LEI: 213800ZPHCBDDSQH5447
19 June 2024
NextEnergy Solar Fund
Limited
("NESF"
or the "Company")
Full Year Results for year
ended 31 March 2024
NextEnergy Solar Fund, a leading
specialist investor in solar energy and energy storage, is pleased
to announce it has today published its full year results and annual
report as at year ended 31 March 2024.
Key Highlights:
Financial:
·
NAV per ordinary share of 104.7p (31 March 2023:
114.3p).
·
Ordinary shareholders' NAV of £618.6m (31 March 2023:
£674.4m).
·
Income generated of c.£80m (31 March 2023: c.£79m)
·
Financial debt gearing (excluding preference
shares) of 29.3% (31 March
2023: 28.4%).
·
Total gearing (including preference shares) of
46.4% (31 March 2023:
44.6%).
·
Weighted average cost of capital of 6.4% (31 March 2023: 5.7%).
·
Weighted average cost of debt of 4.5% including preference shares (31
March 2023: 3.9%).
·
Weighted average discount rate across the
portfolio of 8.1%
1 (31 March 2023: 7.3%).
Dividend:
· 11% increase
in total dividends paid of 8.35p per ordinary share for the twelve
months ended 31 March 2024 (31 March 2023: 7.52p).
·
Dividend cover for the twelve months ended 31
March 2024 was 1.3x (31
March 2023: 1.4x).
·
Increased target dividend to 8.43p per ordinary share for the year
ending 31 March 2025.
·
Attractive high dividend yield of c.11%, as at closing share price on 17
June 2024.
·
Forecasted target dividend cover of 1.1x - 1.3x for the year ending 31
March 2025.
·
Total ordinary dividends paid since IPO of
£345m or 67.8p per share.
Portfolio:
· Reached
1GW installed capacity
milestone with 1,015MW
1,2,3 of total installed capacity (31 March 2023: 889MW
2,3).
·
Increased portfolio size to 103 operating assets (31 March 2023:
99).
·
Maiden 50MW standalone energy storage asset
("Camilla") achieved commercial operation.
·
Energised two international solar co-investments
totalling 260MW 2 alongside NextPower III ESG ("Santarém
and Agenor").
·
Energised Whitecross, a 35.22MW solar asset in the
UK.
·
Remaining weighted asset life of 26.6 years (31 March 2023: 26.3
years).
ESG &
Sustainability:
· Maintained Article
9 Fund classification under the EU Sustainable Finance Disclosure
Regulation and EU Taxonomy Regulation.
· Generated 852GWh of
clean electricity during the period, contributing to the avoidance
of 279.3KtCO2
emissions (31 March 2023: 899GWh, 363KtCO2
emissions).
· Released
third standalone sustainability report, available
here, focused on three principal
sustainability topics: climate, nature and social-related
issues.
·
Powered an equivalent 301,000 homes for one year (31 March
2023: 242,000).
· Adopted the Taskforce on Nature-related Financial Disclosures
("TNFD") to go above and beyond the Company's sustainability
reporting requirements, alongside commitment to disclose under the
new TNFD framework.
· Adopted the
International Sustainability Standards Board ("ISSB") standards S1
and S2, which covers and expands on the Taskforce for
Climate-related Financial Disclosures guidance, through a dedicated
ISSB aligned Sustainability and ESG Report.
Capital Structure:
· Refinanced all
revolving credit facilities at attractive margins demonstrating the
appetite of the Company's banking partners to provide debt to the
Company at attractive terms.
·
The Company's financial debt (excluding preference
shares) is currently £338m which represents a gearing of
29.3% of Gross Asset Value
("GAV") (31 December 2023: 28.8%). The Company also includes
non-amortising preference shares as part of the debt structure and
therefore values the total gearing of the Company at 46.4% of GAV (31 December 2023:
45.7%).
·
Of the Company's total debt4,
68% remains at a fixed rate of interest
(including the preference shares) and 32% is a floating rate at attractive
margins (SONIA + 1.20% to 1.50%).
Capital Recycling
Programme:
· Completed the
first phase of the Capital Recycling Programme with the sale of
Hatherden, a 60MW
ready-to-build solar project, for £15.2m, representing a 100% premium to its holding value (2.0x
Multiple on Invested Capital) and an attractive 57% IRR.
