REG - NextEnergy Solar Fnd - Quarterly Net Asset Value & Operational Update

NextEnergy Solar FundAnnouncement

20/02/2025 07:15

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RNS Number : 7683X  NextEnergy Solar Fund Limited  20 February 2025

LEI: 213800ZPHCBDDSQH5447

20 February 2025

NextEnergy Solar Fund Limited

("NESF" or "the Company")

 

 

 Unaudited Quarterly Net Asset Value & Operational Update

 

NextEnergy Solar Fund, a leading specialist investor in solar energy and
energy storage, announces it has today published its Q3 Net Asset Value and
Operational Update for the period ended 31 December 2024.

 

Key Highlights

 

Financial:

·      Net Asset Value ("NAV") per Ordinary Share of 97.4p (30
September 2024: 97.8p).

·      Ordinary Shareholders' NAV of £565.7m (30 September 2024:
£572.2m).

·     Gross Asset Value of £1,071m (30 September 2024: £1,104m).

·      Financial debt gearing (excluding Preference Shares)
of 28.6% (30 September 2024: 30.2%).

·     Total gearing (including Preference Shares and total look-through
debt) of 47.2% (1)

(30 September 2024: 48.2% (1)).

·      Weighted average cost of debt (including Preference Shares)
of 4.9% (30 September 2024: 4.9%).

·      Weighted average cost of capital of 6.6% (30 September 2024:
6.6%).

·      Weighted average discount rate across the portfolio of 8.0% (30
September 2024: 8.0%).

 

Dividend:

·  The Board is pleased to reaffirm its full-year dividend target guidance
of 8.43p per Ordinary Share for the financial year ending 31 March 2025.

·   The full-year dividend target per Ordinary Share is forecast to be
covered in a range of 1.1x - 1.3x by earnings post-debt amortisation.

·    Total Ordinary Share dividends paid since IPO of £346m.

·    As at 19 February 2025, the Company offers an attractive dividend
yield of c.12%.

 

Portfolio:

·     101 (2) operating assets (30 September 2024: 102 (2)).

·     Total installed capacity of 934MW (2) (30 September 2024: 983MW
(2)).

·     Remaining weighted asset life of 25.0 years (30 September 2024:
25.6 years).

 

Share Buyback Programme:

·    As at 31 December 2024, the Company had purchased 10,089,403
Ordinary Shares for a total consideration of £7.8m through its up to £20m
Share Buyback Programme, producing a NAV uplift of 0.4p per Ordinary Share.

·    As at 19 February 2025, 12,484,767 Ordinary Shares have been
purchased for a total consideration of £9.4m and are currently being held in
the Company's treasury account.

 

Capital Recycling Programme:

·     As at 19 February 2025, the Capital Recycling Programme has:

o  Sold three asset sales totalling c.145MW of capacity from the 245MW
Programme.

o  Raised £72.5m total capital.

o  Added a total estimated Net Asset Value uplift of 2.76p per Ordinary
Share.

·   The remaining 100MW in the Programme is progressing through a
competitive sales process to third-party buyers.  The Company will publish
further updates about Phase IV of the Programme in due course.

 

Capital Structure:

·     As at 31 December 2024:

 Debt facilities                         Original size (£m)   Amount outstanding (£m)
 Long-term amortising debt               £212.5m              £148.6m
 Short-term revolving credit facilities  £205m                £134.4m
 Total financial debt                                         £283.0m
 Preference shares                       £200m                £198.4m
 Total debt                                                   £481.4m (3)

 

·     Short-term revolving credit facilities drawn of £134.4m (30
September 2024: £153.4m).

·    Long-term amortising debt paid down by £60.4m (30 September 2024:
£52.4m).  The remaining outstanding long-term debt of £148.6m is on track
to fully amortise in line with the remaining subsidy life of the portfolio's
government subsidies.

·     Of the Company's total debt  of £481.4m (3):

o  72% remains at a fixed rate of interest (including the Preference Shares).

o  28% remains at a floating rate of interest via the short-term revolving
credit facility.

·    Total look-through debt of £23.6m (30 September 2024: £23.5m).
This represents the total combined short and long-term debt in the Company's
investment into NextPower III LP, and its two co-investments (Agenor and
Santarem) on a look-through equivalent basis. This is included in the
Company's total gearing ratio of 47.2%.

 

ESG & Sustainability:

·     Published its first Nature Strategy Report
(https://www.nextenergysolarfund.com/wp-content/uploads/2024/11/NESF-Approach-to-Nature-Nov-2024-1.pdf)
in November 2024 outlining the Company's strategic plan for nature and nature
targets, which includes commitments to strong nature-related governance,
evidence-led action plans, use of Science-Based Targets, and ongoing
transparent disclosures.

