solar assets by 0.5% to 6.25% (31 March 2022:
5.75%). This change is in line with the increases in discount rates observed
by the Investment Adviser in the sector in which the Company operates and
continues its robust approach to valuing the portfolio. The previous
adjustment to the unlevered operating UK solar discount rate was made for the
valuation as at 31 March 2021.

 Discount rate assumptions       Premium   As at 30 September 2022   As at 31 March 2022
 UK unlevered                    -         6.25%                     5.75%
 UK levered                      0.7-1.0%  6.95-7.25%                6.45-6.75%
 Italy unlevered(1)              1.5%      7.75%                     7.25%
 Subsidy-free (uncontracted)(2)  1.0%      7.25%                     6.75%
 Life extensions(3)              1.0%      7.25-8.25%                6.75-7.75%

(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.

The resulting weighted average discount rate for the Company's portfolio was
6.8% (31 March 2022: 6.3%). The Company does not use the weighted average cost
of capital ("WACC") as the discount rate for its investments as it believes
that the reduction in WACC deriving from the introduction of long-term debt
financing does not reflect the greater level of risk to equity investors
associated with leveraged assets or levered portfolios. However, for the
purposes of transparency, the Company's pre-tax WACC as at 30 September 2022
was 5.2% (31 March 2022: 5.3%).

The Company has not included the impact of the discount rates used in the
NPIII investment, as the Company has no control or influence over these rates
and a weighted average discount rate is not produced by NPIII, as their
underlying investments are in multiple geographies.

Asset life

The discounted cash flow methodology implemented in the portfolio valuation
assumes a valuation time horizon capped to the current terms of the lease and
planning permission on the properties where each individual solar asset is
located. These leases have been typically entered into for a 25-year period
from commissioning of the relevant solar plants (specific terms may vary).
However, the useful operating life of the Company's portfolio of solar assets
is expected to be longer than 25 years. This is due to many factors,
including:

•   Solar assets with technology components similar to the ones deployed in
the Company's portfolio have been demonstrated to be capable of operating for
over 45 years, with levels of the technical degradation lower than those
assumed or guaranteed by the manufacturers; local planning authorities have
already granted initial planning consents that do not expire and/or have
granted permissions to extend initial consented periods;

•   The Company owns rights to supply electricity into the grid through
connection agreements that do not expire; and

•   Discounted cash flow valuation assumes a zero-terminal value at the end
of the lease term for each asset or the end of the planning permission,
whichever is the earlier.

Operating performance

The Company values each solar asset on the basis of the minimum performance
ratio ("PR") guaranteed by the vendor, or that estimated by the appointed
technical adviser during the acquisition due diligence. These estimates have
been generally lower than the actual PR that the Company has been experiencing
during subsequent operations. We therefore deem it appropriate to adopt the
actual PR after two years of operating history when, typically, the plants
have satisfied tests and received Final Acceptance Certification ("FAC").

As at 30 September 2022, 72 solar assets (totalling 602MW) achieved FAC and
their actual PR was used in the discounted cash flow valuation.

 FAC timeline for remaining assets       Capacity

                                         (MW)
 Financial quarter ending December 2022  55
 Financial quarter ending March 2023     56
 2023 onwards                            152
 Total                                   263

 
NAV

The Company's NAV is calculated quarterly and based on the valuation of the
investment portfolio provided by the Investment Adviser and the other assets
and liabilities of the Company calculated by the Administrator. The NAV is
reviewed and approved by the Investment Manager and the Board. All variables
relating to the performance of the underlying assets are reviewed and
incorporated in the process of identifying relevant drivers of the discounted
cash flow valuation.

In accordance with IFRS 10, the Company reports its financial results as an
Investment entity and on a non-consolidated basis (see note 2c to the
Financial Statements). The change in fair value of its assets during the
period is taken through the Statement of Comprehensive Income.

NAV bridge for the period ended 30 September 2022

The movement in the NAV was driven primarily by the following factors:

•    An increase in short-term (2022-26) UK power prices forecasts
provided by Consultants, being 32.3% higher than assumptions at 31 March 2022.
The Company incorporated and applied appropriate discounts where necessary to
the forecasts released by the Consultants up to the date of preparation of
this Interim Report;

•    The increase in discount rate for unlevered operating UK solar
assets;

•    The upward revision in short-term inflation forecasts;

•    The operating results achieved by the Company's solar assets; and

•    The dividends and operating costs paid during the period.

 
NAV sensitivity analysis as at 30 September 2022

Additional sensitivity analyses can be found in note 19b to the Financial
Statements.

 

Operating results

Profit before tax was £77.1m (30 September 2021: £45.5m) with earnings per
ordinary share of 13.1p (30 September 2021: 7.7p).

Operating expenses and ongoing charges

The operating expenses, excluding preference share dividends paid by the
Company, for the period amounted to £3.8m (30 September 2021: £3.3m). The
Company's ongoing charges ratio ("OCR") was 1.1% (2021: 1.1%). The budgeted
OCR for the financial year ending 31 March 2023 is 1.1%. The OCR, which has
been calculated in accordance with the Association of Investment Companies
recommended methodology, is an Alternative Performance Measure.

 
Cash flow analysis

As at 30 September 2022, the Company held cash of £11.7m at an A/+ credit
rated financial institution.

Cash received from assets in the period covered the operating expenses, the
preference share dividends, dividends declared to ordinary shareholders in
respect of the period ended 30 September 2022 and part of the investment into
HoldCos.

 Cash flows of the Company                        Period ended 30 Sep 2022   Period ended 30 Sep 2021

£'000
£'000
 Company cash balance at 1 April                  19,608                     10,809
 Investment in HoldCos                            (36,085)                   (24,057)
 Received from HoldCos                            57,288                     45,026
 Directors' fees                                  (138)                      (106)
 Investment Manager fees                          (2,992)                    (2,499)
 Administrative costs                             (389)                      (653)
 Dividends paid in cash to ordinary shareholders  (20,896)                   (19,618)
 Preference share dividends                       (4,710)                    (4,584)
 Company cash balance at 30 September             11,686                     4,318

 
NESF Group operating SPV's

The below table represents the unaudited consolidated financial results of the
Company's SPVs

                     Period ended September 2022 (unaudited)  Period ended September 2021 (unaudited)

£'000
£'000
 Total SPVs revenue  95,686                                   66,799
 EBITDA              80,821                                   54,844
 EBIT                52,034                                   27,959

 

Cash Dividend Cover

 Six months ended                             £'000    Pre-scrip dividends £'000

30 September 2022
 Cash income for period1                      48,273
 Net operating expenses for period            (3,751)
 Preference share dividend                    (4,763)
 Net cash income available for distribution   39,759
 Ordinary shares dividend paid during period           21,624
 Cash dividend cover(2)                                1.8x

(1)  Cash income differs from the Income in the Statement of Comprehensive
Income as the latter is prepared on an accruals basis.

(2)   Alternative Performance Measures.

 
Financing
Financial debt

In June 2022, the NESF Group signed a two-year extension to its £70m RCF with
Santander UK, now available until July 2024. In September 2022, the NESF Group
secured £60m additional commitments under an existing RCF from £75m to
£135m, available until June 2024.

At 30 September 2022, the Company's subsidiaries (including NPIII) had
financial debt outstanding of £335.7m (31 March 2022: £283m), on a
look-through basis, as shown in the table below. Due to a combination of low
debt levels and RPI linked subsidies, debt covenants at the HoldCos level
would only be breached at very low power prices (less than c.£20/MWh). No
covenants breaches have occurred during the period.

Preference shares

At 30 September 2022, the Company had £200m of preference shares outstanding
(31 March 2022: £200m). The preference shares are non-redeemable (except in
limited exceptional circumstances), non-voting and convertible into ordinary
shares from 1 April 2036 at their issue price (£200m in aggregate) plus any
unpaid preference share dividends at the date of conversion. For financial
accounting purposes, and in line with IFRS the preference shares are
classified as long-term liabilities.

The preference shares are equivalent to non-amortising debt with repayment in
shares, and the Company is not required to use cashflow, or raise funds, to
repay them at the end of their life. The absence of amortisation enhances the
ability to pay the ordinary share dividend, and repayment in shares removes
refinancing risk.

From 1 April 2030, the Company may elect to redeem all or some of the
preference shares. Redemption of the preference shares by the Company would
provide an attractive uplift if the share price is trading at a healthy
premium. Benefits of the preference shares for NESF include:

•    A reduction in the exposure to secured debt financing;

•   The fixed preferred dividend of 4.75p per preference share being a
significantly lower all-in annual cash cost to the Company compared to issuing
ordinary shares; and

•   The further optimisation of the Company's capital structure and, over
the long term, increase in cash flows available to fund ordinary share
dividends or for reinvestment compared to refinancing with conventional
long-term amortising financial debt, thereby increasing the cash dividend
cover

The investment management fee is calculated based on the ordinary share NAV
and, accordingly, no management fee is payable in respect of the preference
shares. The terms of the preference shares can be found in note 23 to the
Financial Statements.

Total gearing

The financial debt, together with the preference shares, represented a total
gearing level of 42% (31 March 2022: 42%), which is below the maximum limit of
50% in the Company's Investment Policy.

 Provider/arranger        Type                              Borrower  No. of power plants secured(1)  Loan to Value(2  Tranches          Facility Amount  Amount Out-standing  Termination (inc. options to extend)  Applicable
                                                                                                      ) (%)
(£m)
(£m)
rate
 MIDIS/CBA/NAB            Fully-amortising long-term debt3  NESH      21 (241MW)                      48.2%            Medium-term       48.3             41.8                 Dec-26                                2.91%4
                          Floating long-term                          24.2                                             24.2                               Jun-35                                                     3.68%(4)
                          Index-linked long-term                      38.7                                             33.85                              Jun-35                                                     RPI + 0.36%
                          Fixed long-term                             38.7                                             38.7                               Jun-35                                                     3.82%
                          Debt service reserve facility               7.5                                              -                                  Jun-26                                                     1.50%
 MIDIS                    Fully-amortising long-term debt3  NESH IV   5 (84MW)                        45.0%            Inflation-linked  27.5             18.95                Sep-34                                RPI + 1.44%
                          Fixed long-term                             27.5                                             22.2                               Sep-34                                                     4.11%
 Total long-term debt                                                                                                                    212.4            179.6
 Banco Santander          Revolving credit facility         NESH VI   13 (100MW)                      N/a              N/a               70.0             40.5                 Jun-24                                SONIA + 1.60%
 Natwest/AIB              Revolving credit facility         NESH III  19 (226MW)                      N/a              N/a               135.0            109.7                Jun-24                                SONIA + 1.20%
 Total short-term debt                                                                                                                   205.0            150.2
 NPIII look through debt  N/a                               N/a       N/a                              N/a                               N/a              5.9(6)
 Total debt                                                                                                                                               335.7

1 NESF has 326MW under long-term debt financing, 326MW under short-term debt
financing and 214MW without debt financing (excludes NPIII look through debt).

2    Loan to Value defined as 'Debt outstanding / GAV'.

3    Long-term debt is fully amortised over the period secured assets
receive subsidies (ROCs and others).

4    Applicable rate represents the swap rate.

5   Represents the "real" outstanding debt balance. The "nominal"
outstanding debt balances are included in the debt balances provided in Note
23b to the financial statements.

6  The total combined short and long-term debt in relation to NESF's
commitment into NPIII (on a look through equivalent basis).

 

Alignment of interest

As at 16 November 2022, NextEnergy Group employees held 475,194 shares in
NESF.

Events After the Balance Sheet Date

Following the period end, NESF signed a £32.5m agreement to acquire the
development rights for a high-quality 250MW lithium-ion battery storage
project in the East of England, called Lapwing.  The project was secured
through JVP2, the Company's second Joint Venture Partnership vehicle with
Eelpower Limited.

 

NextEnergy Capital Limited

18 November 2022

Operating Portfolio

       Power plant                    Location           Acquisition  Subsidy/PPA1             Installed capacity  Cost        Remaining life of plant

date
(MW)
(£m)
(Years)
 1             Higher Hatherleigh     Somerset           Apr-14       1.6                      6.1                 7.3(3)      15.5
 2             Shacks Barn            Northamptonshire   May-14       2.0                      6.3                 8.2(3)      14.8
 3             Gover Farm             Cornwall           Jan-15       1.4                      9.4                 11.1(3)     17.2
 4             Bilsham                West Sussex        Jan-15       1.4                      15.2                18.9(3)     21.7
 5             Brickyard              Warwickshire       Jan-15       1.4                      3.8                 4.1(3)      17.1
 6             Ellough                Suffolk            Jul-14       1.6                      14.9                20.0(3)     26.4
 7             Poulshot               Wiltshire          Apr-15       1.4                      14.5                15.7(3)     16.4
 8             Condover               Shropshire         May-15       1.4                      10.2                11.7(3)     17.1
 9             Llywndu                Ceredigion         Jul-15       1.4                      8.0                 9.4         27.2
 10            Cock Hill Farm         Wiltshire          Jul-15       1.4                      20.0                23.6(3)     16.9
 11            Boxted Airfield        Essex              Apr-15       1.4                      18.8                20.6(3)     17.5
 12            Langenhoe              Essex              Apr-15       1.4                      21.2                22.9(3)     32.5
 13            Park View              Devon              Jul-15       1.4                      6.5                 7.7(3)      32.3
 14            Croydon                Cambridgeshire     Apr-15       1.4                      16.5                17.8(3)     17.2
 15            Hawkers Farm           Somerset           Jun-15       1.4                      11.9                14.5(3)     17.5
 16            Glebe Farm             Bedfordshire       Apr-15       1.4                      33.7                40.5(3)     27.2
 17            Bowerhouse             Somerset           May-15       1.4                      9.3                 11.1(3)     32.5
 18            Wellingborough         Northamptonshire   Jun-15       1.4                      8.5                 10.8(3)     16.7
 19            Birch Farm             Essex              Sep-15       FiTs UK                  5.0                 5.3(3)      17.7
 20            Thurlestone Leicester  Leicestershire     Oct-15       FiTs UK                  1.8                 2.3         10.6
 21            North Farm             Dorset             Oct-15       1.4                      11.5                14.5(3)     32.2
 22            Ellough Phase 2        Suffolk            Aug-16       1.3                      8.0                 8.0(3)      33.1
 23            Hall Farm              Leicestershire     Nov-15       FiTs UK                  5.0                 5.0(3)      37.9
 24            Decoy Farm             Lincolnshire       Mar-16       FiTs UK                  5.0                 5.2(3)      33.5
 25            Green Farm             Essex              Dec-16       FiTs UK                  5.0                 5.8         18.5
 26            Fenland                Cambridgeshire     Jan-16       1.4                      20.4                23.9(2,4)   17.8
 27            Green End              Cambridgeshire     Jan-16       1.4                      24.8                29.0(2,4)   17.9
 28            Tower Hill             Gloucestershire    Jan-16       1.4                      8.1                 8.8(2,4)    17.5
 29            Branston               Lincolnshire       Mar-16       1.4                      18.9                            32.4
 30            Great Wilbraham        Cambridgeshire     Mar-16       1.4                      38.1                            32.4
 31            Berwick                East Sussex        Mar-16       1.4                      8.2                 97.9(2,5)   19.0
 32            Bottom Plain           Dorset             Mar-16       1.4                      10.1                            32.7
 33            Emberton               Buckinghamshire    Mar-16       1.4                      9.0                             37.6
 34            Kentishes              Essex              Jul-17       1.2                      5.0                 4.5         37.5
 35            Mill Farm              Hertfordshire      Jul-17       1.2                      5.0                 4.2         34.3
 36            Bowden                 Somerset           Sep-17       1.2                      5.0                 5.6         34.4
 37            Stalbridge             Dorset             Jan-17       1.2                      5.0                 5.4         34.3
 38            Aller Court            Somerset           Sep-17       1.2                      5.0                 5.5         19.5
 39            Rampisham              Dorset             Sep-17       1.2                      5.0                 5.8         20.0
 40            Wasing                 Berkshire          Aug-17       1.2                      5.0                 5.3         24.2
 41            Flixborough            South Humberside   Aug-17       1.2                      5.0                 5.1         25.3
 42            Hill Farm              Oxfordshire        Mar-17       1.2                      5.0                 5.5         29.4
 43            Forest Farm            Hampshire          Mar-17       FiTs UK                  3.0                 3.3         29.5
 44            Birch CIC              Essex              May-17       FiTs UK                  1.7                 1.7         17.7
 45            Barnby                 Nottinghamshire    Aug-17       1.2                      5.0                 5.4         19.8
 46            Bilsthorpe             Nottinghamshire    Aug-17       1.2                      5.0                 5.4         20.2
 47            Wickfield              Wiltshire          Mar-17       1.2                      4.9                 5.6         20.6
 48            Bay Farm               Suffolk            Sep-17       1.6                      8.1                 10.5        32.4
 49            Honnington             Suffolk            Sep-17       1.6                      13.6                16.0        32.3
 50            Macchia Rotonda        Apulia             Dec-17       FiTs Italy               6.6                             13.3
 51            Lacovangelo            Apulia             Dec-17       FiTs Italy               3.5                             13.6
 52            Armiento               Apulia             Dec-17       FiTs Italy               1.9                             13.6
 53            Inicorbaf              Apulia             Dec-17       FiTs Italy               3.0                 116.22,6    13.4
 54            Gioia del Colle        Campania           Dec-17       FiTs Italy               6.5                             14.1
 55            Carinola               Apulia             Dec-17       FiTs Italy               3.0                             14.1
 56            Marcianise             Campania           Dec-17       FiTs Italy               5.0                             14.0
 57            Riardo                 Campania           Dec-17       FiTs Italy               5.0                 116.2(2,6)  14.0
 58            Gilley's Dam           Cornwall           Nov-17       1.3                      5.0                 6.4         32.2
 59            Pickhill Bridge        Clwyd              Dec-17       1.2                      3.6                 3.7         35.0
 60            North Norfolk          Norfolk            Dec-17       1.6                      11.0                14.6        22.1
 61            Axe View               Devon              Dec-17       1.2                      5.0                 5.6         24.9
 62            Low Bentham            Lancashire         Dec-17       1.2                      5.0                 5.4         23.4
 63            Henley                 Shropshire         Jan-18       1.2                      5.0                 5.2         23.7
 64            Pierces Farm           Berkshire          May-18       FiTs UK                  1.7                 1.2         16.6
 65            Salcey Farm            Buckinghamshire    May-18       1.4                      5.5                 6.5         16.6
 66            Thornborough           Buckinghamshire    Jul-18       1.2                      5.0                 5.7         19.2
 67            Temple Normaton        Derbyshire         Jul-18       1.2                      4.9                 5.6         18.8
 68            Fiskerton Phase 1      Lincolnshire       Jul-18       1.3                      13.0                16.6        27.5
 69            Huddlesford HF         Staffordshire      Jul-18       1.2                      0.9                 0.9         18.3
 70            Little Irchester       Northamptonshire   Jul-18       1.2                      4.7                 5.9         19.3
 71            Balhearty              Clackmannanshire   Jul-18       FiTs UK                  4.8                 2.6         28.3
 72            Brafield               Northamptonshire   Jul-18       1.2                      4.9                 5.8         33.7
 73            Huddlesford PL         Staffordshire      Jul-18       1.2                      0.9                 0.9         18.5
 74            Sywell                 Northamptonshire   Jul-18       1.2                      5.0                 5.9         18.6
 75            Coton Park             Derbyshire         Jul-18       FiTs UK                  2.5                 1.1         18.6
 76            Hook                   Somerset           Aug-18       1.6                      15.3                21.8(2)     31.5
 77            Blenches               Wiltshire          Aug-18       1.6                      6.1                 7.8(2)      16.2
 78            Whitley                Somerset           Aug-18       1.6                      7.6                 10.4(2)     31.3
 79            Burrowton              Devon              Aug-18       1.6                      5.4                 7.3(2)      31.0
 80            Saundercroft           Devon              Aug-18       1.6                      7.2                 9.6(2)      31.4
 81            Raglington             Hampshire          Aug-18       1.6                      5.7                 8.1(2)      31.3
 82            Knockworthy            Cornwall           Aug-18       FiTs UK                  4.6                 6.6(2)      15.5
 83            Chilton Canetello      Somerset           Aug-18       FiTs UK                  5.0                 9.0(2)      29.8
 84            Crossways              Dorset             Aug-18       FiTs UK                  5.0                 10.0(2)     29.8
 85            Wyld Meadow            Dorset             Aug-18       FiTs UK                  4.8                 7.1(2)      30.3
 86            Ermis                  Rooftop Portfolio  Jul-18       FiTs UK                  1.0                 3.0         14.1
 87            Angelia                Rooftop Portfolio  Jul-18       FiTs UK                  0.2                 0.6         14.0
 88            Ballygarvey            County Antrim      Jul-19       1.4 NIROCs               8.2                 8.5         25.3
 89            Hall Farm 2            Leicestershire     Aug-19       Subsidy-free             5.4                 2.5         36.8
 90            Staughton              Bedfordshire       Dec-19       Subsidy-free             50.0                27.4        36.4
 91            High Garret            Essex              Oct-20       Subsidy-free             8.4                 4.1         37.6
 92            Marham                 Norfolk            Jan 21       Long-term PPA            1.0                 0.7         38.7
 93            Sutterton              Lincolnshire       Mar 21       Long-term PPA            0.4                 0.3         38.3
 94            The Grange             Nottinghamshire    Feb 21       Long-term PPA            50.0                32.1        16.9
 95            South Lowfield         Yorkshire          Jun-21       Long-term PPA            50.0                29.6        22.5
 96            JSC (NZ)1              Worcestershire     Mar-19       FiTs UK                  0.04                0.04        24.6
 97            Karcher (NZ)1          Oxfordshire        Nov-19       Subsidy-free             0.3                 0.2         23.3
 98            Dolphin (NZ)1          East Sussex        Jul-21       Subsidy-free             0.2                 0.2         23.4
 99            Holiday Inn (NZ)1      Northamptonshire   Apr-22       Long-term PPA            0.18                0.2         24.6
 Subtotal                                                                                      865.0               999.5       27.0(7)
 100           NextPower III8         OECD Markets       Jun-21       Multiple long-term PPAs  21.78               28.3        n/a
 Total                                                                                         886.7               1027.8