·
Post period end, the Company completed the second
phase of the Capital Recycling Programme with the sale of
Whitecross a 35.22MW
operating solar asset for £27m (the "Transaction") to a
third-party, Downing LLP.
· The
Transaction represents a 1.3x Multiple on Invested Capital, an
attractive 14% unlevered
IRR, and a 14% premium to
the holding value as at 31 March 2024.
· The
Transaction is Net Asset Value ("NAV") accretive to shareholders
and will generate an estimated uplift of 0.57p which will be reflected in the
Company's NAV per share as at 30 June 2024.
· The
Investment Manager ("NEC") secured potential for further
consideration of £1m
payable in the event the project benefits from planned changes to
network charging before 31 December 2028, bringing the total
transaction value to £28m.
· The total
transaction value including this further consideration represents a
1.3x Multiple on Invested
Capital, an attractive 15%
unlevered IRR, and a 18%
premium to the holding value as at 31 March 2024. It would
also generate an estimated uplift of 0.70p if reflected in the Company's NAV
per share as at 30 June 2024.
·
Proceeds from both phases of the Capital Recycling
Programme were used to repay the Company's short-term debt
facilities.
· Subsequent
phases are progressing positively through exclusive negotiations
with selected third-party bidders. The Company will provide further
updates in due course.
Share Buyback Programme:
·
Post period end, the Board announced it approved
an initial Share Buyback Programme of up to £20 million.
Annual Report:
The Company's Annual Report for the
year ended 31 March 2024 is now available on the Reports &
Publications section of the Company's website
here.
(https://www.nextenergysolarfund.com/reports-and-publications/)
A copy of the Annual Report has also
been submitted to the FCA's National
Storage Mechanism.
Full Year Results
Presentation:
A presentation will be held this
morning at 9:00am (BST) at
the London Stock Exchange, 10 Paternoster Square, London, EC4M
7LS. To register to attend in person please contact
ir@nextenergysolarfund.com. The Company will also livestream
the presentation via webcast for investors followed by a Q&A
session.
The presentation will be hosted
by:
·
Helen Mahy (Chairwoman,
NextEnergy Solar Fund)
·
Ross Grier (Chief
Operating Officer and Head of UK Investment, Investment
Adviser)
·
Stephen Rosser (Investment
Director & UK Legal Counsel, Investment Adviser)
Presentation details and
registration link:
·
Time: 9:00am
(BST)
·
Date: Wednesday
19 June 2024
·
Registration and Webcast link:
NextEnergy Solar Fund Full Year Results
Presentation
A recording of the presentation will
be made available on the Company's website shortly after the
event.
Helen Mahy, Chairwoman of NextEnergy
Solar Fund Limited, commented:
"I
am pleased to present the tenth Full Year Results for NESF and my
first Annual Report as Chairwoman. The continued
macroeconomic backdrop has presented challenges to the sector, but
I am encouraged that the Company has continued to show resilience
having achieved multiple key milestones throughout this financial
year.
The Company has made solid progress with its Capital Recycling
Programme, which started with the sale of Hatherden a 60MW
ready-to-build solar project, in November 2023. Since year end,
NESF has successfully delivered the second phase of its Capital
Recycling Programme and realised attractive value for shareholders
from the sale of Whitecross, a 35.22MW operating solar asset.
At the same time, the Company has maintained strict
discipline across its capital structure and continues to look at
active ways to narrow the discount in the share price compared to
the Company's Net Asset Value, including implementing a £20 million
Share Buyback Programme.
NESF recently celebrated its ten-year anniversary since
listing on the London Stock Exchange back in April 2014, a
significant milestone that underpins and demonstrates the value of
the Company's long-term growth and vision."
Michael Bonte-Friedheim, CEO &
Founder of NextEnergy Group, said:
"Over the year, NESF accomplished several impressive
milestones. These included the energisation of four new assets
totalling 345MW, reaching over 1GW of net operating capacity,
paying a fully covered full-year dividend of 8.35p per ordinary
share, and achieving excellent returns for shareholders from our
phased Capital Recycling Programme which has delivered significant
value. With the recent announcement of an increase in dividend
target to 8.43p, NESF is currently offering a dividend yield of
approximately 11%, which stands as one of the highest in the sector
and FTSE 350.
NESF has been a key contributor to
the UK's progress towards its Net Zero targets to date and is well
positioned to continue to be in the future. The majority of
NESF's operating assets are located across the UK and have been
essential in increasing domestic renewable energy generation and
helping strengthen the UK's energy security and
independence."