·  The Company continued to maintain its Article 9 Fund classification
under the EU Sustainable Finance Disclosure Regulation and EU Taxonomy
Regulation.

 

Investment Manager Update:

·   NextEnergy Group announced that it bolstered its leadership and senior
management team with several key appointments and promotions.  This adds
significant expertise and experience to ensure its successful trajectory for
NextEnergy Group's next wave of anticipated global growth across the
renewables sector.

o  Ross Grier: Promoted to Chief Investment Officer of NextEnergy Capital.

o  Andrew Newington: Appointed as Senior Advisor and Chair of the Investment
Committee

of NextEnergy Capital.

o  Carrie Cushing: Appointed as Group Chief People Officer of NextEnergy
Group.

o  Armin Sandhövel: Appointed to NextEnergy Group's Advisory Board.

o  Zoey Carver: Appointed as Group Chief Technology and Information Officer
of

NextEnergy Group.

·     For more information please see the NextEnergy Group Press Release
here
(https://cdn.next1.nextenergycapital.com/next/2025/02/NextEnergy-Group-Leadership-Announcements-PR-030225-1.pdf)
.

 

Management Fees:

·    As part of its ongoing detailed dialogue around the future strategy
of the Company, the Board is in discussion with the Company's Investment
Manager on its management fee structure.  A further announcement in
connection with this is expected to be made after the end of the Company's
financial year, 31 March 2025.

 

 

Helen Mahy, Chairwoman of NextEnergy Solar Fund Limited, commented:

"NextEnergy Solar Fund is pleased to report stable Q3 performance given the
backdrop of financial markets, global politics, and adverse weather
conditions.  The Board and the Company's Investment Manager have an acute
focus on proactively narrowing the share price discount, making good progress
over the quarter by purchasing c.4.5m shares from its up to £20m Share
Buyback Programme, and raising £72.5m in total capital from its Capital
Recycling Programme to date."

 

Ross Grier, Chief Investment Officer of NextEnergy Capital said:

"NextEnergy Solar Fund continues to deliver reliable returns to shareholders
through well-covered quarterly dividends derived from strong cash flows. There
is a lot to be positive about looking forward, with multiple political and
macroeconomic tailwinds that we expect to benefit NextEnergy Solar Fund, its
shareholders, and the renewable energy sector as a whole. NextEnergy Group has
also bolstered its leadership and senior management team with significant
hires to help drive growth across all its platforms and directly strengthen
NextEnergy Solar Fund.  We continue to work hard alongside the Board to
ensure the Company is in the best position possible to capitalise on the
multiple opportunities ahead."

 

 

Quarterly NAV Bridge Breakdown:

                                                                            NAV p/share  NAV
 At 30 September 2024                                                       97.8p        £572.2m
 Time value                                                                 2.4p         £14.0m
 Project actuals                                                            (0.7p)       (£4.1m)
 Power price forecasts                                                      0.2p         £1.4m
 Changes in short-term inflation                                            1.2p         £7.2m
 Revaluation of NextPower III LP investment                                 (0.5p)       (£3.1m)
 Cash dividends paid                                                        (2.5p)       (£14.6m)
 Sale of Staughton                                                          0.9p         £5.4m
 Share buyback                                                              0.2p         (£3.3m)
 Capital movements (no net NAV impact)
 -       New assets at cost                                                 0.8p         £4.4m
 -       Repayment of revolving credit facilities using cash on hand        3.2p         £19.0m
 -       Cash on hand, used to fund investments                             (4.0p)       (£23.4m)
 Other movements in residual value                                          (1.6p)       (£9.4m)
 At 31 December 2024                                                        97.4p        £565.7m

 

The movement in the NAV over the period was driven primarily by the following
factors.

NAV Accretive:

·    Time Value: The time value reflects the change in the valuation as a
result of changing the valuation date, prior to adjusting for any outflows of
the Company.  The increase in value is attributable to the unwinding of the
discount applied to cash flows for the period when calculating the discounted
cash flow.

·  Share Buyback Programme: Shares purchased in the period as part of the
Company's Share Buyback Programme of up to £20m. The Programme used £3.3m of
cash on hand to purchase 4,446,694 Ordinary Shares in the period, resulting in
an increase in the NAV per Ordinary Share of 0.2p.

·   Capital Recycling Programme: The sale of Staughton solar farm, a 50MW
operating solar asset for £30.3m through Phase III of the Capital Recycling
Programme.