 

(1)  1ROCs, unless otherwise stated. An explanation of the ROC subsidy is
available at
www.ofgem.gov.uk/environmental-programmes/renewables-obligation-ro
(http://www.ofgem.gov.uk/environmental-programmes/renewables-obligation-ro) .

2   With project level debt.

3  Part of the Apollo portfolio.

4   Part of the Thirteen Kings portfolio.

5   Part of the Radius portfolio.

6  Part of the Solis portfolio.

7  Average years remaining.

8  21.7MW represents the proportion of NPIII operational assets owned by NESF
on a look through equivalent basis as at 30 September 2022. NPIII is a
portfolio of assets at different stages of their project life cycle.

 

Portfolio Generation Performance

     Power plant                     Operational date    Period ended 30 September 2022                     Since acquisition
             Generation              Solar                            Generation delta  Solar               Generation delta

(GWh)
irradiation delta
(%)
irradiation delta
(%)

(%)
(%)
 1           Higher Hatherleigh      Apr-13              4.1          4.2               (1.7)               1.7               4.0
 2           Shacks Barn             Mar-13              4.5          5.6               9.0                 2.9               8.0
 3           Gover Farm              Oct-14              6.0          10.8              (7.3)               3.9               0.4
 4           Bilsham                 Nov-14              12.2         9.6               10.7                5.5               6.4
 5           Brickyard               Nov-14              2.6          6.0               2.4                 3.5               5.7
 6           Ellough                 Mar-14              10.9         8.9               4.6                 1.5               5.1
 7           Poulshot                Mar-15              10.2         5.2               5.8                 1.3               5.2
 8           Condover                Mar-15              6.7          1.2               (0.6)               0.4               0.9
 9           Llywndu                 Feb-15              6.0          2.3               10.8                (2.5)             4.5
 10          Cock Hill Farm          Mar-15              14.7         6.7               7.9                 3.4               5.3
 11          Boxted Airfield         Mar-15              14.7         9.7               12.4                3.9               6.1
 12          Langenhoe               Mar-15              17.2         13.6              15.9                6.7               9.7
 13          Park View               Mar-15              4.9          3.3               3.9                 (1.0)             1.5
 14          Croydon                 Mar-15              12.8         15.2              20.4                6.9               8.0
 15          Hawkers Farm            Mar-15              9.0          4.4               6.9                 1.0               4.0
 16          Glebe Farm              Mar-15              25.9         14.5              18.3                7.2               12.6
 17          Bowerhouse              Mar-15              6.1          8.3               (5.7)               3.6               (0.7)
 18          Wellingborough          Mar-14              6.3          9.2               13.1                3.1               5.9
 19          Birch Farm              Jun-15              3.9          12.2              11.9                5.0               6.9
 20          Thurlestone Leicester1  Apr-13              1.1          0.0               4.0                 0.0               0.2
 21          North Farm              Mar-15              8.4          4.3               (3.5)               (2.0)             (4.2)
 22          Ellough Phase 2         Jan-16              6.4          14.3              15.8                8.9               12.9
 23          Hall Farm               Aug-16              3.5          8.7               8.0                 4.4               1.4
 24          Decoy Farm              Nov-15              3.9          12.5              15.6                5.6               10.1
 25          Green Farm              Mar-16              3.7          9.5               4.7                 4.2               4.1
 26          Fenland                 Feb-15              15.2         12.6              9.3                 5.8               9.2
 27          Green End               Mar-15              17.4         11.0              3.3                 5.2               3.1
 28          Tower Hill              Mar-15              6.1          4.6               9.9                 3.5               7.2
 29          Branston                Mar-15              14.5         13.8              16.1                6.8               7.8
 30          Great Wilbraham         Mar-15              28.3         12.2              9.7                 5.9               5.8
 31          Berwick                 Mar-15              6.7          9.8               10.3                5.1               9.4
 32          Bottom Plain            Dec-14              7.5          9.0               3.1                 4.0               3.7
 33          Emberton                Mar-15              6.4          11.4              5.3                 4.9               2.6
 34          Kentishes               Dec-16              3.9          12.3              8.2                 6.2               6.4
 35          Mill Farm               Dec-16              4.0          16.2              16.8                9.1               11.2
 36          Bowden                  Mar-17              3.8          3.4               (0.4)               0.7               1.0
 37          Stalbridge              Mar-17              3.9          3.8               5.0                 1.1               6.0
 38          Aller Court             Mar-17              3.9          5.5               5.0                 3.7               5.0
 39          Rampisham               Mar-17              4.0          2.7               3.0                 (1.3)             (0.6)
 40          Wasing                  Mar-17              3.9          11.2              11.8                6.2               9.3
 41          Flixborough             Mar-17              3.7          10.9              11.1                6.1               8.3
 42          Hill Farm               Mar-17              3.8          10.3              14.2                6.6               9.2
 43          Forest Farm             Mar-17              2.4          11.7              14.7                5.4               9.3
 44          Birch CIC               Jun-15              1.3          12.9              7.8                 6.0               5.0
 45          Barnby                  Mar-17              3.6          10.7              11.2                5.2               5.6
 46          Bilsthorpe              Mar-17              3.6          10.1              10.1                4.9               6.6
 47          Wickfield               Mar-17              3.4          8.1               2.2                 5.5               4.3
 48          Bay Farm                Mar-14              6.0          10.0              13.6                7.0               8.9
 49          Honnington              Mar-14              10.3         11.0              11.8                4.4               5.0
 50          Macchia Rotonda         Feb-11              5.7          6.9               (4.6)               6.2               1.7
 51          Iacovangelo             Apr-11              3.2          6.9               2.5                 4.7               5.5
 52          Armiento                Apr-11              1.8          6.6               5.7                 5.4               7.2
 53          Inicorbaf               Mar-11              2.8          6.7               5.4                 5.7               6.3
 54          Gioia del Colle         Oct-11              6.0          1.4               3.0                 1.0               3.7
 55          Carinola                Oct-11              2.7          1.5               4.1                 2.3               3.9
 56          Marcianise              Sep-11              4.5          3.8               4.7                 2.6               3.8
 57          Riardo                  Sep-11              4.4          1.3               (1.0)               2.0               0.2
 58          Gilley's Dam            Mar-16              3.5          (0.3)             (5.7)               (3.8)             (2.8)
 59          Pickhill Bridge         Mar-17              2.6          5.8               8.8                 4.9               8.2
 60          North Norfolk           Jan-14              7.0          12.4              (7.8)               7.1               4.5
 61          Axe View                Mar-17              3.8          9.7               8.9                 6.2               7.5
 62          Low Bentham             Mar-17              3.3          0.3               (2.6)               2.2               2.5
 63          Henley                  Mar-17              3.5          5.3               7.0                 3.5               6.2
 64          Pierces Farm            Mar-15              1.3          10.6              12.0                4.2               7.7
 65          Salcey Farm             Sep-14              3.9          11.6              4.0                 8.4               5.2
 66          Thornborough            Mar-16              3.2          1.3               (9.0)               4.0               (7.8)
 67          Temple Normaton         Mar-16              3.0          7.0               (9.7)               4.7               (5.6)
 68          Fiskerton Phase 1       Mar-15              8.7          10.8              (3.4)               8.1               0.0
 69          Huddlesford HF          Mar-16              0.7          7.5               10.3                5.9               5.8
 70          Little Irchester        Mar-16              2.7          5.5               (20.0)              4.4               (7.7)
 71          Balhearty(4)            Mar-16              -            -                 -                   (0.8)             (27.9)
 72          Brafield                Mar-16              3.6          11.3              1.9                 7.5               1.3
 73          Huddlesford PL          Mar-16              0.6          6.5               4.3                 5.4               2.6
 74          Sywell                  Dec-15              3.8          8.4               8.5                 6.3               3.3
 75          Coton Park              Dec-15              1.7          2.9               7.2                 2.8               5.0
 76          Hook                    Mar-14              10.3         6.1               (5.4)               3.8               (0.2)
 77          Blenches                Mar-14              4.1          5.2               0.5                 4.6               4.8
 78          Whitley                 Mar-14              5.0          13.4              (7.4)               7.0               (1.4)
 79          Burrowton               Mar-14              8.6          6.2               -6.0                4.6               0.0

80
Saundercroft
 81          Raglington              Mar-13              3.3          9.9               (21.8)              4.2               (12.6)
 82          Knockworthy             Mar-13              2.8          4.8               (18.2)              2.3               (11.3)
 83          Chilton Canetello       Jul-12              3.5          13.0              (4.9)               6.1               3.6
 84          Crossways               Jul-12              3.6          8.9               (5.0)               4.4               1.9
 85          Wyld Meadow             Jul-12              3.0          4.0               (17.5)              (0.2)             (5.6)
 86          Ermis(1)                Oct-11              0.6          0.0               3.0                 0.0               0.6
 87          Angelia1                Oct-11              0.1          0.0               6.7                 0.0               3.1
 88          Ballygarvey             Mar-18              4.6          1.0               (4.2)               1.8               (2.1)
 89          Hall Farm 2             Aug-19              3.7          13.0              8.6                 11.3              1.5
 90          Staughton               Dec-19              39.9         19.8              21.1                12.7              11.2
 91          High Garrett            Oct-20              6.6          15.0              12.7                9.9               4.9
 92          Marham                  Jan-21              0.7          6.7               3.1                 (0.03)            (4.7)
 93          Sutterton               Mar-21              0.3          7.3               6.6                 3.1               6.2
 94          The Grange              Jan-21              38.1         14.7              6.4                 10.4              (1.4)
 95          South Lowfield          Jun-21              37.7         11.0              10.8                4.3               4.5
 96          JSC (NZ)1               Mar-19              0.0          0.0               0.2                 0.0               2.5
 97          Karcher (NZ)1           Nov-19              0.2          0.0               (1.1)               0.0               (4.0)
 98          Dolphin (NZ)1           Jul-21              0.2          0.0               12.4                0.0               11.2
 99          Holiday Inn (NZ)1       Apr-22              0.1          0.0               4.8                 0.0               4.8
 Subtotal                                                639          9.9               6.1                 3.6               4.8
 100         NextPower III3          Multiple            n/a          n/a               n/a                 n/a               n/a
 Total                                                   639          9.9               6.1                 3.6               4.8

(1)    Rooftop asset which is not monitored for irradiation.

2    An asset which is yet to pass provisional acceptance clearance (PAC)
are not reported by the Asset Manager.

3    NextPower III performance not included.

4    Due to damage caused by Storm Arwen in November 2021 and Storm Eunice
in February 2022, Balhearty was taken offline and is in the process of being
repaired by a chosen EPC contractor.

 

Sustainability and ESG

Introduction from Kevin Lyon, Chair of NESF

Sustainability and ESG factors are at the forefront of everything that we set
out to achieve: they provide a solid foundation to drive growth, whilst
providing enhanced due diligence on all potential opportunities and risks.
NESF is proud to qualify as an Article 9 fund under the EU SFDR
classifications, with a sustainable investment objective at its core.

Governments and major economies around the world continue to step up their
support for renewable energy, with the UK becoming the first major economy to
pass net zero emission laws, requiring all greenhouse gas emissions to be net
zero by 2050. In addition to this, the war in Ukraine has shown that the world
remains fragile, and that securing energy independence, security and
affordability are vital.

As one of the most affordable forms of renewable energy, solar photovoltaic
(PV) assets and energy storage play a huge part in the transition to clean
energy and we are in an excellent position to increase NESF's positive impact.
The nature and location of our assets offer us a unique opportunity to help
rebalance nature's assets, by developing our solar farms as biodiversity
'hubs'. As at 30 September 2022, we own 99 operating solar assets, of which 91
are in the UK and eight are in Italy, and indirectly own equity stakes in
another 21.7MW of solar projects via our stake in NextPower III. Our expansion
into UK battery energy storage will also contribute to the independence of the
UK's energy supply and aid the penetration of renewables in the UK.

We remain determined to reduce the risk of human rights abuses, including
modern slavery, within our supply chains through the way we do business and
contract with suppliers and partners. Tracking progress and reporting impact
change throughout our value chain is a crucial step in tackling climate
change, driving accountability, and ultimately delivering a sustainable future
for generations to come.