12-Month NAV Bridge
Breakdown:
|
NAV
p/share
|
NAV
|
At
31 March 2023
|
114.3p
|
£674.4m
|
Time value
|
8.0p
|
£47.1m
|
Project actuals
|
(1.5p)
|
(£8.8m)
|
Power price forecasts
|
(7.8p)
|
(£45.5m)
|
Changes in short-term
inflation
|
4.5p
|
£26.9m
|
Revaluation of new assets
|
1.7p
|
£10.8m
|
Revaluation of NextPower III
ESG
|
0.9p
|
£5.1m
|
Cash dividends paid
|
(9.6p)
|
(£57.0m)
|
Sale of Hatherden
|
1.3p
|
£7.5m
|
Discount rate changes
|
(4.6p)
|
(£27.4m)
|
Capital movements (no net NAV
impact):
|
|
|
- New assets at
cost
|
4.5p
|
£26.7m
|
- Repayment of RCF using
cash on hand
|
0.1p
|
£0.6m
|
- Cash used to fund
investments and repayment of RCF
|
(4.6p)
|
(£27.3m)
|
Other movements in residual
value
|
(2.5p)
|
(£14.5m)
|
At
31 March 2024
|
104.7p
|
£618.6m
|
The movement in the NAV over the
period was driven primarily by the following factors:
· Increase due
to time value, reflecting the change in the valuation as a result
of changing the valuation date, prior
to adjusting
for any outflows of the Company. The increase in value is
attributable to the unwinding of the
discount
applied to cash flows for the period when calculating the
DCF.
·
A decrease in short-term
(2024-2029) UK power price forecasts provided by Consultants,
mainly as a result of
lower
commodity prices (particularly gas, which is down c.30-40%),
influenced by above-average gas storage
levels, milder
weather across winter 2023/24 and sustained reductions in
demand.
·
The valuation incorporates
revisions to short-term inflation forecasts from external third
parties.
·
The revaluation of new assets
accounts for assets as they become operational and moved from
holding them at
cost to fair
value. This includes the standalone energy storage asset, the two
international solar co-investments
and
Whitecross.
· The
revaluation of NextPower III ESG.
· The dividends
declared and operating costs incurred during the year, this
includes both ordinary and preference
share dividend
payments.
·
Other movements in residual
value include changes in FX rates, fund operating expenses, and
other non-
material movements.
Inflation Linkage and
Updates
The Company continues to take a
consistent approach to its inflation assumptions, using external
third-party, independent inflation data from HM Treasury Forecasts
and long-term implied rates from the Bank of England for its UK
assets. For international assets, IMF forecasts are
used. Long-term assumptions are aligned with market consensus
including transition to CPI from 2030.
Inflation Rate (UK RPI) Assumptions
Calendar Year
|
31
March 2024
|
31
March 2023
|
2024/25
|
3.10%
|
3.40%
|
2025/26
|
2.90%
|
3.30%
|
2026/27
|
2.90%
|
3.20%
|
2027/28
|
3.50%
|
3.70%
|
2028/29
|
3.60%
|
3.00%
|
2029/30
|
3.00%
|
3.00%
|
2030/31 onwards
|
2.25%
|
2.25%
|
Discount Rate Assumptions
|
|
31
March 2024
|
31 March 2023
|
Solar
|
UK unlevered
|
7.50%
|
6.75%
|
UK levered
|
8.20 - 8.50%
|
7.45-7.75%
|
Italy
unlevered5
|
9.00%
|
8.25%
|
Subsidy-free
(uncontracted)6
|
8.50%
|
7.75%
|
Life
extensions7
|
8.50%
|
7.75%
|
Energy
Storage
|
Uncontracted
|
10.00%
|
n/a
|
Contracted
|
7.00%
|
n/a
|
Power Curve Assumptions
31 March 2024:
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
NextEnergy Solar Fund continues to
lock in 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
8,9,10,11:
Renewable Energy Guarantees of
Origin ("REGOs")
The Company sells REGOs bundled with
power sales through existing PPAs as well as unbundled via
bilateral arrangements. Where REGOs have been sold at a fixed
price, these known prices are used in the calculation of NAV. 100%
of REGOs generated for the 2023-24 compliance year have been sold
at an average price of £2.6/MWh. 92% of expected REGOs for the
2024-25 compliance year have been sold at £3.80/MWh. Unbundled,
unsold REGO volumes of up to c.645GWh/annum are reflected in the
NAV in line with third-party advisor forecasts (£5/MWh until March
2028 and then £1.5/MWh for the remaining life of the
asset).
