TIDMNESF
RNS Number : 4191C
NextEnergy Solar Fund Limited
28 June 2016
28 June 2016
NextEnergy Solar Fund Limited ("NESF" or the "Company")
Final results for the year ended 31 March 2016
Delivering on our strategy since IPO
NextEnergy Solar Fund announces its results for the year ended
31 March 2016.
Highlights
-- Largest listed renewable energy fund on the London Stock
Exchange by installed solar capacity, with 414MWp across an
investment portfolio of 33 solar PV assets
-- Significant operating outperformance; energy generated 4.1% above budget
-- Net Asset Value ("NAV") per share of 98.5p (2015: 103.3p),
reflecting reductions during the year due to power price forecasts
and LECs removal, which had a combined negative impact of 14.6p per
share. Adverse NAV effects mitigated by operating outperformance,
NAV-accretive acquisitions and other value-add measures
-- Weighted average discount rate increased from 7.5% to 7.7% to
reflect project level debt. Unlevered equity discount rate
unchanged at 7.5%. For reference, a discount rate of 6.6% would
result in NAV per share of 111.3p
-- Including capital raisings net assets rose 10% to GBP273.8m at year end (2015: GBP248.4m)
-- GBP285.4m capital raised since IPO in April 2014; GBP38.8m raised in the financial year
-- Financial debt outstanding of GBP216.6m at year end; GBP243m
short and long-term debt facilities in place
-- Total dividend per share up 19% to 6.25p, in line with our
target; strong cash dividend cover of 1.2x
-- 6.31p dividend target for the year ending 31 March 2017 to be paid in quarterly instalments
-- Strong pipeline of acquisition targets and further growth opportunities under consideration
Financial highlights
As at 31 March 2016
Total capital raised GBP285.4m
NAV GBP273.8m
NAV per share 98.5p
Share price 97.8p
Dividend Yield 6.3%
Number of shares 308.8m
Market capitalization GBP271.7m
Dividends in relation to the year GBP17.4m
Net dividend cover 1.2x
Kevin Lyon, Chairman of NESF, commented:
"I am pleased to report another year of significant progress, in
which we continued to deliver on the objectives set at our IPO in
2014."
"We are now the largest listed renewable energy fund on the
London Stock Exchange by installed solar capacity. This is a
testament to our proven ability to identify a high quality
pipeline, raise capital, make acquisitions at attractive valuations
and deliver outperformance through our operational expertise. This
combination was critical in mitigating headwinds from declining
power prices and removal of LECs during the year. I am particularly
pleased to report a second successive year of operational
outperformance across our portfolio."
"We are confident of achieving our dividend target of 6.31p per
share for the current financial year to 31 March 2017. We have
ambitious growth objectives, and expect to continue issuing capital
and financial debt during the course of the current financial
year."
Dividend Declaration
A second interim dividend of 3.125p per Ordinary Share declared
on 28 June 2016, totaling GBP8.7m for payment on 22 July 2016 to
all shareholders on the register on 8 July 2016.
Dividend Timetable
Ex-dividend date: 7 July 2016
Record Date: 8 July 2016
Payment date: 22 July 2016
For further information:
NextEnergy Capital Limited 020 3239 9054
Michael Bonte-Friedheim
Aldo Beolchini
Cantor Fitzgerald Europe 020 7894 7667
Sue Inglis
Shore Capital 020 7408 4090
Bidhi Bhoma
Anita Ghanekar
Macquarie Capital (Europe)
Limited 020 3037 2000
Ken Fleming
Nick Stamp
MHP Communications 020 3128 8100
Andrew Leach / Jamie
Ricketts / Gina Bell
Notes to Editors:
NESF is a specialist investment company that invests in
operating solar power plants in the UK. Its objective is to secure
attractive shareholder returns through RPI-linked dividends and
long-term capital growth. The Company achieves this by acquiring
solar power plants on agricultural, industrial and commercial
sites.
NESF has raised equity proceeds of GBP285.4m since its initial
public offering on the main market of the London Stock Exchange in
April 2014. It also has credit facilities of GBP243.1m in place
(Macquarie and Santander: GBP120m, MIDIS: GBP55.0m, Bayersiche
Landesbank: GBP45.4m and NIBC: GBP22.7m).
NESF is differentiated by its access to NextEnergy Capital Group
(NEC Group), its Investment Manager, which has a strong track
record in sourcing, acquiring and managing operating solar assets.
WiseEnergy is NEC Group's specialist operating asset management
division, providing solar asset management, monitoring and other
services to over 1,250 utility-scale solar power plants with an
installed capacity in excess of 1.7 GW. NextPower II is NEC Group's
private equity fund with initial commitments of EUR150m, investing
in operating solar power plants and focused on consolidating the
substantial, highly fragmented Italian solar market.
Further information on NESF, NEC Group and WiseEnergy is
available at www.nextenergysolarfund.com, www.nextenergycapital.com
and www.wise-energy.eu.
Corporate Summary
NextEnergy Solar Fund Limited is a closed-ended investment
company limited by shares, registered and incorporated in Guernsey
under the Companies (Guernsey) Law, 2008, as amended, on 20
December 2013, with registered number 57739.
The Company is a Registered Closed-ended Collective Investment
Scheme regulated by the Guernsey Financial Services Commission (the
"GFSC") pursuant to the Protection of Investors (Bailiwick of
Guernsey) Law 1987, as amended.
The Company has 308,807,105 shares in issue, of which 30,850,000
are held in Treasury and therefore have no voting rights, are
admitted to the premium listing segment of the Official List of the
UK Listing Authority ("UKLA") and are traded on the London Stock
Exchange's main market for listed securities under the ticker
"NESF".
The Company makes its investments through intermediate holding
companies (the "UK HoldCos") and underlying Special Purpose
Vehicles ("SPVs") which are ultimately wholly-owned by the Company
(collectively referred to as the "Group"). References to the
Company's activities (investments in solar PV plants or debt
financing) refer to activities through the UK HoldCos. The UK
HoldCos are registered and incorporated in England and Wales under
the Companies Act, 2006, as amended:
-- NextEnergy Solar Holdings Limited, incorporated on 24 March
2014, with registration number 08956168
-- NextEnergy Solar Holdings II Limited, incorporated on 13
February 2015, with registration number 09438822
-- NextEnergy Solar Holdings III Limited, incorporated on 20
July 2015, with registration number 09693016
-- NextEnergy Solar Holdings IV Limited, incorporated on 16
March 2016 with registration number 10066420
The Company controls the investment policy of each of the UK
HoldCos and their wholly-owned SPVs to ensure that each will act in
a manner consistent with the investment policy of the Company.