It is of critical importance for the global energy sector to accelerate
renewable energy generation, improving the amount of clean energy consumed
globally, whilst reducing the world's reliance on carbon-emitting energy
sources. We look forward to continuing our leading and transparent approach in
this space, helping to provide a cleaner future for tomorrow's generation.

Tonnes of CO2e emissions

avoided p.a. 1  (#_ftn1)

266,500

(30 September 2021: 229,000)

Equivalent UK homes powered

for one year1

354,274

(30 September 2021: 299,000)

Total clean electricity generated for the period ended 30 September 2022

639 GWh

(30 September 2021: 539 GWh)

 1  Greeninvestmentgroup.com/green-impact/green-investment-handbook
NESF's Sustainability Framework

NESF's Framework is built on three pillars: climate change, biodiversity and
human rights. The investment process is aligned with this Framework, and is
supported by our Sustainable Investment Policy, the Position Statements on
each of the three pillars and the Code of Conduct for Suppliers.

The United Nations Sustainable Development Goals ("SDGs") are core to the
Framework; they provide reference points against which we can measure
performance against the Company's high-level goals. This Framework defines the
sustainability approach and informs investment decisions and operational
practices.

NESF takes a 360° approach to sustainability, starting with the three pillars
as the core. The Company implements a bottom-up approach to its Framework by
measuring the impact on the three pillars by cross-referring the 17 UN SDGs
and their respective targets, particularly those that are material to its
business. The diagram below represents this approach and the layers of which
the approach is built on.

The pillars drive the Company's attention and actions on fundamental areas
where it has identified the existence of the most significant ESG risks and
opportunities for the fund. As a result, they allow the Company to ensure the
most effective management of the application of the Policies and UN SDGs to
our funds.

To find out more about how NESF integrates ESG into its investment process,
please go to the Company's standalone sustainability report:
nextenergysolarfund.com/esg/transparency-and-reporting.

The ESG team currently consists of three members (with plans to expand
significantly in the near future), Giulia Guidi, with more than 20 years of
combined experience in ESG risk management in the financial sector, David
Hawkins, with over 10 years of sustainability and environmental experience in
the energy sector, and Phoebe Wright, the ESG Analyst for the NextEnergy
Group. The expansion plans consist of three new associate positions and one
additional analyst position to contribute to the delivery of the Company's
evolving sustainability standards and growing investor expectations.

Sustainability Pillars
Climate Change:

Climate change mitigation is clearly an opportunity for NESF given its core
activities. This is also a risk with potential negative impacts on operations
that the Company is determined to address and disclose on.

The Company supported the UK Government's ambitious objective of bringing all
greenhouse gas emissions to net zero by 2050 and limiting global average
temperature rises to 1.5ºC compared to pre-industrial levels.

Biodiversity:

Biodiversity is an issue the Company and its investment adviser are
collectively passionate about.

NESF wants to enhance biodiversity at all its asset sites and are committed to
lead best practice in the solar industry. From initial site selection through
to decommissioning, the aim is to align practices with policies such as the UK
Government's 'A Green Future: our 25-year plan to improve the environment',
the objectives of the Taskforce on Nature-related Financial Disclosures
(TNFD), and the relevant UN SDGs.

Human Rights and Modern Slavery:

Action on human rights links directly to local communities. The people who
work on NESF's assets are generally neighbours, so the Company also focuses on
engagement with local communities, contractors and suppliers.

NESF respects fundamental human rights principles, and operate in line with
the UN Universal Declaration of Human Rights, the OECD Guidelines for
Multinational Enterprises and the UN Guiding Principles on Business and Human
Rights. The Company opposes any form of slavery or forced labour and publish
an annual Modern Slavery Statement.

NESF & SFDR - Article 9 Fund

The SFDR came into force on 10 March 2021, requiring financial market
participants to disclose their ESG policies and practices. NESF has published
an ESG Disclosure document on its website, which describes our approach and
how passionate we are in this area, and the Company has also made the relevant
disclosure in the annual report as well as pre-contractual disclosure. This
document outlines how the Company aligns with the EU Taxonomy, in particular
how it substantially contributes to climate mitigation, how it does no
significant harm (DNSH) to the other environmental objectives applicable to
the solar PV sector (climate adaptation, water management, circular economy
and biodiversity), and how it complies with the minimum safeguarding
standards, including, but not limited to, implementation of the OECD
Guidelines for Multinational Enterprises, and the UN Guiding Principles on
Business and Human Rights.

NESF classify under Art. 9 of the SDFR and starting from this year, it has
disclosed according to Annex V of the SFDR and Taxonomy Regulatory Technical
Standard (RTS). Please refer to  the NESF website for the relevant
disclosure. To continue to increase transparency, an FAQ document has been
published on the Investment Adviser website to clarify how NESF (and other
funds) are planning to comply with future EU SFDR requirements.

Task Force on Climate-Related Financial Disclosures ('TCFD')

In June 2022, the Company's published its first TCFD report, which outlines
the risks and opportunities as a result of the physical and economic
consequences of climate change. The full report can be found on the Company's
website: nextenergysolarfund.com/esg/transparency-and-reporting/.

Supply Chain Management

Ensuring that our high standards for ESG are mirrored in our supply chain is a
key priority for NESF. NESF's investment adviser not only enforces a robust
internal risk management approach but is also leading the industry through
collective engagement, including the launch of the Solar Stewardship
Initiative. This initiative has marked a milestone for the sector in
addressing transparency and traceability throughout the value chain.

Natural Capital Commitments

NESF's growing network of UK solar farms provides the opportunity to use land
in a unique way over an extended time period. The Company is seizing this
opportunity by creating biodiversity 'hubs' that benefit many different
stakeholders and the planet as a whole.

The Company is leading the industry and supporting the Global Goal for
Nature's targets of "nature-positive by 2030", and "nature‑recovery by
2050", by creating stepping stones for biodiversity, establishing best
practice, and introducing innovations that enhance, rather than deplete,
agricultural land.

NESF's Sustainability Report

To find out more about NESF's commitment to ESG and its case studies, see
NESF's standalone sustainability report for more information:Transparency
nextenergysolarfund.com/esg/transparency-and-reporting.

 ktCO2e avoided since IPO  Units
 1,985                     ktCO(2)e

 

 Metric                Units                  FY2018  FY2019  FY2020  FY2021  FY2022  HY2023
 GHG avoided           ktCO(2)e               211.2   299.4   307.7   317.6   328.7   266.5
 Nox avoided           tonnes                 193.1   276.5   274.4   283.4   296.3   241.5
 Sox avoided           tonnes                 365.9   499.2   511.9   527.5   549.7   444.5
 PM2,5                 tonnes                 15.9    22.6    23.2    24.0    25.2    20.8
 PM10                  tonnes                 4.0     5.6     5.8     5.9     6.2     5.1
 Fossil Fuels avoided  tonnes oil equivalent  90.0    127.7   131.2   135.9   142.8   117.8
                       million barrels        0.66    0.94    0.96    1.00    1.05    0.9

 

Principal Risks and Uncertainties

For the remaining six months of the year ending 31 March 2023
Emerging and Principal Risks

The Company's approach to risk governance, the risk review process and risk
appetite are set out in the Annual Report for the year ended 31 March 2022
within the following sections; Risk and Risk Management section in the
Strategic Report (pages 55 to 57) and the Risk, Internal Controls and Internal
Audit section in the Corporate Governance Statement (pages 65 and 72), this
can be found on our website (nextenergysolarfund.com).

The Principal risks and uncertainties to the achievement of the Company's
objectives are described on pages 55 to 57 of the Annual Report and are
categorised as follows:

•     Portfolio management and performance risks:

-    electricity generation falling below expectations;

-    asset outages due to long periods of preventative maintenance and
upgrade by Distribution Network Operators ("DNOs"); and

-    portfolio valuations.

•     External and market risks:

-    adverse changes in government policy and political uncertainty;

-    adverse changes to the regulatory framework for solar plants; and

-    changes to tax legislation and tax rates, health and safety.

•     Operational and strategic risks:

-    a decline in the price of electricity;

-    disruptions to supply chains;

-    counterparty risk; and

-    plant operational risks.

The Board believes that the aforementioned risks are unchanged with respect to
the remaining six months of the year to 31 March 2023. The Board has
identified the following emerging risks which are being monitored on an
ongoing basis:

•     The risk to the Company of a pandemic reoccurring; and

•     The risk associated with the ongoing OFGEM reviews of subsidy
accreditations.

During the period, the Board has identified the following new emerging risks
which are being monitored on an ongoing basis:

•    The risk of plans announced in November 2022 by UK government to
introduce a windfall tax for renewables;

•    The risk of goals by ministers to redefine "best and most versatile"
land (BMV) to include grade 3b land, which would restrict the development of
solar assets on such land; and

•    The risk of disruption to the global supply chain for components
required in the construction of solar and battery storage assets.

The inherent risks associated with investment in the solar energy sector could
result in a material adverse effect on the Company's performance and the value
of the ordinary shares. Risks, including emerging risks, are mitigated and
managed by the Board through continual review, policy setting and regular
reviews of the Company's risk matrix by the Audit Committee to ensure that
procedures are in place with the intention of minimising the impact of the
principal risks to the achievement of the Company's objectives. The Audit
Committee undertook a formal review of the Company's risk matrix at its
meeting held on 23 June 2022. The Board and the Audit Committee rely on
periodic reports provided by the Investment Manager and the Administrator
regarding risks that the Company faces. When required, experts, including tax
advisers, legal advisers and environmental advisers, are employed to gather
information.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Interim Report in accordance
with applicable law and regulations.

In accordance with the FCA's Disclosure Guidance and Transparency Rule
4.2.10R, the Directors confirm that, to the best of their knowledge:

•    The Unaudited Condensed Interim Financial Statements have been
prepared in accordance with IAS 34 Interim Financial Reporting;

•    The Interim Report, comprising the Chairman's Statement and the
Investment Adviser's Report, meet the requirements of an interim management
report and include a fair review of the information required by:

-    DTR4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the Unaudited Condensed Interim
Financial Statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and

-    DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place during the first six months
of the current financial year and that have materially affected the financial
position or performance of the Company during that period and any changes in
the related party transactions described in the last Annual Report that could
do so.

The Board is responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website
(nextenergysolarfund.com), and for the preparation and dissemination of
financial statements. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.

On behalf of the Board of Directors of NESF

 

Kevin Lyon

Chairman

18 November 2022

Independent Review Report to NextEnergy Solar Fund Limited

Conclusion
We have been engaged by NextEnergy Solar Fund Limited (the "Company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2022 of the Company, which comprises the Statements of Comprehensive Income, Financial Position, Changes in Equity, Cash Flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2022 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity ("ISRE (UK) 2410") issued by the Financial Reporting Council for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed
in an audit as described in the Scope of review section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However future events or conditions may cause the Company to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Company will continue in operation.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
interim financial report in accordance with the DTR of the UK FCA.

As disclosed in note 2, the annual financial statements of the Company are
prepared in accordance with International Financial Reporting Standards. The
directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 Interim Financial Reporting.

In preparing the half-yearly financial report, the directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless they either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.

Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the scope of review paragraph of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement letter to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
 

Dermot Dempsey

For and on behalf of KPMG Channel Islands Limited

Chartered Accountants, Guernsey

18 November 2022

Statement of Comprehensive Income (Unaudited Condensed)

For the six months ended 30 September 2022

                                                      Notes  Six months ended    Six months ended    Year ended

30 September 2022
30 September 2021
31 March 2022

(unaudited)
(unaudited)
(audited)

£'000
£'000
£'000
 Income
 Income comprises:
 Interest income                                             6,191               6,016               12,799
 Investment income                                           36,878              18,887              42,009
 Administrative services income                              5,203               5,051               10,226
 Net changes in fair value of investments             17     37,125              23,489              78,665
 Unrealised foreign exchange gain                            204                 -                   -
 Total net income                                            85,601              53,443              143,699
 Expenditure
 Preference share dividends                                  4,763               4,718               9,454
 Management fees                                      5      2,875               2,499               5,041
 Legal and professional fees                                 336                 316                 744
 Directors' fees                                      7      128                 106                 222
 Administration fees                                  6      142                 112                 227
 Other expenses                                       9      158                 78                  122
 Audit fees                                           8      90                  90                  138
 Charitable donation                                  10     -                   -                   100
 Regulatory fees                                             11                  45                  79
 Insurance                                                   11                  12                  22
 Total expenses                                              8,514               7,976               16,149
 Profit and comprehensive income for the period/year         77,087              45,467              127,550
 Earnings per ordinary share - basic                  14     13.08p              7.74p               21.69p
 Earnings per ordinary share - diluted                14     10.69p              6.36p               17.34p

All activities are derived from ongoing operations.

There is no other comprehensive income or expense apart from those disclosed
above and consequently a Statement of Other Comprehensive Income has not been
prepared.

The accompanying notes are an integral part of these condensed interim
financial statements.

Statement of Financial Position (Unaudited Condensed)

As at 30 September 2022

                                               Notes  30 September 2022  30 September 2021  31 March

(unaudited)
(unaudited)
2022

£'000
£'000
(audited)

£'000
 Non-current assets
 Investments                                   17     889,078            788,288            842,346
 Total non-current assets                             889,078            788,288            842,346
 Current assets
 Cash and cash equivalents                            11,686             4,318              19,608
 Trade and other receivables                   11     24,654             34,870             16,389
 Total current assets                                 36,340             39,188             35,997
 Total assets                                         925,418            827,476            878,343
 Current liabilities
 Trade and other payables                      12     (2,600)            (22,849)           (11,785)
 Total current liabilities                            (2,600)            (22,849)           (11,785)
 Non-current liabilities
 Preference shares                             23     (198,127)          (197,989)          (198,058)
 Total non-current liabilities                        (198,127)          (197,989)          (198,058)
 Net assets                                           724,691            606,638            668,500
 Equity
 Share capital and premium                     13     608,771            607,193            608,037
 Retained earnings                                    115,920            (555)              60,463
 Equity attributable to ordinary shareholders         724,691            606,638            668,500
 Total equity                                         724,691            606,638            668,500
 Net assets per ordinary share                 16     122.9p             103.1p             113.5p

 

The accompanying notes are an integral part of these condensed interim
financial statements.

The unaudited condensed financial statements were approved and authorised for
issue by the Board of Directors on 18 November 2022 and signed on its behalf
by:

Kevin
Lyon
Patrick Firth

Chairman
Director

 

Statement of Changes in Equity (Unaudited Condensed)

For the six months ended 30 September 2022

                                                     Share capital  Retained   Total equity

and premium
earnings
£'000

£'000
£'000
 Ordinary shareholders' equity at 1 April 2022       608,037        60,463     668,500
 Profit and comprehensive income for the period      -              77,087     77,087
 Scrip shares issued in lieu of dividends            734            -          734
 Ordinary dividends declared                         -              (21,624)   (21,630)
 Ordinary shareholders' equity at 30 September 2022  608,771        115,920    724,691
 Ordinary shareholders' equity at 1 April 2021       605,938        (25,147)   580,791
 Profit and comprehensive income for the period      -              45,467     45,467
 Scrip shares issued in lieu of dividends            1,255          -          1,255
 Ordinary dividends declared                         -              (20,873)   (20,875)
 Ordinary shareholders' equity at 30 September 2021  607,193        (555)      606,638
 Ordinary shareholders' equity at 1 April 2021       605,938        (25,147)   580,791
 Profit and comprehensive income for the year        -              127,550    127,550
 Scrip shares issued in lieu of dividends            2,099          -          2,099
 Ordinary dividends declared                         -              (41,940)   (41,940)
 Ordinary shareholders' equity at 31 March 2022      608,037        60,463     668,500

 

Statement of Cash Flows (Unaudited Condensed)

For the six months ended 30 September 2022

                                                                Notes  Six months ended    Six months ended    Year ended

30 September 2022
30 September 2021
31 March

(unaudited)
(unaudited)
2022

£'000
£'000
(audited)

£'000
 Cash flows from operating activities
 Profit and comprehensive income for the period/year                   77,087              45,467              127,550
 Adjustments for:
 Interest income receivable                                            (6,191)             (6,016)             (12,799)
 Interest income received                                              6,191               6,016               12,799
 Investment income receivable                                          (36,878)            (18,887)            (42,009)
 Investment income received                                            20,290              20,083              34,019
 Change in fair value of investments                            17     (37,125)            (23,489)            (78,665)
 Proceeds from HoldCos                                          17     22,785              64,900              82,443
 Payments to HoldCos                                            17     (26,726)            (38,549)            (58,370)
 Payments to NPIII                                                     (6,562)             (21,506)            (27,716)
 Proceeds from NPIII                                                   -                   -                   10,502
 Financing proceeds from HoldCos                                       5,000               -                   42,100
 Financing proceeds returned to HoldCos                                (5,000)             -                   (42,100)
 Net changes in unrealised foreign exchange                            (204)               -                   (32)
 Financial debt amortisation                                           69                  69                  139
 Dividends paid on preference shares as finance costs

                                                                       4,763               4,718               9,454
 Operating cash flows before movements in working capital

                                                                       17,499              32,806              57,315
 Changes in working capital
 Movement in trade and other receivables                               49                  (13,856)            694
 Movement in trade and other payables                                  (68)                (1,112)             131
 Net cash generated from operating activities                          17,480              17,838              58,140
 Cash flows from financing activities
 Dividends paid on preference shares                                   (4,710)             (4,711)             (9,500)
 Dividends paid on ordinary shares                                     (20,896)            (19,618)            (39,841)
 Net cash used in from financing activities                            (25,606)            (24,329)            (49,341)
 Net movement in cash and cash equivalents during period/year          (8,126)             (6,491)             8,799
 Cash and cash equivalents at the beginning of the period/year         19,608              10,809              10,809
 Effect of foreign exchange rate changes                               204                 -                   -
 Cash and cash equivalents at the end of the period/year               11,686              4,318               19,608

The accompanying notes are an integral part of these condensed interim
financial statements.