Available Capital
Out of the total £205m immediate
RCFs available to the Company, c.£40m remains undrawn and available
for deployment as at 31 March 2024. The Company has
c.£8.9m immediate cash balance available at Company level as at 31
March 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 pipeline of c.£500m domestic and
international solar (>400MW), domestic energy storage assets
(>250MW), and a right of first offer over qualifying projects
developed or sourced by the Investment Manager and Investment
Adviser.
Footnote:
1. Includes new operating
energy storage asset Camilla.
2. NextEnergy Solar Fund owns
13.6% of Santarém (210MW in Portugal) and 24.5% of Agenor (50MW in
Spain).
3. On a look-through MW
equivalent basis, this includes NextEnergy Solar Fund's investment
in NextPower III, a private international infrastructure solar fund
where it owns 6.21%. Ownership in the international
co-investments as above, and 70% ownership of the Company's maiden
standalone energy storage asset Camilla through its joint venture
partnership.
4. Excluding
NextPower III look through debt totalling £12.6m as of 31 March
2024.
5. Unlevered
discount rate for Italian operating assets implying 1.50% country
risk premium to 7.50%.
6. Unlevered
discount rate for subsidy-free uncontracted operating assets
implying 1.0% risk premium to 7.50%.
7. 1.0% risk
premium to 7.50% for cash flows after 30 years where leases have
been extended.
8. Fixed revenues
include subsidy income.
9. Figures are
stated to the nearest 0.1% which may lead to rounding
differences
10. NextEnergy Solar Fund
minimises its merchant exposure through its active rolling PPA
programme. The programme locks in PPA's in the liquid market to
ensure maximum contracted revenues are achieved
11. Fixed prices (£/MWh) covers 85% (861MW) of the total portfolio
as at 6 June 2024.
For further information:
NextEnergy Capital
Michael Bonte-Friedheim
|
020 3746 0700
ir@nextenergysolarfund.com
|
Ross Grier
|
|
Stephen Rosser
|
|
Peter Hamid (Investor
Relations)
|
|
RBC Capital Markets
|
020 7653 4000
|
Matthew Coakes
|
|
Elizabeth Evans
Kathryn Deegan
|
|
Cavendish
|
020 7397 1909
|
James King
|
|
William Talkington
|
|
H/Advisors Maitland
|
020 7379 5151
|
Neil Bennett
|
|
Finlay Donaldson
|
|
|
|
Ocorian Administration (Guernsey)
Limited
|
01481 742642
|
Kevin Smith
|
|
Notes to
Editors1:
About NextEnergy Solar
Fund
NextEnergy Solar Fund is a
specialist solar energy and energy storage investment company that
is listed on the premium segment of the London Stock Exchange and
is a FTSE 250 constituent.
NextEnergy Solar Fund's investment
objective is to provide ordinary shareholders with attractive
risk-adjusted returns, principally in the form of regular
dividends, by investing in a diversified portfolio of utility-scale
solar energy and energy storage infrastructure assets. The
majority of NESF's long-term cash flows are inflation-linked via UK
government subsidies.
As at 31 March 2024, the Company had
an audited gross asset value of £1,155m. More information is
available at www.nextenergysolarfund.com
Article 9 Fund
NextEnergy Solar Fund is classified
under Article 9 of the EU Sustainable Finance Disclosure Regulation
and EU Taxonomy Regulation. NextEnergy Solar Fund's
sustainability-related disclosures in the financial services sector
are in accordance with Regulation (EU) 2019/2088 and can be
accessed on the ESG section of both the NextEnergy Solar Fund and
NextEnergy Capital 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. 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: has over 17 years of
specialist solar expertise having invested in over 400 individual
solar plants across the world. NextEnergy Capital currently
manages four institutional funds with a total capacity in excess of
3GW and has assets under management of $4.3bn.
More information is available at
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 1,500 utility-scale solar power plants with an
installed capacity in excess of 2.5GW. More information is available at 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
Notes:
1: All financial data is
audited at 31 March 2024, being the latest date in respect of which
NextEnergy Solar Fund has published financial
information