The Investment Manager is NextEnergy Capital IM Limited (the
"Investment Manager"), a company incorporated in Guernsey with
registered number 57740 licensed under the Protection of Investors
(Bailiwick of Guernsey) Law, 1987, as amended (the "POI Law") and
regulated by the GFSC. The Investment Manager has appointed
NextEnergy Capital Limited (the "Investment Adviser"), a company
incorporated in England and Wales on 23 October 2006 with
registered number 05975223, to provide investment advice, pursuant
to an Investment Advisory Agreement.
Chairman's Statement
Introduction
I am pleased to present, on behalf of the Board, the Annual
Report and Audited Financial Statements for NextEnergy Solar Fund
Limited for the year ended 31 March 2016.
The Company acquires and owns operating solar power projects
exclusively in the UK. Our investment strategy is driven by our
belief that solar power projects have significantly less operating
and financial risk than other renewable energy technologies, while
regulatory risk in the UK continues to be lower relative to other
geographical markets. We target equity returns of between seven and
nine percent, an attractive yield considering our assets' risk
profiles.
The Company has delivered a strong set of results in a difficult
regulatory and trading environment, and we have significantly
increased our asset base via well-priced acquisitions.
At year-end, the Company's portfolio comprised 33 assets
amounting to c.414MW installed solar capacity and an invested
capital of c.GBP481.0m (2015: 16 assets, 217MW and GBP251.6m
invested capital). At the Date of Distribution, the Company was the
largest listed renewable energy fund on the London Stock Exchange
in terms of installed solar capacity.
Financial Results and Performance
Financial Results
The Company has prepared its accounts for the year to 31 March
2016 in accordance with IFRS. In accordance with these rules, the
Company prepares IFRS financial statements considering the fair
market value of its investments and net assets of its various
subsidiaries.
Profit before tax was GBP2.0m (2015: GBP8.5m) with earnings per
share of 0.78p (2015: 9.13p) negatively impacted by reduction in
fair value of investments. Cash dividend cover was 1.2x.
The Company's Ongoing Charges Ratio ("OCR") was 1.2%, lower than
budgeted (1.3%) and lower than previous year (1.5%). OCR budgeted
for next year is also 1.2%.
Portfolio Performance
We are particularly pleased with the operational performance of
the portfolio during the year. Overall, energy generated by our
plants was 225GWh, approximately 4.1% above our budget. This is the
Company's second year of energy generation outperformance relative
to budget. During the previous financial year, energy generation
from our portfolio amounted to 23GWh.
During the year, solar irradiation across the portfolio was 0.4%
above our expectations, partially explaining the operational
outperformance. However, the principal driver for our continued
outperformance continues to rest with the structure and quality of
our asset management organisation.
We did not experience any significant operational issues or
technical underperformance across the portfolio as a whole during
the course of the year.
The electricity generated by our portfolio is equivalent to a
saving of c.104,179 tonnes of carbon emissions and sufficient to
power some 57,000 households for a year. This is roughly equivalent
to powering a city the size of Oxford for an entire year.
Net Asset Value
At the year end, the Company's NAV was GBP273.8m, equivalent to
98.5p per share (March 2015: NAV of GBP248.4m, 103.3p per share)
mainly affected by reductions in our power price forecast and
removal of LECs (which had a combined negative impact on NAV of
14.6p per share).
As experienced during the previous reporting period, several
issues impacted the Company's NAV over the course of the reporting
year. The Company was affected by the continuing decline of the
market price of electricity, and we have revised our power price
forecasts downward again to reflect current market conditions.
Targeted dividends were paid during the year, while new assets
acquired or completed were NAV-accretive at the time of
completion.
We have further reduced our power price forecasts to take
current market conditions into account, reducing our forecasts by
an average 21% over the forecasting term. The unlevered discount
rate remains unchanged at 7.5%, while we have valued asset
portfolios with leverage acquired during the year at discount rates
up to 8.5% to reflect project leverage. As a consequence, the
weighted average discount rate across the portfolio increased to
7.7% from 7.5%.
Further details on the Company's NAV and discount rate are
included in the Financial Review section.
Portfolio Growth
The Company's Investment Adviser carefully reviews acquisition
targets that are identified in the market. There has been very
significant activity in the UK solar sector in terms of assets
being offered for sale. The Investment Adviser pursues only a small
proportion of opportunities it identifies.
As part of the Company's growth during the year, we acquired
several portfolios of operating plants as well as contracted to
acquire solar plants to be built for us.
Overall, the group of assets added to the portfolio over the
year was secured at attractive investment values compared to the
average costs for solar plants we observed in the market.
Considering each site's irradiation and Renewable Obligation
Certificates ("ROC") banding, our average investment value is below
the market average.
Capital Raising and Financing
The Company continued to secure support from its shareholders to
pursue its growth strategy. In September, the Company issued 37.6m
new shares taking the voting shares in issue to 278.0m. The
majority of these shares were taken up by existing shareholders,
underlining the backing we enjoy among parties that have supported
our growth since the IPO in April 2014. This new capital was
rapidly deployed (within six weeks) to secure new portfolio assets
for the Company.
During the year, the Company took advantage of the strong
interest of institutional debt providers and banks to lend to the
UK solar sector to put in place a mix of short- and long-term debt.
At the year-end, the Company had total financial debt outstanding
of GBP216.6m (2015: no financial debt) on a pro-forma look-through
basis including project level debt. Of the total financial debt,
GBP100.4m was long-term fully amortising debt, while the remainder
of GBP116.2m was drawn under the Company's short-term credit
facilities. The Company sourced its financial debt from multiple
providers, carefully selected to ensure competitive terms and
conditions.
Dividend and Dividend Growth
The Company continues to achieve all of its dividend and
dividend growth objectives. For the year under consideration, the
Company will have paid out a total dividend of 6.25p per share
(2015: 5.25p) in two half-yearly distributions.
Our target is expected to grow future dividends in line with UK
retail price index growth, starting with the 2016/17 financial
year. The UK retail price index published by the Office for
National Statistics and applicable to the value of ROCs during the
2016/17 financial year was 1.0% and therefore we are targeting to
grow the dividend to 6.31p per share for the 2016/17 financial
year.
During the month of April 2016, the board decided to move to a
quarterly dividend schedule, beginning with the 2016/17 financial
year. We expect to pay out four equal dividends starting in
September 2016 and continuing on a quarterly basis thereafter.