·   Power Price Forecasts: An increase in short-term (2025-2030) UK power
price forecasts provided by third-party consultants.  This is due to the
upward revision of gas price forecasts driven by lower than expected
temperatures over the Q3 period and the anticipated higher demand for gas in
summer 2025. See power curve assumptions graph below.

·   Inflation Forecasts: A slight increase in short-term inflation
assumptions from 2026 to 2029. The Company continues to take a consistent
approach to its inflation assumptions, using external third-party, independent
inflation data from HM Treasury Forecasts and long-term implied rates from the
Bank of England for its UK assets.  For international assets, IMF forecasts
are used.  Long-term assumptions are aligned with market consensus including
transition to CPI from 2030.  See breakdown of UK inflation assumptions
below.

 

NAV Deductive:

·   Cash Dividends Paid: The dividends paid during the period, including
both Ordinary and Preference Share dividend payments.

·   Project Actuals: The project actuals figure was driven by generation
performance, which was impacted by lower-than-expected irradiance levels over
the period due to the weather, network outages and higher operating expenses.
 NESF reports individual generation figures twice a year in its interim and
full-year results.

·     NextPower III LP Revaluation: Movements in the fair value of the
holding in NextPower III LP and the two co-investments reflecting operational
and macroeconomic updates.

·    Other Residual Value Movements: Includes changes in FX rates, fund
operating expenses, capital expenditure provisions for asset health, such as
repowering inverters and module replacements, and other non-material
movements.

 

 

Inflation Rate (UK RPI) Assumptions

 Calendar Year    31 December 2024   30 September 2024
 2024/25          Published (3.60%)  3.60%
 2025/26          3.40%              2.90%
 2026/27          3.20%              2.80%
 2027/28          3.40%              3.20%
 2028/29          3.50%              3.10%
 2029/30          unchanged          3.00%
 2030/31 onwards  unchanged          2.25%

 

 

Discount Rate Assumptions

                                                  31 December 2024  30 September 2024
 Solar           UK unlevered                     unchanged         7.50%
                 UK levered                       unchanged         8.20% - 8.50%
                 Italy unlevered (4)              unchanged         9.00%
                 Subsidy-free (uncontracted) (5)  unchanged         8.50%
                 Life extensions (6)              unchanged         8.50% - 9.50%
 Energy Storage  Uncontracted                     unchanged         10.00%
                 Contracted                       unchanged         7.00%

 

 

Power Curve Assumptions

31 December 2024: Blended Power Curves (Capture Price)

 

For the UK portfolio, the Company uses multiple sources for UK power price
forecasts. Where power has been sold at a fixed price under a Power Purchase
Agreement ("PPA") (a hedge), these known prices are used. For periods where no
PPA hedge is in place, short-term market forward prices are used. After two
years, the Company integrates a rolling blended average of three leading
independent energy market consultants' long-term central case projections.

 

For the Italian portfolio, PPAs are used in the forecast where these have been
secured. In the absence of hedges, a leading independent energy market
consultant's long-term projections are used to derive the power curve adopted
in the valuation.

 

 

Power Purchase Agreement Strategy

c.50% of NextEnergy Solar Fund's revenues come from RPI-linked
government-backed subsidies.  The remaining c.50% of revenues are secured
through NextEnergy Solar Fund's PPA strategy where the Company secures PPAs
over a rolling 36-month period. This proactive risk mitigation helps secure
and underpin both dividend commitments and dividend cover whilst reducing
volatility and increasing the visibility of cash flows.

 

Forecasted Total Revenue Breakdown (7):

 

 

 

Available Capital

Out of the total £205m immediate Revolving Credit Facility available to the
Company, c.£70.6m remained undrawn and available for deployment as at 31
December 2024.  The Company had c.£6.7m immediate cash balance available at
the Company level as at 31 December 2024 (this is separate from the cash
currently held at Holdco/SPV level).

 

Future Pipeline

The Company owns the project rights for, or has exclusivity over, a carefully
selected £500m pipeline of development projects in utility-scale solar
(>400MW UK & OECD target markets) and UK energy storage (>250MW UK
BESS).  In addition to this proprietary £500m pipeline, the Company benefits
from the right of first offer on relevant assets across both the NextEnergy
Capital and Starlight development pipelines as and when projects in that
pipeline have progressed to the necessary stage.  The Company will evaluate
future investments into the pipeline relative to the returns available from
all alternative capital uses, including paying down debt and additional share
buybacks.

 

 

Footnotes:

 

1.   Includes total look-through debt of £23.6m (30 September 2024:
£23.5m).  This represents the total combined short and long-term debt in the
Company's investment into NextPower III LP (NPIII), and its two co-investments
(Agenor and Santarém) on a look-through equivalent basis.