 

Notes to the Financial Statements (Unaudited Condensed) For the six months
ended 30 September 2022

1.    General Information

The Company was incorporated with limited liability in Guernsey under the
Companies (Guernsey) Law, 2008 on 20 December 2013 with registered number
57739, and is regulated by the Guernsey Financial Services Commission as a
registered closed-ended investment company. The registered office of the
Company is Floor 2 Trafalgar Court, Les Banques, St Peter Port, Guernsey,
Channel Islands GY1 4LY.

The Company's ordinary shares are publicly traded on the London Stock Exchange
under a premium listing. The Company seeks to provide ordinary shareholders
with attractive risk-adjusted returns, principally in the form of regular
dividends, by investing in a diversified portfolio of primarily UK and OECD
based solar energy infrastructure assets. The Company currently makes its
investments through HoldCos and SPVs which are directly or indirectly wholly
owned by the Company.

The Company has appointed NextEnergy Capital IM Limited as its Investment
Manager pursuant to the Management Agreement dated 18 March 2014. The
Investment Manager is a Guernsey registered company, incorporated under the
Companies (Guernsey) Law, 2008 with registered number 57740 and is licensed
and regulated by the Guernsey Financial Services Commission and is a member of
the NEC Group. The Investment Manager acts as the Alternative Investment Fund
Manager of the Company.

The Investment Manager has appointed NextEnergy Capital Limited as its
Investment Adviser pursuant to the Investment Advisory Agreement dated 18
March 2014. The Investment Adviser is a company incorporated in England with
registered number 05975223 and is authorised and regulated by the FCA.

2.    Summary of Significant Accounting Policies

a)    Basis of Preparation

The unaudited condensed interim financial statements for the six months ended
30 September 2022 have been prepared in accordance with IAS 34 Interim
Financial Reporting and the FCA's Disclosure Guidance and Transparency Rules.
They have been prepared under the historical cost convention with the
exception of financial assets held at fair value through profit and loss. The
principal accounting policies adopted are set out below. These accounting
policies and critical accounting estimates and judgments used in preparing the
unaudited condensed interim financial statements are consistent with those
used in the Company's latest audited financial statements for the year ended
31 March 2022.

The condensed interim financial statements are unaudited but have been
reviewed by the Company's Auditor, KPMG Channel Islands Limited, in accordance
with International Standard on Review Engagements (UK) 2410, Review of Interim
Financial Information Performed by the Independent Auditor of the Entity and
were approved for issue on 18 November 2022.

The unaudited condensed interim financial statements do not include all
information and disclosures required in the annual financial statements and
should be read in conjunction with the Company's audited financial statements
for the year ended 31 March 2022, which were prepared in accordance with IFRS
and the FCA's Disclosure Guidance and Transparency Rules.

b)    Going Concern

The Company owns a portfolio of solar energy infrastructure assets in the UK,
Italy, Spain and Portugal that are predominantly fully constructed,
operational and generating renewable electricity. A significant proportion of
the income from the Company's investments is fixed for a long period of time
in accordance with the terms of the relevant ROC or FiT subsidy. The balance
of the income has exposure to wholesale electricity prices, although the
Investment Manager seeks to reduce this exposure through entering into short-
or long-term power purchase agreements with fixed price mechanisms.

The Directors have reviewed the current and projected financial position of
the Company making reasonable assumptions about future performance. The key
areas reviewed were:

•      Maturity of debt facilities;

•      Future investment transactions;

•      Expenditure commitment; and

•      Forecast income and cash flows.

The Company's cash balance as at 30 September 2022 was £11.7m, all of which
was readily available. It also had immediately available but undrawn amounts
under its debt facilities of a further £54.8m. The NESF Group had capital
commitments totalling £54.3m at the period end. The majority of the NESF
Group's revenues are derived from government subsidies. A significant part of
the NESF Group's borrowings are on a non-recourse basis. The Company's
portfolio is diversified by geography, components, plant size, subsidy
schemes and revenue streams.

The Board is satisfied that the Company has sufficient financial resources
available to be able to manage the Company's business effectively and pursue
the Company's principal activities and investment objective. In particular,
the Board is not currently aware of any material uncertainties in relation to
the Company's ability to continue for a period of at least 12 months from the
date of approval of this Interim Report. The Board is of the opinion,
therefore, that the going concern basis adopted in the preparation of the
Financial Statements is appropriate.

c)    Basis of Non-Consolidation

The Company has set up/acquired SPVs through its investment in the holding
companies. The Company meets the definition of an investment entity as
described by IFRS 10. Under IFRS 10 investment entities are required to hold
subsidiaries at fair value through profit or loss rather than consolidate
them. There are four holding companies (NextEnergy Solar Holdings Limited,
NextEnergy Solar Holdings III Limited, NextEnergy Solar Holdings IV Limited
and NextEnergy Solar Holdings V Limited, collectively the "HoldCos"). The
HoldCos are also investment entities and, as required under IFRS 10, value
their investments at fair value.

Under the definition of an investment entity, the entity should satisfy all
three of the following tests:

•   Obtains funds from one or more investors for the purpose of providing
these investors with investment management services;

•     Commits to its investors that its business purpose is to invest
funds solely for returns from capital appreciation, investment income, or both
(including having an exit strategy for investments); and

•      Measures and evaluates the performance of substantially all of
its investments on a fair value basis.

In assessing whether the Company meets the definition of an investment entity
set out in IFRS 10, the Directors note that:

•    The Company is an investment company that invests funds obtained from
multiple investors in a diversified portfolio of solar energy infrastructure
assets and related infrastructure assets and has appointed the Investment
Manager to manage the Company's investments;

•     The Company's purpose is to invest funds for investment income and
potential capital appreciation and will exit its investments at the end of
their economic lives or when their planning permissions or leasehold land
interests expire (unless it has repowered their sites) and may also exit
investments earlier for reasons of portfolio balance or profit; and

•   The Board evaluates the performance of the Company's investments on a
fair value basis as part of the quarterly management accounts review and the
Company values its investments on a fair value basis twice a year for
inclusion in its annual and interim financial statements with the movement in
the valuations taken to the Income Statement.

Taking these factors into account, the Directors are of the opinion that the
Company has all the typical characteristics of an investment entity and meets
the definition set out in IFRS 10.

The Directors believe the treatment outlined above provides the most relevant
information to investors.

d)   Segmental Reporting

IFRS 8 Operating Segments requires a "management approach" under which segment
information is presented on the same basis as that used for internal reporting
purposes.

The Chief Operating Decision Maker, which is the Board, is of the opinion that
the Company is engaged in a single segment of business, being investment in
solar energy infrastructure assets via its HoldCos and SPVs. Therefore, the
financial information used by the Chief Operating Decision Maker to allocate
resources and manage the Company presents the business as a single segment.

e)    Seasonal Reporting

The Company's results may vary during reporting periods as a result of a
fluctuation in the levels of sunlight during the period and, together with
other factors, will impact the NAV. Other factors including changes in
inflation and power prices.

f)     Functional and Presentational Currency

The financial information is presented in pounds sterling ("GBP") because that
is the currency of the primary economic environment in which the Company
operates.

3.    New and Revised Standards

a)    New and Revised IFRSs Adopted by the Company

The Directors have assessed all new standards and amendments to standards and
interpretations which are effective for annual periods commencing on or after
1 April 2022 and noted no material impact on the Company.

b)    New and Revised IFRSs in Issue but not yet Effective

The Directors have considered new standards and amendments to standards and
interpretations in issue and effective for annual periods commencing after 1
April 2022 and do not expect that their adoption will result in a material
impact on the financial statements of the Company in future periods.

4.    Critical Accounting Estimates and Judgements

The Company makes estimates and assumptions that affect the reported amounts
of assets and liabilities. Estimates and judgements are continually evaluated
and based on historic experience and other factors believed to be reasonable
under the circumstances.

a) Critical Accounting Estimate: Investments at Fair Value Through Profit or
Loss

The Company's investments are measured at fair value for financial reporting
purposes. The Board has appointed the Investment Manager to produce investment
valuations based on projected future cash flows. These valuations are reviewed
and approved by the Board. The investments are held through SPVs.

IFRS 13 establishes a single source of guidance for fair value measurements
and disclosures about fair value measurements. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.
The Board bases the fair value of the investments on the information received
from the Investment Manager.

The Company classified its investments at fair value through profit or loss as
level 3 within the fair value hierarchy. As at 30 September 2022 level 3
investments amount to £889.1m (30 September 2021: £788.3m; 31 March 2022:
£842.4m) and consist of 1 Private Equity Solar fund investment (NPIII) which
has been valued using estimated attributable NAV and 99 investments in solar
PV plants (30 September 2021: 99, 31 March 2022: 99) all of which have been
valued on a look through basis based on the discounted cash flows of the solar
assets (except for those solar assets not yet operational) and the residual
value of net assets at the HoldCos level.

The discount rate is a significant Level 3 input and a change in the discount
applied could have a material effect on the value of the investments. The
conflict in Ukraine has had an unprecedented and sustained positive impact on
the long-term power price projections, which is also a significant Level 3
input. Investments in solar assets that are not yet operational are held at
fair value, where the cost of the investment is used as an appropriate
approximation of fair value. Level 3 valuations are reviewed regularly by the
Investment Manager who reports to the Board on a periodic basis. The Board
considers the appropriateness of the valuation model and inputs, as well as
the valuation result.

Information about the unobservable inputs used at 30 September 2022 in
measuring financial instruments categorised as Level 3 in the fair value
hierarchy and their sensitivities are disclosed in note 19. Unlisted
investments reconcile to the "Total investments at fair value" in the table in
note 17.

b) Significant Judgement: Consolidation of Entities

The Company, under the investment entity exemption rule, holds its investments
at fair value. The Company meets the definition of an investment entity per
IFRS 10 as detailed in note 2c).

The Company does not have any other subsidiaries other than those determined
to be controlled subsidiary investments. Controlled subsidiary investments are
measured at fair value through profit or loss and are not consolidated in
accordance with IFRS 10. The fair value of controlled subsidiary investments
is determined as described in note 17.

The Company and the HoldCos operate as an integrated structure whereby the
Company invests both in the HoldCos and a singular direct investment. Under
IFRS 10, there is a requirement for the Board to assess whether the HoldCos
are themselves investment entities. The Board has performed this assessment
and concluded that each of the HoldCos is an investment entity for the
following reasons:

•   The HoldCos have obtained funds for the purpose of investing in equity
or other similar interests in multiple investments and providing the Company
(and its investors) with investment income; and

•    The performance of investments made through the HoldCos are measured
and evaluated on a fair value basis.

Furthermore, the HoldCos themselves are not deemed to be operating entities
providing services to the Company and, therefore, are able to apply the
exemption from consolidation.

5.    Management Fees

The Investment Manager is entitled to receive an annual fee, accruing daily
and calculated on a sliding scale, as follows below:

•      1% of NAV up to £200m;

•      0.9% of NAV above £200m and up to and including £300m; and

•      0.8% of NAV above £300m.

The NAV for the purpose of calculation, is reduced by an amount equivalent to
US$50m for NESF's investment in NPIII. For the six months ended 30 September
2022 the Company incurred £2.9m in management fees (six months ended 30
September 2021: £2.5m; year ended 31 March 2022: £5.0m), of which £15k was
outstanding at 30 September 2022 (30 September 2021: £nil; 31 March
2022: £62k).

6.    Administration Fees

Under an amended Administration Agreement with the previous administrator the
administration fee was a fixed fee of £220k per annum with effect from 1
October 2020. With effect from 1 January 2022, the fixed fee was to increase
annually in line with the annual increase in Guernsey RPI. For the period up
to 30 March 2022, the previous administrator was also entitled to additional
fees for attendance at ad hoc Board and Board Committee meetings.

With effect from 30 March 2022 Ocorian Administration (Guernsey) Limited was
appointed Administrator to the Company. The administration fee changed to a
fixed fee of £275k per annum with effect from 30 March 2022. With effect from
1 January 2023, the fixed fee will increase annually in line with the annual
increase in Guernsey RPI.

For the six months ended 30 September 2022 the Administrator was entitled to
administration fees of £142k (six months ended 30 September 2021: £nil; year
ended 31 March 2022: £nil), of which £69k was outstanding at 31 March 2022
(30 September 2021: £nil; 31 March 2022: £nil).

For the six months ended 30 September 2022 the previous Administrator was
entitled to administration fees of £nil (six months ended 30 September 2021:
£112k; year ended 31 March 2022: £227k), of which £nil was outstanding at
31 March 2022 (30 September 2021: £56k; 31 March 2022: £115k).

The fee payable to the previous administrator was payable quarterly in
arrears. The fee payable to the new Administrator is payable quarterly in
advance.

7.    Directors' Fees

The Directors are all non-executive and their remuneration is solely in the
form of fees. The Directors' total fees for the period were £128k (six months
ended 30 September 2021: £106k; year ended 31 March 2022: £222k), of which
£nil was outstanding at 30 September 2022 (30 September 2021: £nil; 31 March
2022: £11k).

8.    Audit Fees

The analysis of the auditor's remuneration is as follows:

                                                                    Six months ended    Six months ended    Year ended

30 September 2022
30 September 2021
31 March 2022

(unaudited)
(unaudited)
(audited)

£'000
£'000
£'000
 Fees payable to the auditor for the audit of the Company           45                  45                  84
 Fees payable to the auditor for the interim review of the Company  45                  45                  45
 Additional audit fee and disbursements for the prior period/year   -                   -                   9
 Total                                                              90                  90                  138

9.    Other Expenses

                       Six months ended    Six months ended    Year ended

30 September 2022
30 September 2021
31 March 2022

(unaudited)
(unaudited)
(audited)

£'000
£'000
£'000
 Amortisation expense  69                  69                  139
 Sundry expenses       87                  9                   (18)
 Director's expenses   2                   -                   1
 Total                 158                 78                  122

10.  Charitable Donation

During the period ended 30 September 2022, the Company made a charitable
donation of £nil (six months ended 30 September 2021: £nil; year ended 31
March 2022: £100k). Information on the NextEnergy Foundation and how it used
the donation can be found on our website (nextenergysolarfund.com).

11.  Trade and Other Receivables

                                               30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 Administrative service fee income receivable  -                  2,041              -
 Prepayments                                   45                 46                 74
 Accrued income                                -                  -                  20
 Due from HoldCos                              24,609             32,783             16,295
 Total trade and other receivables             24,654             34,870             16,389

Amounts due from HoldCos are interest free and payable on demand.

12.  Trade and Other Payables

                                 30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 Other payables                  171                228                273
 Due to NPIII                    -                  -                  896
 Preference dividends payable    2,395              2,395              2,342
 Due to HoldCos                  -                  20,226             8,274
 Trade creditors                 34                 -                  -
 Total trade and other payables  2,600              22,849             11,785

 

Amounts due to HoldCos were interest free and payable on demand.

During the period, an amount of £8.3m representing a non-cash dividend was
set-off against amounts due to Holdcos as these transactions are with the same
Holdco.

13.  Share Capital and Reserves

a) Ordinary Shares

The share capital of the Company comprises solely of ordinary shares of no par
value and preference shares of no par value.

 Ordinary shares issuance                    Six months ended    Six months ended    Year ended

30 September 2022
30 September 2021
31 March 2022

(unaudited)
(unaudited)
(audited)

£'000
£'000
£'000
 Opening balance                             589,077,244         586,987,678         586,987,678
 Scrip shares issued during the period/year  621,399             1,246,447           2,089,566
 Total issued                                589,698,643         588,234,125         589,077,244

 

 Issued ordinary shares - share capital and premium   Six months ended    Six months ended    Year ended

30 September 2022
30 September 2021
31 March 2022

(unaudited)
(unaudited)
(audited)

£'000
£'000
£'000
 Opening balance                                      608,037             605,938             605,938
 Value of scrip shares issued during the period/year  734                 1,255               2,099
 Total issued                                         608,771             607,193             608,037

All the holders of the ordinary shares are entitled to receive dividends as
declared from time to time. At any general meeting of the Company, each
ordinary shareholder will have, on a show of hands, one vote and, on a poll,
one vote in respect of each ordinary share held.

b) Preference Shares

In accordance with International Accounting Standard 32, the preference shares
are classified as liabilities. Details of the preference shares can be found
in note 23.

c) Retained Reserves

Retained reserves comprise the retained earnings as detailed in the Statement
of Changes in Equity.

Under Guernsey law, the Company can pay dividends in excess of its retained
earnings provided it satisfies the solvency test prescribed by the Companies
(Guernsey) Law, 2008. The solvency test considers whether the Company is able
to pay its debts when they fall due, and whether the value of the Company's
assets is greater than its liabilities. The Company satisfied the solvency
test in respect of all dividends declared or paid in the year.