Corporate Governance and Regulation
The Board continues to review the Company's corporate governance
structure with a view to maintaining best-practice processes and
procedures. During the course of the year, the Board undertook a
review of its effectiveness, taking into account the views of the
external service providers and consultants of the Company. The
outcome of the review was that the Board and the Audit Committee
are functioning effectively. We undertake the Board effectiveness
review on a yearly basis. Further details (including adhering to
the 2014 UK Corporate Governance Code and viability statement
reporting) on the Company's Corporate Governance can be found in
the Corporate Governance section.
Market Developments
The solar PV sector has grown significantly in the UK. The
Department of Energy and Climate Change ("DECC") reported that at
the end of 2015 energy from renewables represented 27% of all
electricity generation in the UK (up from 22% at the end of 2014),
and solar PV represented c.10% of renewable generation for the full
year 2015. DECC also reported a growth in installed solar capacity
from 8,023MW in April 2015 to 9,519MW in March 2016, an increase of
19%. We expect the UK solar market to continue growing into
2016/17, and are forecasting a total installed capacity of
c.12,000MW to be constructed and in place by the end of our
financial year. This equates to a further growth of 26% in
installed capacity and is the same target we expected at the time
of IPO to be reached by 2020.
The ROC regime will come to an end on 1 April 2017, newly
constructed solar projects will not be eligible to receive ROCs for
the energy they generate and should be eligible for other forms of
support, such as future Contract for Difference ("CfD") auctions
and/or Feed-in-Tariff ("FiT") structures.
Nonetheless, the Company will continue to grow its portfolio by
predominantly acquiring operating solar power plants constructed
under the ROC regime.
Roughly 50% of the Company's long-term revenues derive from the
sale of electricity into the market. As a result, the market price
of electricity is one of the Company's key value drivers. We have
observed a recent brief period of relative stabilisation in the
electricity market price after a period of continuous decline over
the year. The Company has sought to reduce revenue volatility by
fixing the price of a significant portion of its generated energy.
For the 2016/17 financial year, approximately 83% of the Company's
expected generation, including ROCs and electricity generated, has
fixed sales prices agreed.
Outlook
The UK Government held a referendum on 23 June 2016 for the UK
to vote either to remain in or leave the European Union. As a
result of the referendum, the majority of voters elected to leave
the European Union ("Brexit"). While the impact of Brexit on the
Company and on the renewable energy sector is at this point
unclear, we believe it will have limited, if any, impact on the
UK's climate change policies or the regulation of the sector. We
will monitor any Brexit effects on power prices, sector regulation
and growth opportunities carefully.
The risk-return characteristics of acquisition opportunities we
are reviewing continue to be attractive and in line with our
investment objectives. We expect to increase the portfolio of
assets further during the course of the coming year.
The Company has begun reviewing refinancing options for its
short-term credit facilities. These may include issuing long-term
fully amortising debt or extending the facilities short-term (for
further details see the Financial Review).
Given our ambitious growth objectives, we expect to continue
issuing equity and increasing financial debt during the course of
the next financial year.
In parallel, we will continue to focus on maximising the
operating performance of the assets currently owned and exploring
further value-enhancing opportunities around the existing
portfolio.
Kevin Lyon
Chairman of the Board of Directors
Strategic Report
Solar Energy within Renewable Energy Context
Renewable energy is defined as energy sourced from theoretically
inexhaustible sources and not derived from fossil or nuclear fuels.
The principal renewable generation sources include solar, wind,
geothermal, hydro and biomass.
The Company believes that, within renewable energy, solar
represents the most attractive risk-adjusted investment
opportunity. The low variability of solar irradiation over the
long-term, low on-going operating costs and low capital expenditure
requirements post-construction compare favourably with the
characteristics of other clean energy technologies.
In the second period of operation, the Company has made a
contribution to the reduction of greenhouse gas emissions into the
Earth's atmosphere. The amount of CO2 emissions avoided by the
Company's plants amounts to c.104,179 tonnes. This amount is
expected to increase as the new plants in the portfolio achieve a
full year of operation and further projects are acquired in due
course.
Market Growth
2015 marked a very strong year for renewable energy worldwide as
renewables added 156GW of net power generating capacity in 2015,
compared to 97GW from coal, gas and nuclear. The cumulative amount
of installed renewable generating capacity as at 2015 stood at
1,985GW. This trend is expected to continue, with renewable energy
increasing its share of energy produced as well as of new capacity
added to the global grid.
The transition to cleaner energy is driven and defined by
important considerations, including the need to address climate
change, emissions of greenhouse gases into the Earth's atmosphere,
the relative rapidity in the construction of renewable energy
plants, concerns on reliance of hydrocarbon sourcing and imports,
the relative ease of constructing clean energy plants as well as
the rapidly declining unit investment cost of renewable energy
installations.
Developed countries and economies in transition across the globe
continue to embrace renewable energy as a key energy source to
satisfy increased energy demand and replace obsolete power
generation plants.
Investment Objective and Policy
The Company's Investment Objectives and Policy are stated in the
Investment Manager's Report.
Corporate Group Structure
The Company is a Guernsey Registered Closed-ended Investment
Scheme. Further information is provided in the Corporate Summary.
The Company's Board comprises three independent Directors.
The Company has a 31 March financial year-end and announces
interim results in November and full year results in June. The
updated NAV is published on a quarterly basis and in the course of
any fundraising events during the financial year.
The Company's Board and Committees
The Company's Board of Directors comprises three independent,
non-executive directors. The Board's role is to manage and monitor
the Company in accordance with its terms of reference. The Board
monitors the Company's adherence to its investment policy, the
operational and financial performance of the Company and its
underlying assets, as well as the performance of the Investment
Adviser and other key service providers. In addition, the Board has
overall responsibility for the review and approval of the Company's
NAV valuations prepared by the Investment Manager and
Administrator. It also maintains the risk register, which it
monitors and updates on a regular basis. The structure of the Board
processes allows the members to test business controls and choice
of acquisitions to ensure they meet the strategy driving the
long-term dividend target.
The Investment Manager, Investment Adviser, Developer and
Operating Asset Manager
The Company's Investment Manager is NextEnergy Capital IM
Limited. The Investment Manager has appointed NextEnergy Capital
Limited to act as Investment Adviser in relation to the Company.
Michael Bonte-Friedheim, Aldo Beolchini and Abid Kazim comprise the
Investment Committee of the Investment Adviser, whose role is to
consider and, if thought fit, recommend actions to the Manager in
respect of the Company's potential and actual investments.
-- Michael Bonte-Friedheim is Founding Partner and CEO of the
NextEnergy Capital Group. He has over 20 years' specialist
experience in the power and energy sector and was previously
Managing Director in Goldman Sachs energy and power investment
banking team in London and non-executive Chairman and CEO of listed
energy companies.