2.   On a look-through MW equivalent basis, this includes investment NPIII,
where it owns 6.21%.  Ownership in the international co-investments (13.6% of
Santarém (210MW in Portugal) and 24.5% of Agenor (50MW in Spain)), and 70%
ownership of the Company's standalone energy storage asset Camilla through its
joint venture partnership.

3.    Excludes total look-through debt of £23.6m.

4.    Unlevered discount rate for Italian operating assets implying 1.50%
country risk premium to 7.50%.

5.    Unlevered discount rate for subsidy-free uncontracted operating
assets implying 1.0% risk premium to 7.50%.

6.    1.0% risk premium added to UK unlevered (7.50%) and UK levered assets
(8.20% - 8.50%) for cash flows after 30 years where leases have been extended.

7.   As at 31 December 2024, fixed revenues include subsidy income, figures
are stated to the nearest 0.1% which may lead to rounding differences.
NextEnergy Solar Fund minimises its merchant exposure through its active
rolling PPA Programme.  The Programme locks in PPAs in the liquid market to
ensure maximum contracted revenues are achieved. Pie charts exclude Camilla,
50MW standalone energy storage asset. Fixed prices (£/MWh) covered 83%
(776MW) of the total portfolio as at 31 December 2024. Excludes Solis
portfolio.

 

 For further information:

 NextEnergy Capital

                                               020 3746 0700

 Michael Bonte-Friedheim                       ir@nextenergysolarfund.com (mailto:ir@nextenergysolarfund.com)
 Ross Grier
 Stephen Rosser
 Peter Hamid (Investor Relations)
                                               020 7653 4000

 RBC Capital Markets
 Matthew Coakes
 Kathryn Deegan
                                               020 7908 6000

 Cavendish
 Robert Peel
                                               020 7379 5151

 H/Advisors Maitland
 Neil Bennett
 Finlay Donaldson

                                               01481 742642

 Ocorian Administration (Guernsey) Limited
 Kevin Smith

 

 

Notes to Editors (1):

About NextEnergy Solar Fund

NextEnergy Solar Fund is a specialist solar energy and energy storage
investment company that is listed on the Main Market of the London Stock
Exchange.

 

NextEnergy Solar Fund's investment objective is to provide Ordinary
Shareholders with attractive risk-adjusted returns, principally in the form of
regular dividends, by investing in a diversified portfolio of utility-scale
solar energy and energy storage infrastructure assets.  The majority of
NESF's long-term cash flows are inflation-linked via UK government subsidies.

 

As at 31 December 2024, the Company had an unaudited gross asset value of
£1,071m.  For further information please visit www.nextenergysolarfund.com
(http://nextenergysolarfund.com/)

 

Article 9 Fund

NextEnergy Solar Fund is classified under Article 9 of the EU Sustainable
Finance Disclosure Regulation and EU Taxonomy Regulation.  NextEnergy Solar
Fund's sustainability-related disclosures in the financial services sector are
in accordance with Regulation (EU) 2019/2088 and can be accessed on the ESG
section of both the NextEnergy Solar Fund and NextEnergy Capital websites.

 

About NextEnergy Group

NextEnergy Solar Fund is managed by NextEnergy Capital, part of the NextEnergy
Group.  NextEnergy Group was founded in 2007 to become a leading market
participant in the international solar sector which now employs over 370
professionals.  Since its inception, NextEnergy Group has been active in the
development, construction, and ownership of solar assets across multiple
jurisdictions.  NextEnergy Group operates via its three business units:
NextEnergy Capital (Investment Management), WiseEnergy (Operating Asset
Management), and Starlight (Asset Development).

 

·    NextEnergy Capital: has over 18 years of specialist solar expertise
having invested in over 530 individual solar plants across the world.
NextEnergy Capital currently manages four institutional funds with a total
capacity in excess of 3GW+ and has assets under management of $4.5bn.  More
information is available at www.nextenergycapital.com
(https://www.nextenergycapital.com/)

·   WiseEnergy®:  is a leading specialist operating asset manager in the
solar sector.  Since its founding, WiseEnergy has provided solar asset
management, monitoring and technical due diligence services to over 1,600
utility-scale solar power plants with an installed capacity in excess of
3.5GW.  More information is available at www.wise-energy.com
(https://www.wise-energy.com/)

·   Starlight: has developed over 100 utility-scale projects
internationally and continues to progress a large pipeline of c.10GW of both
green and brownfield project developments across global geographies.  More
information is available at www.starlight-energy.com
(https://www.starlight-energy.com/)

 

Notes:

(1:) All financial data is unaudited at 31 December 2024, being the latest
date in respect of which NextEnergy Solar Fund has published financial
information.

 

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