14.  Earnings per Ordinary Share

a)    Basic

                                                                Six months ended    Six months ended    Year ended

30 September 2022
30 September 2021
31 March 2022

(unaudited)
(unaudited)
(audited)

£'000
£'000
£'000
 Profit and comprehensive income for the period/year (£'000)     77,087              45,467              127,550
 Basic weighted average number of issued ordinary shares        589,212,809         587,566,139         588,014,946
 Earnings per share basic                                       13.08p              7.74p               21.69p

b)    Diluted

From 1 April 2036 the preference shares have the right to convert, based on
100p per preference share and the NAV per ordinary share at the time of
conversion, into new ordinary shares or a new class of unlisted B shares with
dividend and capital rights ranking pari passu with the ordinary shares.

                                                                             30 September 2022  30 September 2021  31 March

2022
 Profit and comprehensive income for the period/year (£'000)                  77,087             45,467             127,550
 Plus: preference share dividends paid during the period/year (£'000)        4,763              4,718              9,454
 Profit for the period/year attributable to ordinary shareholders (£'000)     81,850             50,185             137,004
 Basic weighted average number of issued ordinary shares                     589,212,809        587,566,139        588,014,946
 Plus: weighted number of ordinary shares issuable on any conversion of      176,211,454        202,020,202        202,224,469
 preference shares, based on the NAV per ordinary share as at the start of
 period/year
 Adjusted weighted average number of ordinary shares                         765,424,263        789,586,341        790,239,415
 Earnings per share diluted                                                  10.69p             6.36p              17.34p

15.  Ordinary Share Dividends

a)    Paid During the period/year

            Six months ended    Six months ended                    Six months ended    Six months ended                    Year ended  Year ended

30 September 2022
30 September 2022 Pence per share
30 September 2021
30 September 2021 Pence per share
31 March
31 March

£'000
£'000
2022
2022

£'000
Pence per share
 Quarter 1  10,544              1.7900                              10,346              1.7625                              10,346      1.7625
 Quarter 2  11,080              1.8800                              10,527              1.7900                              10,527      1.7900
 Quarter 3  N/a                 N/a                                 N/a                 N/a                                 10,529      1.7900
 Quarter 4  N/a                 N/a                                 N/a                 N/a                                 10,538      1.7900
 Total      21,624              3.6700                              20,873              3.5525                              41,940      7.1325

b)    Declared in Respect of the period/year

            Six months ended    Six months ended                    Six months ended    Six months ended                    Year ended  Year ended

30 September 2022
30 September 2022 Pence per share
30 September 2021
30 September 2021 Pence per share
31 March
31 March

£'000
£'000
2022
2022

£'000
Pence per share
 Quarter 1  11,080              1.8800                              10,527              1.7900                              10,527      1,7900
 Quarter 2  11,086              1.8800                              10,529              1.7900                              10,529      1,7900
 Quarter 3  N/A                 N/A                                 N/A                 N/A                                 10,538      1,7900
 Quarter 4  N/A                 N/A                                 N/A                 N/A                                 10,544      1,7900
 Total      22,166              3.7600                              21,056              3.5800                              42,138      7.1600

16.  Net Assets per Ordinary Share

                                         30 September 2022  30 September 2021  31 March

2022
 Ordinary shareholders' equity (£'000)   724,691            606,638            668,500
 Number of issued ordinary shares        589,698,643        588,234,125        589,077,244
 Net assets per ordinary share           122.9p             103.1p             113.5p

17.  Investments at Fair Value Through Profit or Loss

The Company owns its portfolio of solar assets through its investments in
HoldCos and a direct investment in NPIII. The Company's investments comprise
its portfolio of solar assets and the residual net assets of the HoldCos. As
explained in note 4a), all of the Company's investments are held at fair value
through profit or loss and classified as Level 3 in the fair value
hierarchy. There were no movements between the hierarchy Levels during the
period ended 30 September 2022 (six months ended 30 September 2021: none; year
ended 31 March 2022: none).

The Company's total investments at fair value are recorded under "Non-current
assets" in the Statement of Financial Position.

                                                         Six months ended    Six months ended    Year ended

30 September 2022
30 September 2021
31 March 2022

(unaudited)
(unaudited)
(audited)

£'000
£'000
£'000
 Brought forward cost of investments                     809,531             815,494             815,494
 Investment proceeds from HoldCos                        (22,785)            (64,900)            (82,443)
 Investment payments to HoldCos                          26,726              38,549              58,370
 Investment payments from NPIII                          -                   -                   (10,502)
 Investment payments to NPIII                            5,666               21,506              28,612
 Carried forward cost of investments                     819,138             810,649             809,531
 Brought forward unrealised gains/(losses) on valuation  32,815              (45,850)            (45,850)
 Movement in unrealised gains on valuation               37,125              23,489              78,665
 Carried forward unrealised gains/(losses) on valuation  69,940              (22,361)            32,815
 Total investments at fair value                         889,078             788,288             842,346

 

Non-cash transactions: On 23 February 2022, NESH V issued Eurobonds listed on
The International Stock Exchange totalling £6.6m. During the period ended 30
September 2022, no Eurobonds were listed on The International Stock Exchange.

To facilitate the acquisition of various investments at 30 September 2022
£5.0m, (30 September 2021; £nil; 31 March 2022; £42.1m) was drawn down at
subsidiary level, remitted to the Company before £5.0m was returned to a
subsidiary (30 September 2021; £nil; 31 March 2022; £42.1m).

The total change in the value of the investments in the HoldCos is recorded
through profit and loss in the Statement of Comprehensive Income. Information
about the principal unobservable inputs used in valuing the Company's
investments and their sensitivities is included in note 19.

18.  Subsidiaries and Other Investments

The Company holds investments through subsidiary companies (the HoldCos) which
have not been consolidated as a result of the adoption of IFRS 10: Investment
entities exemption to consolidation. The Company holds its investment of NPIII
directly. As stated in note 4b), the HoldCos are incorporated in the UK and
100% directly owned. There are no cross guarantees amongst Group entities.
During the period to 30 September 2022, NextEnergy Solar Holdings II Limited
and its subsidiaries were transferred to RRAM Energy Limited (a subsidiary of
NextEnergy Solar Holdings III Limited). Below is the legal entity name for the
SPVs, all owned 100% at 30 September 2022 directly or indirectly through the
HoldCos listed below (besides Agenor (24.5%) and NextPower III Co-Invest LP
(18%) which are owned by Next Energy Solar Holdings V Limited).

 Name                                     Country of      Name                                   Country of

incorporation
incorporation
 NextEnergy Solar Holdings Limited        UK
 BL Solar 2 Limited                       UK              North Farm Solar Park Limited          UK
 Bowerhouse Solar Limited                 UK              Push Energy (Birch) Limited            UK
 Ellough Solar 2 Limited                  UK              Push Energy (Boxted Airfield) Limited  UK
 Glebe Farm SPV Limited                   UK              Push Energy (Croydon) Limited          UK
 Glorious Energy Limited                  UK              Push Energy (Decoy) Limited            UK
 Greenfields (A) Limited                  UK              Push Energy (Hall Farm) Limited        UK
 NESF-Ellough Ltd                         UK              Push Energy (Langenhoe) Limited        UK
 Nextpower Ellough LLP                    UK              SSB Condover Limited (Condover)        UK
 Nextpower Gover Farm Limited             UK              ST Solarinvest Devon 1 Limited         UK
 Nextpower Higher Hatherleigh             UK              Sunglow Power Limited                  UK
 Nextpower Shacks Barn Ltd                UK              Wellingborough Solar Limited           UK

 NextEnergy Solar Holdings III Limited    UK
 Balhearty Solar Limited                  UK              Burcroft Solar Parks Ltd               UK
 Ballygarvey Solar Ltd                    UK              Burrowton Farm Solar Park Ltd          UK
 Birch Solar Farm CIC                     UK              Camilla Battery Storage Limited        UK
 Blenches Mill Farm Solar Park Ltd        UK              Chilton Cantello Solar Park Ltd        UK
 Brafield Solar Limited                   UK              Crossways Solar Park Ltd               UK
 Greenfields (T) Limited                  UK              Empyreal Energy Limited                UK
 Helios Solar 1 Limited                   UK              Fiskerton Limited                      UK
 Helios Solar 2 Limited                   UK              NextZest Ltd                           UK
 Hook Valley Farm Solar Park Ltd          UK              PF Solar Limited                       UK
 Knockworthy Solar Park Ltd               UK              Pierces Solar Limited                  UK
 Lark Energy Bilsthorpe Ltd               UK              Raglington Farm Solar Park Ltd         UK
 Le Solar 51 Limited                      UK              RRAM Energy Limited                    UK
 Little Irchester Solar Limited           UK              Saundercroft Farm Solar Park Ltd       UK
 Little Staughton Airfield Solar Limited  UK              SL Solar Services Ltd                  UK
 Micro Renewables Domestic Ltd            UK              Sywell Solar Limited                   UK
 Micro Renewables Ltd                     UK              Tau Solar Limited                      UK
 NESH 3 Portfolio A Limited               UK              Temple Normanton Solar Limited         UK
 Nextpower Bosworth Ltd                   UK              NextPower Grange Limited               UK
 Nextpower Eelpower Ltd                   UK              Thornborough Solar Limited             UK
 NextPower High Garrett Ltd               UK              NextPower South Lowfield Limited       UK
 Nextpower Hops Energy                    UK              Thurlestone-Leicester Solar Limited    UK
 Nextpower SPV 4 Ltd                      UK              UK Solar (Fiskerton) LLP               UK
 Nextpower SPV 6 Ltd                      UK              Wheb European Solar (UK) 2 Ltd         UK
 Nextpower SPV 10 Ltd                     UK              Wheb European Solar (UK) 3 Ltd         UK
 Nextpower Water Projects Ltd             UK              Whitley Solar Park (Ashcott Farm) Ltd  UK
 Nextpower Eelpower (2) Ltd               UK              Wickfield Solar Ltd                    UK
 Wyld Meadow Farm                         UK              Wyld Meadow Farm                       UK
 NextEnergy Solar Holdings II Limited     UK              Trowbridge PV Limited                  UK
 ESF Llwyndu Limited                      UK              NextEnergy Solar Holdings VI Limited   UK
 Bowden Lane Solar Park Ltd               UK              Green End Renewables Limited           UK
 Fenland Renewables Limited               UK              Tower Hill Farm Renewables Limited     UK

 NextEnergy Solar Holdings IV Limited     UK
 Berwick Solar Park Limited               UK              Emberton Solar Park Limited            UK
 Bottom Plain Solar Park Limited          UK              Great Wilbraham Solar Park Limited     UK
 Branston Solar Park Limited              UK              Nextpower Radius Limited               UK

 NextEnergy Solar Holdings V Limited      UK
 Agrosei S.r.l                            Italy           Starquattro S.r.l                      Italy
 Fotostar 6 S.r.l                         Italy           SunEdison Med. 6 S.r.l                 Italy
 Macchia Rotonda Solar S.r.l              Italy           Agenor*                                Spain
 NextPower III Co-Invest LP**             Portugal

* Agenor is an associate of the Company, not a subsidiary.

**NextPower III Co-Invest LP is an investment of the Company, not a subsidiary
or an associate.

19.  Fair Value of Investment in Unconsolidated Subsidiaries

a) Valuation process

The valuation process is described in note 4a.

The Directors and the Investment Manager consider that the discounted cash
flow methodology used in deriving the fair value of investments in operating
solar plants is in accordance with the fair value requirements of IFRS 13 and
that the valuation methodology used, including the key estimates and
assumptions applied, is appropriate. As at 30 September 2022, investments held
at fair value totalled £889.1m (30 September 2021: £788.3m; 31 March 2022:
£842.3m).

During the prior year the Company invested directly in a private equity fund
NPIII. The fair value of the Company's investment in private equity funds is
generally considered to be the Company's attributable portion of the NAV of
the private equity fund, as determined by the general partner/manager of such
funds, adjusted if considered necessary by the Board of Directors, including
any adjustment necessary for carried interest. The Board of Directors and the
Investment Manager consider the IPEV guidelines when valuing private equity
fund investments. As at 30 September 2022, investments held at fair value
using NAV totalled £28.3m (30 September 2021: £18.8m; 31 March 2022:
£17.3m).

Investments in assets that are not yet operational (this included the
co-investment into Project Agenor and NextPower III Co-Invest LP) are also
held at fair value, where the cost of the investment is used as an appropriate
approximation of fair value. These investments are not included in the
sensitivity analyses. As at 30 September 2022, investments held at fair value
using the cost methodology totalled £46.0m (30 September 2021: £9.6m; 31
March 2022: £21.9m).

Another £54.6m of investments held at fair value relates to the residual net
assets of the HoldCos. Therefore, the total operational fair value to which
the sensitivity analysis has been applied in the below tables is £760.2m.

b) Sensitivity Analyses of Changes in Significant Unobservable Inputs to the
Discounted Cash Flow Calculation

Most of the Company's investments are valued using the discounted cash flow
methodology. Information on this methodology is included in note 4a). The
Directors consider the following to be significant unobservable inputs to the
discounted cash flows calculation on a look through basis.

Discount Rates

Discount rates used in the valuation of the Company's investments represent
the Investment Adviser's and Board's assessment of the rate of return in the
market for assets with similar characteristics and risk profile.

                                                                           30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 Weighted average discount rate                                            6.8%               6.3%               6.3%
 Range of discount rates (unlevered to levered)                            6.25% to 7.75%     5.75% to 7.25%     5.75% to 7.25%
 Premium applied to cash flows earned 30 years after grid connection date  1.0%               1.0%               1.0%

 

The table below shows the sensitivity of the portfolio valuation to a change
to the weighted average discount rate by plus or minus 0.5%, with all other
variables held constant.

 Discount rate sensitivity                   +0.5% change  Investments  -0.5% change
 30 September 2022
 Directors' valuation                        (£20.0m)      £760.2m      £21.4m
 Directors' valuation - percentage movement  (2.4%)                     2.6%
 Change in NAV per ordinary share            (3.4p)                     3.6p
 30 September 2021
 Directors' valuation                        (£20.5m)      £788.3m      £22.1m
 Directors' valuation - percentage movement  (3.0%)                     3.3%
 Change in NAV per ordinary share            (3.1p)                     3.4p
 31 March 2022
 Directors' valuation                        (£20.1m)      £842.4m      £21.6m
 Directors' valuation - percentage movement  (2.7%)                     2.9%
 Change in NAV per ordinary share            (3.4p)                     3.7p

Power Price

As at 30 September 2022, estimates implied an average rate of growth of UK
electricity prices (2022-2041) of approximately -7.7% (30 September 2021:
-5.2%; 31 March 2022: -7.7%) in 2022 real terms and an average rate of growth
of Italian electricity prices (2022-2042) of approximately -7.3% (30 September
2021: -1.6%; 31 March 2022: -4.7%) in 2022 real terms. As at 30 September
2022, estimates implied a long-term inflation rate of 2.3% (30 September 2021:
2.5%; 31 March 2022: 2.3%).

The impact of the current higher power price environment, heightened by the
conflict in Ukraine, on 2022 power prices has been unprecedented. The blended
average of the 'central case' scenario has been applied to the valuation which
includes the impact of the current high power price environment. Given the
recent volatility in power prices and, at the time of calculating the NAV, the
possibility of a price cap or windfall tax on renewable generation being
implemented by the UK government, the Company discounted the forward power
prices as supplied by its market consultants which it uses in the calculation
of its NAV.  The Company does not consider that the short-term power price
forecasts are a reliable reflection of the power prices which are likely to be
received for future generation.  Therefore, where prices have not been
fixed/hedged, forecast power prices are discounted to capture this underlying
uncertainty and to reduce risk associated with future cash flows.  The
discounts outlined below were applied to the Company's NAV analysis, leading
to a reduction of 7.5p / share in the Company's NAV.

 

 Time period  Discount applied to unhedged portion of portfolio power prices
 Q4 2022      No discount has been applied
 Q1 2023      50% discount
 FY 2023/24   35% discount
 FY 2024/25   25% discount has been applied to Summer 2024 price and 20% discount has been
              applied to Winter 2024 prices
 FY 2025/26   10% discount
 FY 2026/27   No discount has been applied

 

The table below shows the sensitivity of the portfolio valuation to a
sustained decrease or increase in the power price by minus or plus 10% on the
valuation, with all other variables held constant.

 Power price sensitivity                     -10% change  Investments  +10% change
 30 September 2022
 Directors' valuation                        (£55.5m)     £760.2m      £53.4m
 Directors' valuation - percentage movement  (6.6%)                    6.4%
 Change in NAV per ordinary share            (9.4p)                    9.1p
 30 September 2021
 Directors' valuation                        (£45.2m)     £788.3m      £43.0m
 Directors' valuation - percentage movement  (6.7%)                    6.4%
 Change in NAV per ordinary share            (6.9p)                    6.6p
 31 March 2022
 Directors' valuation                        (£48.9m)     £842.4 m     £46.5m
 Directors' valuation - percentage movement  (6.6%)                    6.3%
 Change in NAV per ordinary share            (8.3p)                    7.9p

Energy Generation

The portfolios aggregate energy generation yield depends on the combination of
solar irradiation and technical performance of the solar assets. The table
below shows the sensitivity of the portfolio valuation to a sustained decrease
or increase of energy generation by minus or plus 5% on the valuation, with
all other variables held constant.