-- Aldo Beolchini is Managing Partner and CFO of the NextEnergy
Capital Group. He has over 15 years' experience in investment
banking and renewables. Mr Beolchini joined in 2008 and was
previously Vice President at Morgan Stanley Investment Banking and
an Officer at the Financial Guard Corps in Italy.
-- Abid Kazim is the UK Managing Director of the NextEnergy
Capital Group and has over 25 years' experience in strategy
development and large programme delivery, with a significant track
record in business outsourcing, transaction services, and service
management in the renewable energy sector.
The Company has also signed a project sourcing agreement with
NextPower Development Limited (the "Developer"), another unit of
the NextEnergy Capital Group. The relationship has increased the
efficiency of the transactional process reflected in the size of
the investment pipeline and is a key driver for delivering dividend
growth.
The Company has entered into an asset management framework
agreement with the Operating Asset Manager WiseEnergy (GB) Limited,
an affiliate of the NextEnergy Capital Group. Under the framework
agreement, WiseEnergy (GB) Limited enters into individual asset
management contracts with each solar power plant entity acquired by
the Company and performs a broad and defined set of asset
management activities for each entity. The collective experience of
the NextEnergy Capital Group in managing and monitoring solar PV
plants best positions the Company to implement efficiencies at both
the investment and operating asset level. The technical and
operating outperformance of the portfolio to date underlines the
benefits of this comprehensive strategic relationship.
The NextEnergy Capital Group is a privately-owned specialist
investment and asset manager focused on the solar sector. It was
formed in 2007 and has developed a unique track record in the
European solar sector. Prior to the IPO of the Company, it had
developed, financed, managed the construction of and owned 14 solar
projects in the UK and Italy. In addition, its asset management
activities now cover the management and monitoring of in excess of
1,250 utility-scale solar power plants and approximately 3,000
solar rooftop installations for a total capacity of over 1.7GW on
behalf of third-party equity investors and financing banks. Its
clients include listed solar funds (in addition to the Company),
private equity, family offices, renewable energy specialists and
other equity investors as well as some of Europe's leading lenders
to and financiers of the solar sector. The estimated value of the
assets managed and monitored by NextEnergy Capital Group amounts to
c.GBP3.5 billion. It has developed proprietary hardware and
software products and solutions to facilitate delivery of its
services to its client base. The NextEnergy Capital Group also
manages NextPower II LP, a EUR150m private equity fund dedicated to
solar PV investments in Italy.
NextEnergy Capital Group's team comprises some 50 dedicated
staff focused on the European solar sector. The team has a combined
investment track record of over 1GW in European solar transactions
and had roles in over EUR100 billion in European energy and
infrastructure transactions.
The Company, through its contractual arrangements with the
NextEnergy Capital Group, has access to a highly experienced
investment team and to a leading asset manager in the European
solar sector and expects to leverage this expertise to secure
further attractive solar power plant acquisitions and achieve
best-in-class technical, operational and financial performance from
its portfolio of operating plants. The wide range of services
provided by the NextEnergy Capital Group strategically positions
the Company to best resolve any potential technical and commercial
issues that may impact individual assets and drive best-in-class
performance. This ensures that the Company's solar PV plants are
operated as efficiently as possible to optimise their technical and
financial performances with a view to achieve and exceed the target
cash flow yield over their useful life span.
Activities of the NEC Group for NextEnergy Solar Fund
Limited
Investment Manager
NextEnergy Capital IM Limited
-- Full discretion to make investments in accordance with investment policy
-- Acts as Alternative Investment Fund Manager ("AIFM") of the Company
-- Responsible for risk management and portfolio management activities
-- Considers investment proposals, exclusively advanced by the Investment Adviser
-- The Board reviews activity of the Investment Manager to
ensure adherence to the Company's investment objective and
investment policy
-- Reports to the Company's Board comprehensively on all
technical, operational and financial issues
Developer
NextPower Development Limited
-- Sources and presents investment opportunities to the Company and its advisers
-- The Company has right of first offer over all suitable projects identified by the Developer
-- Identifies projects at all stages (pre-construction, construction and operation)
-- Structures and negotiates, in conjunction with the Investment Adviser, project contracts
-- Project manages pre-construction and construction phase
Investment Adviser
NextEnergy Capital Limited
-- Provides investment advice and recommendations to the Investment Manager
-- Identifies, in conjunction with the Developer, investment opportunities for the Company
-- Evaluates investment opportunities and co-ordinates external due diligence activities
-- Negotiates all project contracts with counterparts
-- Prepares investment proposals and provides general advice and
recommendations to the Investment Manager concerning the Company's
portfolio, financing, strategy, market developments, etc.
-- Reviews performance of the Company's portfolio together with the Operating Asset Manager
Operating Asset Manager
WiseEnergy (GB) Limited
-- Assumes asset management of solar power plants upon acquisition
-- Provides periodic technical, financial and administrative reports to the Company
-- Undertakes periodic site visits on each plant
-- Prepares technical and financial analysis of each site to
assess and identify improvement potential
-- Manages Special Purpose Vehicle's ("SPV") administrative and
financial functions and requirements
-- Ensures SPV's suppliers perform in accordance with contracts
-- Manages unexpected occurrences at plants and ensures prompt
response to any asset management requirements of the Company
Other Key Service Providers
In addition to the Investment Manager, Investment Adviser,
Developer and Operating Asset Manager, the Company has the
following key service providers:
Name Role
Ipes (Guernsey) Limited Administrator and Company Secretary
to the Company
PricewaterhouseCoopers Independent Auditor to the Company
CI LLP
Simmons & Simmons Legal adviser to the Group as
LLP to UK law
Mourant Ozannes Legal adviser to the Group as
to Guernsey law
Stephenson Harwood Legal adviser to the Group as
to Debt Financing
Cantor Fitzgerald Financial Advisor and Broker
to the Company
Shore Capital & Corporate Broker to the Company
Limited
Macquarie Capital Broker to the Company
(Europe) Limited
MHP Media and Public Relations
Capita Registrars Registrar and receiving agent
(Guernsey) Limited to the Company
Investment Outlook
The Company believes the investment outlook for UK solar remains
very attractive. It expects to secure investment opportunities from
a variety of solar sub- sectors over the course of the 2016/17
financial year. These opportunities are expected to include
recently constructed plants accredited under the 1.4 ROC regime,
projects to be built under current Feed-in Tariff ("FiT") or ROC
regimes, previously constructed projects under the 1.4, 1.3 and 1.2
ROC regimes as well as portfolios of rooftop installations either
already in operation or to be constructed over the course of the
year.
At the Date of Distribution of this annual report the Investment
Manager, together with the Developer, have identified a pipeline of
c.540MW of short-term acquisition targets and are actively
developing further opportunities.
The Company's market standing coupled with the NextEnergy
Capital Group's market access will continue to position the Company
as a pre-eminent participant in the UK solar market.
Kevin Lyon
Chairman of the Board of Directors
Corporate Social Responsibility
Context
There is an implied contract between business and society.
Businesses need a healthy environment and society to survive, and
communities also need successful businesses in order to progress,
therefore mitigating negative externalities and securing a
sustainable future.
The Company's activities are highly supportive of the
environment, as they comprise renewable energy investments that
directly address global environmental and climate change regulatory
and political targets. For our investors, we seek to both mitigate
the risk of increased regulatory pressure, as well as to improve
the community relationship, that will indirectly drive a positive
impact to the business.
The Company views the adoption of Corporate Social
Responsibility ("CSR") and Environmental, Social and Governance
("ESG") principles as a potent source of innovation and competitive
advantage for its core business. In this sense, it is committed to
generating economic value in a way that also produces value for
society by addressing its challenges and safeguarding the
transition to a low-carbon economy.
Increasingly adverse social and economic pressures have pushed
landowners and local communities to look for alternative sources of
income and land use to support their financial sustainability.
Whilst solar farms present this alternative source of income to the
farmers and already benefit the local communities by giving them
comfort that the land will not be misused, the Company has an
ethical commitment to engage with them in a way that develops a
strong and long-lasting relationship for the entire life-time of
the project. This means getting involved in local projects for
outdoor recreation, wildlife conservation, education, and raising
awareness on benefits of solar farms for landowners and communities
alike with investments such as biodiversity and local energy
supply. By taking a proactive approach the Company creates what is
termed as shared value to its regular activities.
Sustainable Metrics
In order to maximise value creation, the Company accounts for
ESG metrics that relate to the value chain of its activities. By
proactively taking an additional step to traditional investment in
the photovoltaic solar industry, it aims to create higher standards
of long-term value in the entire industry.
One of the core ambitions of the Company is to build supportive
industry clusters for its projects in the UK. It believes it can
achieve this by mitigating ESG externalities and enhancing
relationships with stakeholders and developing projects that
improve the ecosystem and environmental outputs of the photovoltaic
solar plants it invests in.
As shown above, these actions create added value to the
business, which studies show correlates with improved stock market
performance over time, whilst concurrently positively impacting
society. This leads to an optimal integration between the Company
and society, maximising return to investors as shareholders to the
Company, and also as part of society. The ultimate result of which
is that society perceives the shared value and benefits generated
from the Company's activities, supporting future business, and
shareholders stimulate the company to continue implementing its
strategy and investing in additional projects.
Implementing ESG Metrics in our portfolio
In 2015, the Company expanded its efforts in supporting local
communities where its projects are located by investing in
educational activities and development contributions.
The Company began engaging with local schools and intends to
become more involved in coming years. It donated the appropriate
photovoltaic systems and installed solar panels on the rooftop of a
local school in Cornwall, helping them become more energy efficient
and economical in the long-term. The Company's technical team has
also been devoting time to educating local children on the
technical and operational functionality of ground mounted solar
farms, so they can appreciate the work and outputs that result from
the solar farm that is connected with their community. The
organised school visit to one of its sites in Suffolk.
We believe educating the community about the local environment
is very important to improve their relationship with their own
society and stimulate the preservation of ecological systems. With
this in mind, the Company is now funding the building of an outdoor
classroom structure in a country park in Bedfordshire, containing
information displays about the park and its amenities (as shown
below), for school groups and visitors to learn about the local
environment, which is particularly rich in birdlife. One of our
solar power plants in East Sussex already has an outdoor classroom
structure in place, which the company aims to start making use of
to educate the local community.
One of the Company's goals for 2016 is to continue deploying its
efforts engaging with the community and start implementing the
environmental metrics in developing a biodiversity management plan
to:
-- improve local stakeholder and community engagement and
education on the benefits of transforming solar plants into
ecosystem-friendly assets;
-- improve local wildlife habitat conditions and community
ecosystem services and well-being; and
-- play an active role in assisting the UK meet its biodiversity
and environmental policy targets.
This plan will allow the Company to optimise land use and
improve landscape conditions, whilst systematically assessing the
vulnerability of the projects and local communities to floods,
droughts, and other climate change risks. It will also create
opportunities for the community to learn more about the local
environment and wildlife.
We believe supporting local communities is of paramount
importance to sustain long-term relationships that help our solar
power plants access value creation opportunities that ultimately
contribute to their outperformance. By such means, the Company
intends to continue to build stronger and long-lasting
relationships that positively influence the efficiency and
responsible management of its portfolio.
United Nations Principles for Responsible Investment
In our fiduciary role as institutional investors, we believe
that ESG issues can affect the performance of investment portfolios
(to varying degrees across companies, sectors, regions, asset
classes and through time). In 2016, NextEnergy Capital Group
committed to the United Nations' Principles for Responsible
Investment (UNPRI), an independent, leading proponent of
responsible investment.
By becoming a signatory, NextEnergy Capital Group companies work
together to enhance the effectiveness by which it implements the
Principles for Responsible Investment, reflecting the Company's
initiative to incorporate ESG issues into investment analysis,
decision-making processes, ownership policies and practices.
In partnership with:
PRI Principles for Responsible Investment UNEP FINANCE
INITIATIVE/United Nations Global Compact
Investment Manager's Report
About NextEnergy Capital
The Investment Manager and Investment Adviser are both members
of the NextEnergy Capital Group. The NextEnergy Capital Group is a
specialist investment and operating asset manager focused on the
solar energy sector, with a 50-strong team of which 25 are focused
on the UK solar market. Through its operating asset management
division, WiseEnergy, the NextEnergy Capital Group manages and
monitors over 1,250 utility-scale solar plants and approximately
3,000 solar rooftop installations (comprising an installed capacity
of approximately 1.7GW and an estimated GBP3.5 billion asset value)
for a client base which includes leading European banks and equity
investors (including private equity funds, listed funds and
institutional investors). The NextEnergy Capital Group also manages
NextPower II LP, a EUR150m private equity fund dedicated to solar
PV investments in Italy.
Investment Objective
The Company seeks to provide investors with a sustainable and
attractive dividend that increases in line with RPI over the long
term. In addition, the Company seeks to provide investors with an
element of capital growth through the reinvestment of net cash
generated in excess of the target dividend in accordance with the
Company's investment policy.