 Energy generation sensitivity               -0.5% underperformance  Investments  +0.5% outperformance
 30 September 2022
 Directors' valuation                        (£47.1m)                £760.2m      £45.3m
 Directors' valuation - percentage movement  (5.6%)                               5.4%
 Change in NAV per ordinary share            (8.0p)                               7.7p
 30 September 2021
 Directors' valuation                        (£42.8m)                £788.3m      £42.2m
 Directors' valuation - percentage movement  (6.4%)                               6.3%
 Change in NAV per ordinary share            (6.6p)                               6.5p
 31 March 2022
 Directors' valuation                        (£46.2m)                £842.4m      £43.9m
 Directors' valuation - percentage movement  (6.3%)                               6.0%
 Change in NAV per ordinary share            (7.8p)                               7.5p

Inflation Rates

The portfolio valuation assumes long-term inflation of 2.3% (30 September
2021: 2.5%; 31 March 2022: 2.3%) p.a. for investments (based on UK RPI).

The table below shows the sensitivity of the portfolio valuation to a change
to the inflation rate by minus or plus 3% for 30 September 2022 and 31 March
2022 and minus or plus 0.5% for 30 September 2021, with all other variables
held constant.

 Inflation rate sensitivity                  -3.0% change  Investments  +3.0% change
 30 September 2022
 Directors' valuation                        (£140.9m)     £760.2m      £198.4m
 Directors' valuation - percentage movement  (16.9%)                    23.8%
 Change in NAV per ordinary share            (23.9p)                    33.6p
 30 September 2021                           -0.5% change               +0.5% change
 Directors' valuation                        (£27.4m)      £788.3m      £29.5m
 Directors' valuation - percentage movement  (4.1%)                     4.4%
 Change in NAV per ordinary share            (4.2p)                     4.5p
 31 March 2022                               -3.0% change               +3.0% change
 Directors' valuation                        (£132.9m)     £842.4m      £191.1m
 Directors' valuation - percentage movement  (18.0%)                    25.9%
 Change in NAV per ordinary share            (22.6p)                    32.4p

Operating Costs

The table below shows the sensitivity of the portfolio to changes in operating
costs by plus or minus 5% for 30 September 2022 and 31 March 2022 and plus or
minus 10% for 30 September 2021 at the SPVs level, with all other variables
held constant.

 Operating costs sensitivity                 +5.0% change  Investments  -5.0% change
 30 September 2022
 Directors' valuation                        (£7.0m)       £760.2m      £6.9m
 Directors' valuation - percentage movement  (0.8%)                     0.8%
 Change in NAV per ordinary share            (1.2p)                     1.2p
 30 September 2021                           +10% change                -10% change
 Directors' valuation                        (£13.1m)      £788.3m      £13.1m
 Directors' valuation - percentage movement  (2.0%)                     2.0%
 Change in NAV per ordinary share            (2.0p)                     2.0p
 31 March 2022                               +5.0% change               -5.0% change
 Directors' valuation                        (£6.5m)       £842.4m      £6.5m
 Directors' valuation - percentage movement  (0.9%)                     0.9%
 Change in NAV per ordinary share            (1.1p)                     1.1p

Tax Rates

The UK corporation tax rate used in the portfolio valuation is 19% until 2023
and 25% thereafter (30 September 2021: 19% until 2023 and 25% thereafter; 31
March 2022: 19% until 2023 and 25% thereafter), in accordance with the latest
UK Budget announcements.

(ii) Sensitivity analysis of changes in significant unobservable inputs of
Private Equity Investments

The NAV of NPIII, the direct private equity investment as at 30 September 2022
was £28.3m (30 September 2021: £18.8m; 31 March 2022: £17.3m). The
valuation of private equity investments is subject to changes in the
valuations of the underlying portfolio companies. These can be exposed to a
number of risks, including liquidity risk, price risk, credit risk, currency
risk and interest rate risk.

A movement of 10% in the value of the private equity investment would move the
Company NAV at the period end by 0.4%.

20.  Non-investment Financial Assets and Liabilities

Cash and cash equivalents are Level 1 items in the fair value hierarchy.

Current assets and current liabilities are Level 2 items in the fair value
hierarchy, with their carrying value being approximates for their fair values
as these are short-term items.

The preference shares are held at amortised cost using the effective interest
method and are measured at gross proceeds net of transaction costs incurred,
as at September 2022 they are held at £198.1 m (30 September 2021: £197.9m;
31 March 2022: £198.1m). The transaction costs are amortised over the
expected life of the preference shares to 2036. Management has assessed that
the carrying amount of the preference shares is not significantly different to
their fair value as at 30 September 2022.

21.  Capital Management

a)    Capital Structure

The NESF Group, which comprises the Company and its unconsolidated
subsidiaries (being the direct investment in NPIII, HoldCos and SPVs), manages
its capital to ensure that it will be able to continue as a going concern
whilst maximising the return to ordinary shareholders through the optimisation
of the debt and equity balances. The NESF Group's principal use of cash has
been to fund investments in accordance with the Company's Investment Policy as
well as ongoing operational expenses.

The capital structure of the Company consists entirely of equity (comprising
issued ordinary share capital and retained earnings) and preference share
capital (which, for accounting purposes is treated as a liability). The
capital structure of each of the Company's subsidiaries consists entirely of
equity or a combination of equity and debt, which may be short- or long-term.
The Board, with the assistance of the Investment Adviser, monitors and reviews
the NESF Group's capital structure on an ongoing basis.

b)    Debt

The Company's Investment Adviser reviews the debt structure of the Company and
its subsidiaries on an ongoing basis. The Company and its subsidiaries use
leverage for financing the acquisition of solar investments and working
capital purposes. In accordance with the Company's Investment Policy, the NESF
Group may employ leverage, provided that it does not exceed (at the time the
relevant arrangement is entered into) 50% of GAV. For this purpose, leverage
includes all short- and long-term debt raised by the Company or any of its
subsidiaries, as well as the aggregate subscription monies paid in respect of
all preference shares in issue and any unpaid dividends due in respect of the
preference shares.

As at 30 September 2022, the Company had £200m of preference shares in issue
(30 September 2021: £200m; 31 March 2022: £200m) and no financial debt
outstanding. The subsidiaries had £335.7m in long-term debt, look through
debt and revolving credit facilities outstanding (30 September 2021: £282.8m;
31 March 2022: £283.3m) (see note 22.b), representing a total gearing level
of 42% (30 September 2021: 44%; 31 March 2022: 42%).

22.  Financial Risk Management Objectives

The Board, with the assistance of the Investment Manager and Investment
Adviser, monitors and manages the financial risks relating to the operations
of the NESF Group through an internal risk map and the Investment Manager's
reports. These risks include capital risk, market risk (including price risk,
power price risk, currency risk and interest rate risk), credit risk and
liquidity risk. The objective of the risk management programme is to minimise
the potential adverse effects on the financial performance of the NESF Group.

For the Company and its subsidiaries, financial risks are managed by the
Investment Manager and Investment Adviser, which operate within Board-approved
policies. The various types of financial risk which affect the Company, its
subsidiaries or both are managed as described below. Risks that affect the
Company's unconsolidated subsidiaries may affect in turn the fair value of
investments held by the Company.

a)    Capital Risk (Company Only)

The Company has put in place a financing structure that enables it to manage
its capital effectively. The Company's capital structure comprises equity
(issued ordinary share capital and retained earnings) and preference share
capital. As at 30 September 2022 the Company had no recourse financial debt,
although the Company is a guarantor for two financing and hedging facilities
of its subsidiaries (see note 25).

b)    Market Price Risk (Company and Subsidiaries)

Market price risk is the risk that the fair value of future cash flows of a
financial instrument held by the Company, through its subsidiaries, will
fluctuate because of changes in market prices. Changes in market prices will
affect the discount rate applied to the expected future cash flows from the
Company's investments and, therefore, the fair value of those investments. The
impact of changes in the discount rate is considered in note 19.

Power Price Risk (Company and Subsidiaries)

The wholesale market price of electricity is volatile and is affected by
multiple factors, including demand for electricity, the generation across the
entire grid and government subsidies, as well as fluctuations in the market
prices of fuel commodities and foreign exchange. Whilst some of the Company's
investments benefit from subsidies and short-term PPA hedges that fix prices,
other revenue streams are not hedged and subject to wholesale electricity
prices.

The Investment Adviser monitors these factors and hedges the price at which
the subsidiaries sell electricity as necessary.

Currency Risk (Company, NESH V and NESH VI)

Foreign currency risk, as defined in IFRS 7, arises as the values of
recognised monetary assets and monetary liabilities denominated in other
currencies fluctuate due to changes in foreign exchange rates. The Company
has no direct exposure to currency risk as all its assets and liabilities are
in pounds sterling, the Company's functional and presentational currency. A
substantial majority of the cash flows from the Company's solar assets in
Italy to NESH V are hedged and so the cash flows to the Company from that
HoldCo are exposed to limited currency risk and therefore the currency risk on
the value of the assets is not considered to be significant.

Interest Rate Risk (Company and Subsidiaries)

The Company is indirectly exposed to interest rate risk from the credit
facilities of the HoldCos, as at 30 September 2022. Of the £335.7m (30
September 2021; £268.6m; 31 March 2022: £278.5m) credit facilities
outstanding (excluding NPIII look through debt of £5.9m (30 September 2021;
£14.2m; 31 March 2022: £4.8m), £113.6m (30 September 2021; £117.5m; 31
March 2022: £115.8m) had fixed interest rates and the remaining £216.1m (30
September 2021; £151.1m; 31 March 2022: £162.7m) had floating interest
rates. For the floating amount, interest rate swaps were implemented over the
term of the loans to mitigate interest rate risks for £66.0m (30 September
2021; £72.0m; 31 March 2022: £66.5m). The counterparties to these swaps are
all Investment grade financial institutions. The remaining £150.2m (30
September 2021: £79.1m; 31 March 2022: £96.2m) had floating rates which are
not hedged and are not considered by the Directors to be significant.

c)    Credit Risk (Company and Subsidiaries)

Credit risk is the risk that a counterparty will default on its contractual
obligations resulting in a financial loss to the Company or the subsidiary
that is a party to the contract. Credit risk arises from cash and cash
equivalents and derivative financial instruments, as well as credit exposures
to customers.

The Company and its subsidiaries mitigate their risk of cash and derivative
transactions by only transacting with major international financial
institutions with high credit ratings assigned by international credit rating
agencies. At the investment level, the credit risk relating to significant
counterparties is reviewed on a regular basis, in conjunction with monitoring
the credit ratings issued by recognised credit rating agencies, and potential
adjustments to the discount rate are considered to recognise changes to credit
risk where applicable. The Directors believe that the NESF Group is not
significantly exposed to the risk that the customers of its investments do not
fulfil their payment obligations because of the NESF Group's policy to invest
in jurisdictions and with customers with satisfactory credit ratings.

The Company's maximum exposure to credit risk is the carrying amounts of the
respective financial assets set out below:

                              30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 Cash and cash equivalents    11,686             4,318              19,608
 Trade and other receivables  24,654             34,870             16,389
 Debt investments             306,554            300,000            306,554
 Total                        342,894            339,188            342,551

Debt investments relate to Eurobonds which have been valued at fair value as
part of the Company's investments as disclosed in note 17. No collateral is
received from NESH III or NESH V in relation to the Eurobonds. The credit
quality of these investments is based on the financial performance of NESH
III and NESH V as well as the underlying investments they own. The risk of
default is deemed low and the principal repayments and interest payments are
expected to be made in accordance with the agreed terms and conditions.

The Company does not have any significant credit risk exposure to any single
counterparty in relation to trade and other receivables. In respect of the
Company's subsidiaries, ongoing credit evaluation is performed on the
financial condition of accounts receivable. As 30 September 2022, the
probability of default of the Company's subsidiaries was considered low and so
no allowance has been recognised based on 12-month expected credit loss as any
impairment would be insignificant to the subsidiary (30 September 2021: none;
31 March 2022: none). The Investment Adviser has sufficient oversight of the
subsidiary's receivables to assess the probability of default.

Details of the Company's cash and cash equivalent balances at the period end
are set out in the table below.

                    Credit rating Standard & Poor's      Cash

£'000
 30 September 2022
 Barclays Bank PLC  Long - A/+                           11,686

Short - A-1
 30 September 2021
 Barclays Bank PLC  Long - A/+                           4,318

Short - A-1
 31 March 2022
 Barclays Bank PLC  Long - A                             19,608

Short - A/A-1

d)    Liquidity Risk (Company and Subsidiaries)

Liquidity risk is the risk that the NESF Group will not be able to meet its
financial obligations as they fall due as a result of the maturity of assets
and liabilities not matching. The Board has established an appropriate
liquidity risk management framework for the management of the NESF Group's
short-, medium- and long-term funding and liquidity management requirements.
The Company and its subsidiaries manage liquidity risk by monitoring forecast
and actual cash flows and matching the maturity profiles of assets and
liabilities and maintaining sufficient cash balances to meet their operating
needs.

The following table shows the maturity of the Company's non-derivative
financial assets and liabilities. The amounts disclosed are contractual,
undiscounted cash flows and may differ from the actual cash flows received
or paid in the future as a result of early repayments.

                                                                 Carrying amount  Up to 3 months £'000   3 to 12 months £'000   Greater than

£'000
12 months

£'000
 30 September 2022
 Assets
 Cash and cash equivalents                                       11,686           11,686                 -                      -
 Trade and other receivables                                     24,654           24,654                 -                      -
 Liabilities
 Contractual preference shares repayment and dividends payable1  (198,127)        (2,395)                (7,105)                (328,341)
 Trade and other payables                                        (2,600)          (2,600)                -                      -

 30 September 2021
 Assets
 Cash and cash equivalents                                       4,318            4,318                  -                      -
 Trade and other receivables                                     34,870           34,870                 -                      -
 Liabilities
 Contractual preference shares repayment and dividends payable1  (200,384)        (2,359)                -                      (335,431)
 Trade and other payables                                        (22,849)         (22,849)               -                      -
 31 March 2022
 Assets
 Cash and cash equivalents                                       19,608           19,608                 -                      -
 Trade and other receivables                                     16,389           16,389                 -                      -
 Liabilities
 Contractual preference shares repayment and dividends payable1  (200,400)        (2,342)                (7,132)                (333,000)
 Trade and other payables                                        (9,443)          (9,443)                -                      -

1 Assumes no conversion of preference shares in 2036.

23.  Preference Shares and Revolving Credit and Debt Facilities

a)    Preference Shares

On each of 12 November 2018 and 12 August 2019, the Company issued 100,000,000
preference shares at a price of 100p per preference share. The preference
shares pay a preferred dividend of 4.75% p.a. until March 2036, after which
they have the right to convert, based on 100p per preference share and the NAV
per ordinary share at the time of conversion, into new ordinary shares or a
new class of unlisted B shares with dividend and capital rights ranking pari
passu with the ordinary shares. The preference shares do not confer any voting
rights, except in limited circumstances.

The preference shares are redeemable at the option of the Company at any time
after 1 April 2030, in full or in part. The redemption price will be the
subscription price plus any unpaid dividends. In addition, the preference
shares may be redeemed in full at the option of the holders in the event of a
delisting or change of control of the Company.

                    Opening  Amortisation  Carry Amount

£'000
£'000
£'000
 30 September 2022
 Preference shares  198,058  69            198,127
 30 September 2021
 Preference shares  197,920  69            197,989
 31 March 2022
 Preference shares  197,920  139           198,058

b)    Revolving credit and debt facilities

The Company's HoldCos have revolving credit and debt facilities which are
factored into the calculation of the fair value of the underlying investments.

In January 2017, NESH closed a syndicated loan with MIDIS, NAB and CBA for
£157.5m ("Project Apollo") to refinance its revolving credit facility. As
part of the facility agreement, the lenders provide an additional Debt Service
Reserve Facility of £7.5m and hold a charge over the assets of NESH. As at 30
September 2022, the nominal outstanding amount was £146.0m (30 September
2021: £149.6m; 31 March 2022: £145.1m).

In June 2021, NESH III closed a RCF with National Westminster Bank plc and AIB
Group (UK) p.l.c. for £75.0m of which £75.0m was subsequently drawn down. In
September 2022 the facility was increased to a total commitment of £135.0m.
As at 30 September 2022, the outstanding amount was £109.7m (30 September
2021: £50.0m; 31 March 2022: £75.0m).

In March 2016, NESH IV agreed the purchase of Project Radius. The acquisition
was part funded by a debt facility entered between NESH IV and Macquarie Bank
Limited for £55.0m, which was fully drawn down in April 2016. As part of the
debt facility agreement Macquarie Bank Limited holds a charge over the assets
of NESH IV. As at 30 September 2022, the nominal outstanding amount was
£46.9m (30 September 2021: £47.5m; 31 March 2022: £47.3m).