Investment Policy
The Company intends to achieve its investment objective by
investing exclusively in solar PV plants located in the UK.
The Company intends to continue to acquire solar PV plants that
are primarily ground-based and utility-scale and which are on sites
that may be agricultural, industrial or commercial. The Company may
also acquire portfolios of residential or commercial
building-integrated installations. The solar PV plants that will be
targeted are anticipated to generate stable cash flows over their
asset lifespan.
The Company will typically seek to acquire sole ownership of
individual solar PV plants through SPVs, but may enter into joint
ventures or acquire majority interests, subject, in each case, to
the Company maintaining a controlling interest. Where an interest
of less than 100% in a particular solar PV plant is acquired, the
Company intends to secure controlling shareholder rights through
shareholders' agreements or other legal arrangements.
The Company has built up a diversified portfolio of solar PV
plants and its investment policy contains restrictions to ensure
risk diversification. No single investment (or, if an additional
stake in an existing investment is acquired, the combined value of
both the existing and the additional stake) by the Company in any
one solar PV plant will constitute, at the time of investment, more
than 30% of the Gross Asset Value. In addition, the four largest
solar PV plants will constitute, at the time of investment, not
more than 75% of the Gross Asset Value.
The Company will, primarily, continue to acquire operating solar
PV plants, but may also invest in solar PV plants under development
(that is, at the stage of origination, project planning or
construction) when acquired. Such assets will constitute (at the
time of investment) not more than 10% of the Gross Asset Value in
aggregate. As at year end, the Company has not invested directly in
solar PV plants under development.
The Company may also agree to forward-fund by way of secured
loans the construction costs of solar PV plants where it retains
the right (but not the obligation) to acquire the relevant solar
plant once operational. Such forward-funding will not fall within
the 10% restriction above but will be restricted to no more than
25% of the Gross Asset Value (at the time such arrangement is
entered into) in aggregate and will only be undertaken where
supported by appropriate security (which may include financial
instruments as well as asset-backed guarantees).
A significant proportion of the Company's income is expected to
result from the sale of the entirety of the electricity generated
by the solar PV plants within the terms of power purchase
agreements ("PPA") to be executed from time to time. These are
expected to include the sale of ROC's, other regulated benefits and
the sale of electricity generated by the plants. Within this
context, the Investment Manager expects to conclude PPAs with
creditworthy counterparties at the appropriate time.
The Company will continue to diversify its third party
suppliers, service providers and other commercial counterparties,
such as developers, engineering and procurement contractors,
technical component manufacturers, PPA providers and landlords.
In pursuit of the Company's investment objective, the Company
may employ leverage, which will not exceed (at the time the
relevant arrangement is entered into) 50% of the Gross Asset Value
in aggregate. Such leverage will be deployed for the acquisition of
further solar PV plants in accordance with the Company's investment
policy. The Company may seek to raise leverage at any of the SPV,
UK Holdco or Company level. The Company has a preference for
medium- to long-term amortising debt financing.
The Company intends to invest with a view to holding its solar
PV plants until the end of their useful life. However, assets may
be disposed of or otherwise realised where the Investment Manager
determines, in its discretion, that such realisation is in the best
interest of the Company. Such circumstances may include (without
limitation) disposals for the purposes of realising or preserving
value, or of realising cash resources for reinvestment or
otherwise. The Company will seek to optimise and extend the
lifespan of its assets and may invest in their repowering and/or
integration of ancillary technologies (e.g. energy storage) on its
solar PV plants to fully utilise grid connections and balance the
electricity grid with a view to generating greater revenues. The
Company expects to re-invest any cash surplus (in excess of that
required to meet the Company's dividend target and on-going
operating expenses) in further investments, thereby supporting its
long-term net asset value ("NAV").
The Company may invest cash held for working capital purposes
and pending investment or distribution in cash or near-cash
equivalents, including money market funds. The Company may (but is
not obliged to) enter into hedging arrangements in relation to
interest rates and/or power prices.
Portfolio Highlights and Performances
At the Date of Distribution of this annual report, the Company
has announced the acquisition of 33 separate solar PV plants for a
total investment cost of up to c.GBP481.0 m, representing 169% of
the equity proceeds raised to date. The 33 solar PV plants amount
to an installed capacity of c.414MW in operation.
The portfolio grew continually during the year, with further
equity and debt issuance enabling the Company to acquire an
additional 17 assets during its second financial year, growing the
number of plants from 16 to 33. At 31 March 2016, all of the 33
solar plants acquired by the Company were operational and connected
to the grid.
During the year, the Company focused on integrating the
acquisition of assets that had been previously announced and made
further incremental acquisitions. The NextEnergy Capital Group has
actively led the completion process of all the acquisitions made by
the Company. The completion process is subject to the satisfaction
of several conditions set in the interests of the Company,
including the plant satisfactorily passing strictly-defined
technical and performance tests. The details of these tests, and
whether they refer to the delivery of preliminary, intermediate or
nal acceptance certi cates (or PAC, IAC, FAC as they are known)
vary across the portfolio but in general terms these are required
by the Investment Manager to ensure that the Company settles the
majority of the acquisition consideration only as and when the
target solar PV plants demonstrate the desired level of quality and
ability to obtain and exceed the expected technical performances in
the long run.
The operational performance of the portfolio during the year was
satisfactory. The Investment Manager is providing in this report
details of the actual performance compared to expectation for 23 of
the total 33 solar PV plants, specifically only those plants that
have been managed and monitored by the NextEnergy Capital Group for
at least three months at the year end. As a result of the Company's
operating asset management strategy, this sub-portfolio of 23 solar
PV plants generated an outperformance of 4.1% above the budgeted
generation values, for a total generation of 225GWh. Solar
irradiation across the sub-portfolio was broadly in line with
expectations, registering 0.4% above budget. During the previous
period, the observed sub-portfolio of six plants meeting the above
criteria registered solar irradiation of 0.4% below budget, while
energy generated by the portfolio was above budget by 4.8%.