In July 2018, NESH IV closed a RCF with Santander for £40.0m which was
subsequently fully drawn down. In January 2019, the facility was increased to
a total commitment of £70.0m with a subsequent £30.0m drawdown. In August
2019, £56.0m was repaid. In February 2021 £35.2m was drawn down. As at 30
September 2022, the outstanding amount was £40.5m (30 September 2021:
£29.1m; 31 March 2022: £21.1m).

24.  Reconciliation of Financing Activities

                            Opening             Cash Flows  Net Income Allocation  Non-cash Flows  Carry Amount

£'000
£'000
£'000
£'000
£'000
 Six months ended 30 September 2022
 Share capital and premium  608,037             -           -                      734             608,771
 Preference shares          198,058             -           -                      69              198,127
 Retained earnings          60,463              (20,896)    77,087                 (734)           115,920
 Six months ended 30 September 2021
 Share capital and premium  605,938             -           -                      1,255           607,193
 Preference shares          197,920             -           -                      69              197,989
 Retained earnings          (25,147)            (19,620)    45,467                 (1,255)         (555)
 31 March 2022
 Share capital and premium  605,938             -           -                      2,099           608,037
 Preference shares          197,920             -           -                      138             198,058
 Retained earnings          (25,147)            (39,841)    127,550                (2,099)         60,463

25.  Commitments and Guarantees

The Company had parental guarantees in place with two financial institutions
for its subsidiaries, debt obligations and a currency hedge transaction
executed through subsidiaries.

The Company, through its Holdco, had forward and development funding
facilities in relation to the construction of subsidy-free development
projects. As at 30 September 2022, the facilities amounted to £nil and £nil
respectively (30 September 2021: £nil and £nil; 31 March 2022: £3m and
£1.4m).

On 19 November 2018, the Company entered into a counter-indemnity deed with
Banco Santander ("Santander") regarding borrowings by NextPower Radius
Limited. Under the terms of the deed the Company may request Santander to
issue a letter of credit for no more than €2,500,000. As at 30 September
2022, a letter of credit of £2,374,426 was in issue (30 September 2021:
£nil; 31 March 2022: £2,374,426).

On 1 December 2017, the Company provided a guarantee to Intesa Sanpaolo S.p.A.
("ISP") relating to derivative transactions made available to NESH V. The
guarantee covers all present and future obligations of NESH V to ISP relating
to the derivative transactions. As at 30 September 2022 the Company has no
outstanding commitments related to this guarantee (30 September 2021: none; 31
March 2022: none).

The Company has a remaining commitment to NPIII of $19.1m as at 30 September
2022 (30 September 2021: $23.3m; 31 March 2022: $25.9m). The Company, through
its subsidiary, has a remaining commitment of €0.2m in relation to the
co-investment in Project Agenor as at 30 September 2022 (30 September 2021:
none; 31 March 2022: €1.0m). The Company, through its subsidiary, has a
remaining commitment of €4.1m in relation to the co-investment in Project
Santarem as at 30 September 2022 (30 September 2021: none; 31 March 2022:
none).

The Company, through its HoldCo's, had other project spending commitments
totaling £33m as at 30 September 2022.

26.  Related Parties

The Investment Manager, the Investment Adviser and the Asset Manager are
considered to be related parties in light of their responsibilities in
implementing the investment strategy set by the Board of Directors and
directing the activities of Group entities. All management fee transactions
with the Investment Manager are disclosed in note 5.

There are no fee transactions between the Company and the Investment Adviser.

Under existing arrangements with the Asset Manager, each of the operating
subsidiaries of the Company entered into an asset management agreement with
the Asset Manager and each of the HoldCos entered into on accounting services
agreement with the Asset Manager. The total value of recurring and one-off
services paid to the Asset Manager by the subsidiaries during the period
amounted to £nil (30 September 2021: £nil; 31 March 2022: £6.6m).

At 30 September 2022 £24.6m (30 September 2021: £32.8m; 31 March 2022:
£8.3m) was owed from the subsidiaries in relation to their restructuring,
£24.6m being cash trapped within the structure at period end (30 September
2021: £12.6m; 31 March 2022: £8.0m). £5.2m of administrative service fees
were received from the subsidiaries during the period (30 September 2021:
£5.1m; 31 March 2022: £10.2m), none of which was outstanding at 30
September 2022 (30 September 2021: £nil; 31 March 2022: £nil). During the
period, dividends of £36.9m (30 September 2021: £18.9m; 31 March 2022:
£42.0m) were received from the subsidiaries. Refer to note 11 and 12 for
terms and conditions on amounts due from and to subsidiaries.

During the prior year the Company committed US$50m to NPIII, as a Limited
Partner governed by a Limited Partnership Agreement, with US$30.9m drawn as at
30 September 2022 (30 September 2021: US$26.7m; 31 March 2022: US$24.1m). The
Investment Manager, the Investment Adviser and the Asset Manager are all
professionally engaged to provide services to this fund. Equalisation interest
of £0.8m was received in the prior year due to subsequent closes of NPIII.
The principal activity of NPIII is to invest in solar photovoltaic plants
globally (primarily in OECD countries). The Company has committed a fixed
amount of capital which may be drawn (and returned) over the life of NPIII.
The Company pays capital calls when due and receives distributions from NPIII
over the life of the fund. The outstanding commitment to NPIII is disclosed in
note 25.

During the period to 30 September 2022, NextEnergy Solar Holdings II Limited
and its subsidiaries were sold to RRAM Energy Limited (a subsidiary of
NextEnergy Solar Holdings III Limited) for consideration of £33.4m.

The Directors' fees for the six months ended 30 September 2022 amounted to
£128k (30 September 2021: £106k; 31 March 2022: £222k).

As at 16 November 2022, NextEnergy Capital Group employees held 475,194 shares
in NESF.

27.  Controlling Parties

In the opinion of the Directors, on the basis of shareholdings disclosed to
them, the Company has no immediate nor ultimate controlling party.

28.  Events After the Balance Sheet Date

On 9 November 2022, NESF signed a £32.5m agreement to acquire the development
rights for a high-quality 250MW lithium-ion battery storage project in the
East of England. The project was secured through JVP2, the Company's second
Joint Venture Partnership vehicle with Eelpower Limited.

On 9 November 2022, the Directors approved a dividend of 1.88 pence per
ordinary share for the quarter ended 30 September 2022 to be paid on 30
December 2022 to ordinary shareholders on the register as at the close of
business on 17 November 2022.

Following the period end, the UK Government announced initial details of a
windfall tax on low-carbon electricity generators in the UK, as part of its
Autumn Statement on the 17 November 2022.  Full details are expected to be
clarified through the legislative process during December 2022.  Under the
temporary tax, which takes effect from 1 January 2023 and runs to 31 March
2028, low carbon generators will pay a surcharge of 45% on in-scope revenues
exceeding £75/MWh.  The tax will be calculated at group level for each
accounting year, based on aggregated generation and revenues for that year,
less an allowance of £10m.

 

Based on information available at the date of publication, the Company
considers that the methodology used to derive the Company's NAV as at 30
September 2022, and based on the assumptions outlined in note 19b, takes
account of the potential impact of the windfall tax levy.

 

The windfall tax will not be applied to the Company's government subsidised
revenues which makes up c.50% of the Company's total revenue profile, it will
also not be applicable to revenues generated from energy storage assets, an
area where the Company is strategically positioned with a secured pipeline to
rapidly expand and diversify its future revenue sources.

 

Historical Financial and Portfolio Information

                                                           Year ended 31 March                                                     Six months ended 30 September 2022
                                                           2018          2019        2020           2021        2022
 Financial
                                                                                                                      589.1m

 Ordinary shares in issue                                  575.7m        581.7m      584.2m         586.9m                         589.7m
 Ordinary share price                                      111.0p        117.5p      101.5p         99.6p       103.4p             111.0p
 Market capitalisation of ordinary shares                  £639m         £683m       £593m          £585m       £609m              £655m
 NAV per ordinary share(1)                                 105.1p        110.9p      99.0p          98.9p       113.5p             122.9p
 Total ordinary NAV(1)                                     £605m         £645m       £579m          £580m       £669m              £725m
 Premium/(discount) to NAV(1)                              5.6%          6.0%        2.5%           0.7%        (8.9%)‌‌           (9.7%)‌‌
 Earnings per ordinary share                               5.88p         12.37p      (5.09p)‌‌      6.87p       21.69p             13.08p
 Dividends per ordinary share                              6.42p         6.65p       6.87p          7.05p       7.16p              3.76p
 Dividend yield(1)                                         5.8%          5.7%        6.8%           7.1%        6.9%               6.8%
 Cash dividend cover - pre-scrip dividends1                1.1x          1.3x        1.2x           1.1x        1.2x               1.8x
 Preference shares in issue                                -             100m        200m           200m        200m               200m
 Financial debt outstanding at subsidiaries level          £270m         £269m       £214m          £246m       £283m              £336m
 GAV                                                       £875m         £1,014m     £991m          £802m       £1,150m            £1,258m
 Financial debt (financial debt/GAV)(1)                    31%           27%         22%            24%         25%                27%
 Gearing (financial debt + preference shares/GAV)(1)       31%           36%         42%            43%         42%                42%
 Ordinary shareholder total return - cumulative since IPO  33.6%         46.7%       37.5%          42.6%       53.6%              64.8%
 Ordinary shareholder total return - annualised since IPO  8.5%          9.5%        6.3%           6.1%        6.7%               7.7%
 Ordinary shareholder total return                         6.2%          11.8%       (7.8%)‌‌       5.1%        11.0%              11.0%
 Ordinary NAV total return(1)                              6.3%          11.8%       (4.6%)‌‌       7.0%        22.0%              11.6%
 Ordinary NAV total return - annualised since IPO(1)       7.0%          8.1%        5.9%           6.0%        8.0%               9.1%
 Ongoing charges ratio(1)                                  1.1%          1.1%        1.1%           1.1%        1.1%               1.1%
 Weighted average discount rate                            7.3%          7.0%        6.8%           6.3%        6.3%               6.8%
 Operational
 Invested capital(1)                                       £734m         £896m       £950m          £998m       £1,039m            £1,074m
 Number of assets                                          63            87          90             94          99                 99
 Total installed capacity                                  569MW         691MW       755MW          814MW       865MW              865MW
 Annual generation                                         451 GWh       693 GWh     712 GWh        738 GWh     773GWh             639GWh
 Generation since IPO                                      1.1 TWh       1.8 TWh     2.5 TWh        3.2 TWh     4.0TWh             4.7TWh
 Irradiation (delta vs. budget)                            (0.9%)‌‌      +9.0%       +4.0%          +6.2%       +1.8%              +9.9%
 Generation (delta vs. budget)                             +0.9%         +9.1%       +4.7%          +5.5%       +3.4%              +6.1%
 Asset Management Alpha(1)                                 +1.8%         +0.1%       +0.7%          +0.7%       (1.6%)‌‌           (3.8%)‌‌
 Weighted average lease life                               23.3 years    25.2 years  26.9 years     27.5 years  27.3 years         27.0 years

1 Alternative performance measure.

2 Excludes share in private equity vehicle (NextPower III). Inclusion of
NESF's share of NextPower III would increase capacity by 21.7MW to 886.7MW

 

Alternative Performance Measures ("APMS")

We assess our performance using a variety of measures that are not
specifically defined under IFRS and are therefore termed APMs. The APMs that
we use may not be directly comparable with those used by other companies. Our
APMs, which are shown below, are used to present a clearer picture of how the
Company has performed over the period/year and are all financial measures of
historical performance.

Asset Management Alpha

Asset Management Alpha measures the operating performance of the portfolio. It
is the performance of the portfolio relative to budget due to active
management and excludes the effect of variation in solar irradiation.

                                      Six months ended  Six months ended  Year ended

30 Sep 2022
30 Sep 2021
31 Mar 2022

%
%
%
 Delta of generation vs. budget (A)   6.1               1.1*              1.8
 Delta of irradiation vs. budget (B)  9.9               2.4               3.4
 Asset Management Alpha (A - B)       (3.8)             (1.2)*            (1.6)

*the values do not cast due to rounding differences.

Invested Capital

Invested capital measures the capital deployed into solar assets through the
HoldCos and SPVs to generate investment returns for shareholders.

                   30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 Invested capital  1,073,733          1,029,098          1,038,648

Total Gearing

Total gearing measures the aggregate of the NESF Group's financial debt and
fair value of the preference shares relative to GAV.

                                                                    30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 NESF Group's outstanding financial debt (A)                        335,651            282,832            283,304
 Preference shares as per Statement of Financial Position (B)       198,128            197,989            198,058
 Net assets as per Statement of Financial Position (C)              724,691            606,638            668,500
 Total gearing ((A + B) / (A + B + C)), expressed as a percentage)  42.4%              44.2%              41.9%

Financial Debt Gearing

Financial debt gearing measures the aggregate of the NESF Group's financial
debt relative to GAV.

                                                                         30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 NESF Group's outstanding financial debt (A)                             335,651            282,832            283,304
 Preference shares as per Statement of Financial Position (B)            198,128            197,989            198,058
 Net assets as per Statement of Financial Position (C)                   724,691            606,638            668,500
 Financial debt gearing ((A) / (A + B + C)), expressed as a percentage)  26.7%              26.0%              24.6%

Cash Income

Cash income measures of the cash generated from the Company's operations.

                                                                                 30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 Income as per Statement of Comprehensive Income (A)                             48,273             29,954             65,034
 Trade and other receivables - administrative service fee income accrual at      -                  759                758
 beginning of period/year (B)
 Trade and other receivables - administrative service fee income accrual at end  -                  2,041              -
 of period/year (C)
 Cash income (A + B - C)                                                         48,273             28,672             65,792

Cash Dividend Cover (Pre-scrip Dividends)

Cash dividend cover (pre-scrip dividends) measures the cash available to pay
ordinary share dividends, treating all scrip dividends as if they had been
paid as cash dividends.

                                                                              30 September 2022  30 September 2021  31 March 2022

£'000
£'000
£'000
 Cash Income as per the table above (A)                                       48,273             28,672             65,792
 Total expenses as per Statement of Comprehensive Income (B)                  8,514              7,976              16,190
 Pre-scrip ordinary dividends paid as per Statement of Changes in Equity (C)  21,624             20,875             41,940
 Cash dividend cover (pre-scrip dividends) ((A - B) / C)                      1.8x               1.0x               1.2x

Dividend Yield

Dividend yield is a measure of the return to the ordinary shareholders.

                                                    30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 Dividend per ordinary share (A)                    7.52               7.16               7.16
 Ordinary share price at end of period/year (B)     111.0              99.8               103.4
 Dividend yield (A / B, expressed as a percentage)  6.77%              7.2%               6.92%

NAV per Ordinary Share

NAV per ordinary share is a measure of the value of one ordinary share.

                                                                 30 September 2022  30 September 2021  31 March

pence
pence
2022

pence
 Net assets as per Statement of Financial Position (£,000) (A)   724,691            606,638            668,500
 Number of ordinary shares in issue at period/year end (B)       589,698,643        588,234,125        589,077,244
 NAV per ordinary share ((A / B) x 1,000)                        122.9p             103.1p             113.5p

NAV Total Return per Ordinary Share

NAV total return per ordinary share is a measure of the overall financial
performance of the Company and measures the combined effect of dividends paid
together with the rise or fall in the NAV.

                                                                                Six months ended  Six months ended  Year ended

30 Sep
30 Sep
31 Mar

2022
2021
2022

pence
pence
pence
 Basic NAV per ordinary share at period/year end as per Statement of Financial  122.9             103.1             113.5
 Position (A)
 Annual dividend per ordinary share declared in respect of period/year (B)      3.76              3.58              7.16
 Basic NAV per ordinary share at beginning of period/year as per Statement of   113.5             98.9              98.9
 Financial Position (C)
 NAV total return per ordinary share ((A + B - C) / C,                          11.59%            7.9%              21.98%

expressed as a percentage)

Ordinary Shareholder Total Return

Ordinary shareholder total return is a measure of the overall performance of
the ordinary shares and measures the combined effect of dividends paid
together with the rise or fall in the share price.

                                                                                 30 September 2022  30 September 2021  31 March

pence
pence
2022

Pence
 Ordinary share price at period/year end (A)                                     111.0              99.8               103.4
 Annual dividend per ordinary share declared/paid in respect of period/year (B)  3.76               3.58               7.16
 Ordinary share price at beginning of period/year (C)                            103.4              99.6               99.6
 Ordinary shareholder total return per share ((A + B - C) / C, expressed as a    10.99%             3.8%               11.0%
 percentage)

Discount to NAV per Ordinary Share

Discount to NAV per ordinary share is a measure of the performance of the
ordinary share price relative to the NAV per ordinary share.

                                                         30 September 2022  30 September 2021  31 March

pence
pence
2022

Pence
 Ordinary share price at period/year end (A)             111.0              99.8               103.4
 NAV per ordinary share at year end as per Statement of  122.9              103.1              113.5

Financial Position (B)
 Discount to NAV per Ordinary Share ((A - B) / B,        (9.7%)             (3.3%)             (8.9%)

expressed as a percentage)

Ongoing Charges Ratio

Ongoing charges ratio measures the Company's recurring operating costs
(excluding the costs of acquisition or disposal of investments, financing
charges and gains or losses arising on investments) as a percentage of the
average of the net assets at the end of each of the last four consecutive
quarters ending at the period end.

                                                                          30 September 2022  30 September 2021  31 March

£'000
£'000
2022

£'000
 Total expenses as per Statement of Comprehensive Income (A)              8,514              7,976              16,181
 Preference share dividends as per Statement of Comprehensive Income (B)  4,763              4,718              9,454
 Non-recurring expenses (C)                                               69                 158                248
 Average of quarterly net assets (D)                                      346,425            296,734            595,637
 Ongoing charges ratio ((A - B - C) / D, expressed as a percentage)       1.1%               1.1%               1.09%

 

General Shareholder Information

Alternative Investment Fund Management Directive ("AIFMD")

The AIFMD aims to harmonise the regulation of Alternative Investment Fund
Managers ("AIFMs") and imposes obligations on managers who manage or market
Alternative Investment Funds ("AIFs") in the EU or who market shares in such
funds to EU investors.

The Company is a non-EU AIF and has appointed NextEnergy Capital IM Limited as
its non-EU AIFM. The Company's marketing activities in the UK and the EU are
subject to regulation under the AIFMD and any applicable national private
placement regimes ("NPPRs"). NPPRs provide a mechanism to market non- EU AIFs
that are not allowed to be marketed under the AIFMD domestic marketing
regimes. The Board uses NPPRs to market the Company, specifically in the UK,
the Republic of Ireland, the Netherlands and Sweden.

In accordance with the AIFMD, information in relation to the Company's
leverage and remuneration of the Investment Manager, as the Company's AIFM,
are required to be made available to investors. These disclosures, including
those on the AIFM's remuneration policy, are available on request from the
Investment Manager.

Packaged Retail and Insurance-Based Investment Products ("PRIIPs")
Regulation/Key Information Document ("KID")

The PRIIPs Regulation aims to ensure retail investors are provided with
transparent and consistent information across different types of financial
products.

The Company is a PRIIP. The PRIIPs Regulation requires the Investment Manager
to publish a KID in respect of the Company that includes standardised
illustrations of theoretical risk and returns. The KID is available on the
Company's website under Investor Relations (nextenergysolarfund.com).

The Company is not responsible for the information contained in the KID and
investors should note that the procedures for calculating the risks, costs and
potential returns are prescribed by law. The figures in the KID may not
reflect the expected returns for the Company and anticipated performance
returns cannot be guaranteed.

Foreign Account Tax Compliance Act ("FATCA")/ OECD Common Reporting Standard
("CRS")

FATCA is a United States federal law enacted in 2010, the intent of which is
to enforce the requirement for United States persons (including those living
outside the US) to file yearly reports on their non-US financial accounts.
Developed and approved by the OECD in 2014, the CRS is a global standard for
the automatic exchange of financial account information between governments
around the world to help fight against tax evasion and protect the integrity
of systems.

The Board, in conjunction with the Company's service providers and advisers,
will ensure the Company's compliance with the FATCA and CRS requirements to
the extent relevant to the Company.

Markets in Financial Instruments Directive II ("MiFID II") Status

MiFID II requires retail investors in complex products to be assessed for
"knowledge and understanding" by distributing firms if they are buying them
without advice.

The Company's ordinary shares are considered as "non-complex" in accordance
with MiFID II.

Retail Distribution of the Company's Shares Via Financial Advisers and Other
Third-Party Promoters

The FCA's rules restrict the promotion of investment products classified as
"non-mainstream pooled investment products" to retail investors. The
restrictions do not apply to ordinary shares in a UK investment trust or
non-UK investment company which would qualify for approval as an investment
trust under section 1158 of the Corporation Tax Act 2010 if resident and
listed in the UK.

The Board has been advised that the Company would qualify as an investment
trust if it was resident in the UK. Accordingly, the promotion and
distribution of the Company's ordinary shares are not subject to the FCA's
restrictions referred to above.

The Company currently conducts its affairs so that its ordinary shares can be
recommended by financial advisers to retail investors and intends to continue
to do so for the foreseeable future.

ISA Status

NESF's ordinary shares are eligible for stocks and shares ISAs.

The Company intends to continue to manage its affairs so that its ordinary
shares qualify as an eligible investment for a stocks and shares ISA.

Net Asset Value per Ordinary Share

The NAV per ordinary share is calculated on a quarterly basis and published
through a stock exchange announcement.

Scrip Dividends

The Company offers a scrip dividend alternative to shareholders. For further
information, please see the scrip dividend alternative circular for the year
ending 31 March 2023, which is available under "Publications" in the Investor
Relations section of the Company's website (nextenergysolarfund.com).

Additional Information

Copies of the Company's Annual and Interim Reports, quarterly fact sheets and
stock exchange announcements, together with information on the Company's
ordinary share price, NAV per ordinary share, historic ordinary share and NAV
performance, together with further information, is available on the Company's
website (nextenergysolarfund.com).

Financial Calendar for Year Ending

31 March 2023

Annual Results announced June 2023

Annual General Meeting August 2023

Interim dividends

In the absence of unforeseen circumstances, the Directors expect to declare
and pay the following interim dividends per ordinary share in respect of the
financial year ending 31 March 2023.

 

 Dividend  Announcement    Ex-dividend     Payment date    Amount

date
Date
 2nd       10 November 22  17 November 22  30 December 22  1.88p
 3rd       9 February 23   16 February 23  31 March 23     1.88p
 4th       11 May 23       18 May 23       30 June 23      1.88p

Cautionary Statement

This Interim Report and the Company's website may contain certain
"forward-looking statements" with respect to the Company's financial
condition, results of its operations and business, and certain plans,
strategies, objectives, goals and expectations with respect to these items and
the markets in which the Company invests. Forward-looking statements are
sometimes, but not always, identified by their use of a date in the future or
such words as "aims", "anticipates", "believes", "estimates", "expects",
"intends", "targets", "objective", "could", "may", "should", "will" or "would"
or, in each case, their negative or other variations or comparable
terminology.

Forward-looking statements are not guarantees of future performance. By their
very nature forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. Many of these
assumptions, risks and uncertainties relate to factors that are beyond the
Company's ability to control or estimate precisely. There are a number of such
factors that could cause the Company's actual investment performance, results
of operations, financial condition, liquidity, dividend policy and financing
strategy to differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not limited to:
changes in the economies and markets in which the Company operates; changes in
the legal, regulatory and competition frameworks in which the Company
operates; changes in the markets from which the Company raises finance; the
impact of legal or other proceedings against or which affect the Company;
changes in accounting practices and interpretation of accounting standards
under IFRS; and changes in power prices and interest and exchange rates.

Any forward-looking statements made in this Interim Report or the Company's
website, or made subsequently, which are attributable to the Company, or
persons acting on its behalf (including the Investment Manager and Investment
Adviser), are expressly qualified in their entirety by the factors referred to
above. Each forward-looking statement speaks only as of the date it is made.
Except as required by its legal or statutory obligations, the Company does not
intend to update any forward-looking statements.

Nothing in this Interim Report or the Company's website should be construed as
a profit forecast or an invitation to deal in the securities of the Company.

Glossary and Definitions

 Administrator                      Ocorian Administration (Guernsey) Limited
 AGM                                Annual General Meeting
 AIC                                The Association of Investment Companies
 AIC Code                           The AIC Code of Corporate Governance (February 2019)
 AIFM                               Alternative Investment Fund Manager for the purpose of the EU's Alternative
                                    Investment Fund Management Directive
 Asset Management Alpha             The difference between (i) the delta of generation vs. budget and (ii) the
                                    delta of irradiation vs. budget
 Apollo portfolio                   21 UK solar plants held within NESH (see the Operating Portfolio - Overview
                                    for further details)
 Asset Manager or                   WiseEnergy (Great Britain) Limited and WiseEnergy Italia Srl

 WiseEnergy
 Brexit                             The withdrawal of the United Kingdom from the European Union
 Cash dividend cover                The ratio of the Company's cash income to dividends paid or payable in respect
                                    of the financial period/year
 CBA                                Commonwealth Bank of Australia
 Company or NESF                    NextEnergy Solar Fund Limited
 Consultants                        The three independent market forecasters used by the Company
 CO2e or                            A term for describing different greenhouse gases in a common unit. For any

carbon dioxide                    quantity and type of greenhouse gas, CO2e signifies the amount of CO2 which

equivalent                        would have the equivalent global warming impact
 DNO                                Distribution Network Operator
 DNOO                               Distribution Network Operator Outages
 EBITDA                             Earnings before interest, tax, depreciation and amortisation
 Embedded benefits                  Supplier costs that are reduced or avoided via contracting with small-scale
                                    generation connected at the distribution network level instead of the national
                                    transmission system
 EPC                                Engineering, Procurement and Construction
 ESG                                Environmental, Social and Governance
 FCA                                Financial Conduct Authority
 FiT                                Feed-in-Tariff schemes are financial mechanisms by which the UK Government
                                    incentivised the deployment of small-scale renewable energy generation and the
                                    Italian Government incentivised the deployment of large-scale renewable energy
                                    generation by requiring participating licensed electricity suppliers to make
                                    payments on both generation and export from eligible installations
 GAV                                Gross asset value, 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
 GW                                 Gigawatt; A unit of power equal to 1,000 MW
 GWh                                GW hour, being a measure of electricity generated per hour
 HoldCos                            Intermediate holding companies used by the Company as pass-through vehicles to
                                    invest in underlying solar energy infrastructure assets, currently being NESH,
                                    NESH II, NESH III, NESH IV, NESH V and NESH VI
 IFRS                               International Financial Reporting Standards
 Investment Adviser or              NextEnergy Capital Limited

 NEC
 Investment Manager                 NextEnergy Capital IM Limited
 IPO                                Initial Public Offering
 IRR                                Internal Rate of Return
 KPMG                               KPMG Channel Islands Limited, independent auditor to the Company
 KWh                                Kilowatt hour, being a measure of electricity generated per hour
 LIBOR                              London Interbank Offered Rate
 MIDIS                              Macquarie Infrastructure Debt Investment Solutions
 MW                                 A Megawatt is unit of power equal to one million watts and is used as a
                                    measure of the output of a power plant
 MWh                                MW hour, being a measure of electricity generated per hour
 NAB                                National Australia Bank
 Net assets or NAV                  Net asset value
 NAV total return                   The actual rate of return from dividends paid and any increase or reduction in
                                    the NAV per ordinary share over a given period of time
 NEC or NEC Group                   The NextEnergy Capital group of companies, including the Investment Manager,
                                    Investment Adviser and Asset Manager
 NESF Group                         The Company, HoldCos and SPVs
 NESH                               NextEnergy Solar Holding Limited
 NESH II                            NextEnergy Solar Holding II Limited
 NESH III                           NextEnergy Solar Holding III Limited
 NESH IV                            NextEnergy Solar Holding IV Limited
 NESH V                             NextEnergy Solar Holding V Limited
 NESH VI                            NextEnergy Solar Holding VI Limited
 NIROC                              Like the ROCs in Great Britain, the Northern Ireland Renewable Obligation
                                    Certificate scheme obliges electricity suppliers to produce a certain number
                                    of NIROCs for each MWh of electricity which they supply to their customers in
                                    Northern Ireland or to pay a buy-out fee that is proportionate to any
                                    shortfall in the number of NIROCs being so presented
 NPIII                              NextPower III L.P.
 NZ                                 NextZest
 O&M                                Operations and Maintenance
 OECD                               Organisation for Economic Co-operation and Development
 OFGEM                              Office of Gas and Electricity Markets
 Ongoing charges ratio              The regular, recurring annual costs of running the Company (excluding the
                                    costs of acquisition or disposal of investments, financing charges and gains
                                    or losses arising on investments), expressed as a percentage of average net
                                    assets, calculated in accordance with the AIC's methodology
 Ordinary shareholder total return  The actual rate of return from dividends paid and any increase or reduction in
                                    the ordinary share price over a given period of time
 Ordinary shares                    The issued ordinary share capital of the Company
 Performance ratio                  Describes the relationship between the actual and theoretical energy outputs
                                    of a solar plant (expressed as a percentage)
 PPA                                Power purchase agreement
 Premium/discount to NAV            The amount, expressed as a percentage, by which the Company's ordinary shares
                                    trade above or below the NAV per ordinary share
 Preference shares                  The issued preference share capital of the Company
 PV                                 Photovoltaic
 Radius portfolio                   Five UK solar plants held within NESH IV (see the Operating Portfolio -
                                    Overview for further details)
 RCF                                Revolving Credit Facility
 ROC                                Renewable Obligation Certificates (the Renewable Obligation scheme is the
                                    financial mechanism by which the UK Government incentivised the deployment of
                                    large-scale renewable electricity generation by placing a mandatory
                                    requirement on licensed UK electricity suppliers to source a specified and
                                    annually increasing proportion of the electricity they supply to customers
                                    from eligible renewable sources or pay a penalty)
 ROC recycle                        The payment received by generators from the redistribution of the buy-out fund
                                    (payments are made into the buy-out fund when suppliers do not have sufficient
                                    ROCs or NIROCs to cover their obligation)
 RPI                                Retail Price Index
 RRAM portfolio                     10 UK solar plants held in NESH III (see the Operating Portfolio - Overview
                                    for further details)
 Scrip shares                       Ordinary shares issued pursuant to the Company's scrip dividend alternative
 SDG                                The Sustainable Development Goals are a set of ambitious global developmental
                                    targets adopted by the United Nations Member States in 2015 to be achieved by
                                    2030 and seek to address the global challenges we face through the promotion
                                    of development as a balance of social, economic, and environmental
                                    sustainability
 Solis portfolio                    Eight Italian solar plants held within NESH V (see the Operating Portfolio -
                                    Overview for further details)
 SPVs                               Special purpose vehicles that hold the Company's investment portfolio of
                                    underlying solar energy infrastructure assets
 Thirteen Kings portfolio           13 plants held in NESH III (see the Operating Portfolio - Overview for further
                                    details)
 Treasury shares                    Ordinary shares which are bought back by the Company, reducing the number of
                                    outstanding shares on the open market, and held by the Company for resale at a
                                    future date
 Wholesale revenue                  Revenue from energy sold in the wholesale power market which is not connected
                                    with subsidy schemes or PPAs

This document is printed on FSC® certified paper and to the EMAS standard and
its Environmental Management System is certified to ISO 14001.

This publication has been manufactured using 100% offshore wind electricity
sourced from UK wind.

100% of the inks used are HP Indigo ElectroInk which complies with RoHS
legislation and meets the chemical requirements of the Nordic Ecolabel (Nordic
Swan) for printing companies, 95% of press chemicals are recycled for further
use and, on average 99% of any waste associated with this production will be
recycled and the remaining 1% used to generate energy.

This document is printed on Revive 100 Silk and Revive 100 uncoated paper
containing 100% recycled fibre. The FSC® label on this product ensures
responsible use of the world's forest resources.

This is a certified climate neutral print product for which carbon emissions
have been calculated and offset by supporting recognised carbon offset
projects. The carbon offset projects are audited and certified according to
international standards and demonstrably reduce emissions. The climate neutral
label includes a unique ID number specific to this product which can be
tracked at www.climatepartner.com, giving details of the carbon offsetting
process including information on the emissions volume and the carbon offset
project being supported.

 

The Company

NextEnergy Solar Fund Limited

Registered Office:

Floor 2

Trafalgar Court

Les Banques

St Peter Port

Guernsey GY1 4LY

Registered no.: 57739

LEI: 213800ZPHCBDDSQH5447

Ordinary Share ISIN: GG00BJ0JVY01

Ordinary Share SEDOL: BJ0JVY0

London Stock Exchange Ticker: NESF

Website: nextenergysolarfund.com

Directors

Kevin Lyon, Chairman

Vic Holmes, Senior Independent Director

Patrick Firth

Josephine Bush

Joanne Peacegood

(All non-executive and independent)

Investment Manager

NextEnergy Capital IM Limited
East Wing, Trafalgar Court

Les Banques

St Peter Port

Guernsey GY1 3PP

Investment Adviser

NextEnergy Capital Limited
20 Savile Row

London W1S 3PR

Asset Manager

WiseEnergy

20 Savile Row

London W1S 3PR

Company Secretary and Administrator

Ocorian Administration (Guernsey) Limited
Floor 2

Trafalgar Court

Les Banques

St Peter Port

Guernsey GY1 4LY

Independent Auditor

KPMG Channel Islands Limited
Glategny Court

Glategny Esplanade

St Peter Port

Guernsey GY1 1WR

Registrar

Link Market Services (Guernsey) Ltd
Mont Crevelt House

Bulwer Avenue

St Sampson

Guernsey GY2 4LH

Legal Advisers

As to UK Law

Stephenson Harwood LLP
1 Finsbury Square

London EC2M 7SH

As to Guernsey Law

Carey Olsen (Guernsey) LLP
PO Box 98

Carey House

Les Banques

St Peter Port

Guernsey GY1 4BZ

Sponsor and Joint Broker

Cenkos Securities plc
6, 7, 8 Tokenhouse Yard

London EC2R 7AS

Joint Broker

RBC Capital Markets Ltd
100 Bishopsgate

London EC2N 4AA

Media and Public Relations Adviser

Camarco

107 Cheapside

London EC2V 6DN

Principal Bankers

Barclays Bank plc
6/8 High Street

St Peter Port

Guernsey GY1 3BE

 

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