Typically, energy generation of a solar PV asset is directly
correlated with the level of solar irradiation received by the PV
plant itself, such that a higher level of solar irradiation by any
percentage should normally result in a higher energy generation by
the same percentage. Active asset management practices and
technical improvements can positively affect the technical
performance of PV plants and thus impact this direct correlation
(as well as unplanned outages or technical issues can negatively
impact it). NESF defines as Asset Management Alpha the difference
between the delta of energy generation vs. budget and the delta of
solar irradiation vs. budget. The table below summarizes this
analysis for the relevant periods since IPO:
Solar Irradiation Power Generation
Assets (delta vs. (delta vs. Asset Management
Period monitored budget) budget) Alpha
Full Year
2014/15 6 (0.4%) +4.8% +5.2%
First Half
2015/16 17 +2.9% +5.7% +2.8%
Full Year
2015/16 23 +0.4% +4.1% +3.7%
Cumulative
from IPO to
March 2016 23 +1.4% +4.5% +3.1%
The Asset Management Alpha allows the Company to identify a
"real" outperformance of the solar portfolio due to active
management having sterilised the effects of variation in solar
irradiation. The nominal outperformance is calculated as GWh
generated by the portfolio vs. the GWh expected in the assumptions
used at the time of acquisition. In this light, the "nominal"
outperformance of the Company's portfolio during the period ended
31 March 2016 was 4.1% whereas the Asset Management Alpha of 3.7%
during the period represents the "real" outperformance due to
active asset management.
The budgeted electricity generation and solar irradiation are
derived from the financial models prepared at acquisition of each
solar power plant and used to value and acquire such plant. An
on-going operating outperformance versus the acquisition budget is
expected to result in higher asset returns, other things being
equal.
Investment Portfolio
The Investment Manager achieved a high level of diversification
in the Company's portfolio: the 33 solar PV plants are located
across 17 different counties of England and Wales, the largest one
represents 9% of the total installed capacity and the four largest
solar PV plants represent together 28% of the total installed
capacity. In addition, the portfolio is diversified across 16
non-connected contractors, 12 different Tier 1 solar panel
manufacturers and nine Tier 1 inverter manufacturers. This spread
of counterparties effectively diversifies the Company's key
counterparty risks.
Below is a summary of the overall investment portfolio with
various relevant breakdown analysis:
Power plant Location Announcement Regulatory Status(2) Plant Investment % of
Date Regime(1) capacity (GBPm) Equity
(MW) Proceeds
Higher
Hatherleigh Somerset 01/05/2014 1.6 Completed 6.1 7.3 2.6%
Shacks Barn Northants 09/05/2014 2.0 Completed 6.3 8.2 2.9%
Gover Farm Cornwall 23/06/2014 1.4 Completed 9.4 11.1 3.9%
Bilsham Sussex 03/07/2014 1.4 Completed 15.2 18.9 6.6%
Brickyard Warwickshire 14/07/2014 1.4 Completed 3.8 4.1 1.4%
Ellough Suffolk 28/07/2014 1.6 Completed 14.9 20.0 7.0%
Poulshot Wiltshire 09/09/2014 1.4 Completed 14.5 15.7 5.5%
Condover Shropshire 29/10/2014 1.4 Completed 10.2 11.7 4.1%
Llywndu Ceredigion 22/12/2014 1.4 Completed 8.0 9.4 3.3%
Cock Hill
Farm Wiltshire 22/12/2014 1.4 Completed 20.0 23.3 8.2%
Boxted Airfield Essex 31/12/2014 1.4 Completed 18.8 20.6 7.2%
Langenhoe Essex 12/03/2015 1.4 Completed 21.2 22.9 8.0%
Park View Devon 19/03/2015 1.4 Completed 6.5 7.7 2.7%
Croydon Cambridgeshire 27/03/2015 1.4 Completed 16.5 17.8 6.2%
Hawkers
Farm Somerset 13/04/2015 1.4 Completed 11.9 14.5 5.1%
Glebe Farm Bedfordshire 13/04/2015 1.4 Completed 33.7 40.5 14.2%
Bowerhouse Somerset 18/06/2015 1.4 Completed 9.3 11.1 3.9%
Wellingborough Northants 18/06/2015 1.6 Completed 8.5 10.8 3.8%
Birch Farm Essex 21/10/2015 FiT Completed 5.0 5.3 1.9%
Thurlestone
Leicester Leicestershire 21/10/2015 FiT Completed 1.8 2.3 0.8%
North Farm Dorset 21/10/2015 1.4 Completed 11.5 14.5 5.1%
Ellough
Phase 2 Suffolk 03/11/2015 1.3 Operational 8.0 8.0 2.8%
Hall Farm Leicestershire 03/11/2015 FiT Completed 5.0 5.0 1.7%
Decoy Farm Lincolnshire 03/11/2015 FiT Completed 5.0 5.2 1.8%
Green Farm Essex 26/11/2015 FiT Operational 5.0 5.8 2.0%
Fenland Cambridgeshire 11/01/2016 1.4 Completed 20.4 23.9(3)(4) 8.4%
Green End Cambridgeshire 11/01/2016 1.4 Completed 24.8 29.0(3)(4) 10.2%
Tower Hill Gloucestershire 11/01/2016 1.4 Completed 8.1 8.8(3)(4) 3.1%
Branston Lincolnshire 05/04/2016 1.4 Completed 18.9
Great Wilbraham Cambridgeshire 05/04/2016 1.4 Completed 38.1
Berwick Sussex 05/04/2016 1.4 Completed 8.2 97.9(3)(5) 34.3%
Bottom Plain Dorset 05/04/2016 1.4 Completed 10.1
Emberton Buckinghamshire 05/04/2016 1.4 Completed 9.0
Total 413.7 481.4 168.7%
(1) An explanation of ROC Regime is available at
www.ofgem.gov.uk/environmental-programmes/renewables-obligation-ro
(2) As at the Date of Distribution of this annual report.
(3) Investment excludes debt drawn down included in cost.
(4) Part of the Three Kings portfolio.
(5) Part of the Radius Portfolio.
Higher Hatherleigh
Higher Hatherleigh was NESF's first acquisition, which took
place in May 2014. The site is located near Wincanton in Somerset
and has a capacity of 6.1MW. The site has performed well since it
became operational in April 2013 and during the period from
acquisition to 31 March 2016 the plant produced 11.9GWh (+6.8% vs
budget). The acquisition cost was GBP7.3m and the investment value
at year end was GBP6.9m, which is 1.8% of the portfolio value.
Higher Hatherleigh
Location Somerset
Capacity 6.1MW
Regulatory Regime 1.6 ROCs
EPC Moser Baer/Daylighting
Power
Panels JA Solar
Inverter Power-One
Operational Since Apr-13
YE March 2016 Since Acquisition
MWh Generated 6,147 11,854
Solar Irradiation vs
expectations (1.3%) +2.7%
Energy Generation vs
Budget +4.4% +6.8%
Shacks Barn
Announced shortly after the Higher Hatherleigh acquisition,
Shacks Barn, located near Silverstone in Northamptonshire, was also
acquired by the Company in May 2014. This 6.3MW plant has been
operational since March 2013. Since acquisition to 31 March 2016,
the site has produced 12.0GWh (+11.9% vs budget). The acquisition
cost was GBP8.2m and the investment value at year end was GBP8.0m,
which is 2.1% of the portfolio value.
Shacks Barn
Location Northants
Capacity 6.3MW
Regulatory Regime 2.0 ROCs
EPC Moser Baer/Daylighting
Power
Panels JA Solar
Inverter Power-One
Operational Since Mar-13
YE March 2016 Since Acquisition
MWh Generated 6,440 12,003
Solar Irradiation vs
expectations + 2.6% +3.3%
Energy Generation vs
Budget +11.4% +11.9%
Gover Farm
Gover Farm is the Company's most south-westerly asset, located
near to Truro in Cornwall. The acquisition was announced at 9.4MW
in June 2014. From acquisition to 31 March 2016, the plant produced
11.7GWh (+9.2% vs budget). The acquisition cost was GBP11.1m and
the investment value at year end was GBP11.4m, which is 3.0% of the
portfolio value. As part of the Company's commitment to
biodiversity, the site is in the NextEnergy grazing programme
ensuring that the land is dual-purpose and remains employed in food
production.
Gover Farm
Location Cornwall
Capacity 9.4MW
Regulatory Regime 1.4 ROCs
EPC Moser Baer
Panels BYD
Inverter ABB
Operational Since Oct-14
YE March 2016 Since Acquisition
MWh Generated 9,942 11,671
Solar Irradiation vs
expectations +0.8% +2.1%
Energy Generation vs
Budget +7.4% +9.2%
Bilsham
Bilsham is located near Bognor Regis in Sussex, close to the
southern coast of the UK. The plant was delivered to the Company in
two phases with an initial phase of 12.7MW followed by an extension
of 2.5MW in March 2015. The site produced 18.2GWh (+3.3% vs budget)
since acquisition to 31 March 2016. The acquisition cost was
GBP18.9m and the investment value at year end was GBP17.6m, which
is 4.6% of the portfolio value.
Bilsham
Location Sussex
Capacity 15.2MW
Regulatory Regime 1.4 ROCs
EPC GDF Suez
Panels Renesola
Inverter ABB
Operational Since Nov-14
YE March 2016 Since Acquisition
MWh Generated 16,270 18,227
Solar Irradiation vs
expectations +0.0% +0.2%
Energy Generation vs
Budget +2.6% +3.3%
Brickyard
Brickyard is a site located near Leamington Spa in Warwickshire
and has a capacity of 3.8MW. Since acquisition to 31 March 2016,
Brickyard produced 4.3GWh (+7.4% vs budget). The acquisition cost
was GBP4.1m and the investment value at year end was GBP3.7m, which
is 1.0% of the portfolio value.
Brickyard
Location Warwickshire
Capacity 3.8MW
Regulatory Regime 1.4 ROCs
EPC Moser Baer
Panels BYD
Inverter ABB
Operational Since Nov-14
YE March 2016 Since Acquisition
MWh Generated 3,746 4,275
Solar Irradiation vs
expectations +1.9% +2.4%
Energy Generation vs
Budget +7.9% +7.4%
Ellough
Ellough is a solar plant located on a disused airfield near
Ellough in Suffolk and has been operational since March 2014. The
14.9MW site has produced 20.5GWh (+4.7% vs budget) since acquisiton
to 31 March 2016. The acquisition cost was GBP20.0m and the
investment value at year end was GBP18.8m, which is 4.9% of the
portfolio value. The Company has committed to acquire a second
phase to this project which has already been constructed and
commissioned.
Ellough
Location Suffolk
Capacity 14.9MW
Regulatory Regime 1.6 ROCs
EPC Lark Energy
Panels Hanwha
Inverter Free Sun
Operational Since Mar-14
YE March 2016 Since Acquisition
MWh Generated 13,118 20,500
Solar Irradiation vs
expectations (2.8%) (2.4%)
Energy Generation vs
Budget +4.1% +4.7%
Poulshot
The Poulshot plant is located near Trowbridge in Wiltshire and
has a capacity of 14.5MW. The plant was acquired in September 2014
and has been operational since March 2015. The site has produced
13.9GWh (+1.8% vs budget) since acquisition to 31 March 2016. The
acquisition cost was GBP15.7m and the investment value at year end
was GBP15.3m, which is 4.0% of the portfolio value.
Poulshot
Location Wiltshire
Capacity 14.5MW
Regulatory Regime 1.4 ROCs
EPC Moser Baer/Daylighting
Power
Panels BYD
Inverter ABB
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 13,860 13,860
Solar Irradiation vs
expectations (0.0%) (0.0%)
Energy Generation vs
Budget +1.8% +1.8%
Condover
Condover is located near Shrewsbury in Shropshire and has a
capacity of 10.2MW. The plant was acquired in October 2014 has been
operational since March 2015. The site has produced 8.7GWh (+3.4%
vs budget) since acquisition to 31 March 2016. The acquisition cost
was GBP11.7m and the investment value at year end was GBP10.5m,
which is 2.7% of the portfolio value. The plant has been installed
around two existing rocky outcrops on the site. These add an
interesting dimension to the layout and provide sheltered habitat
for local wildlife.
Condover
Location Shropshire
Capacity 10.2MW
Regulatory Regime 1.4 ROCs
EPC Zaragoza Group
Panels Canadian Solar
Inverter Free Sun
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 8,739 8,739
Solar Irradiation vs
expectations (3.8%) (3.8%)
Energy Generation vs
Budget +3.4% +3.4%
Llwyndu
Currently Llwyndu is the only asset owned by the Company that is
not in England. This site is located in Mid-Wales and has a
capacity of 8.0MW. The plant was acquired in December 2014 and has
been operational since February 2015. This site has produced 6.9GWh
(+2.4% vs budget) since acquisition to 31 March 2016. The
acquisition cost was GBP9.4m and the investment value at year end
was GBP9.0m, which is 2.4% of the portfolio value. It is the most
westerly plant that the Company has acquired in the mid-country
sector, close to the Ceredigion coast.
Llwyndu
Location Ceredigion
Capacity 8.0MW
Regulatory Regime 1.4 ROCs
EPC Greencells
Panels BYD
Inverter Huawei
Operational Since Feb-15
YE March 2016 Since Acquisition
MWh Generated 6,890 6,890
Solar Irradiation vs
expectations (4.7%) (4.7%)
Energy Generation vs
Budget +2.4% +2.4%
Cock Hill Farm
Cock Hill Farm is located near Trowbridge in Wiltshire and has a
capacity of 20.0MW. The plant was acquired in December 2014 and has
been operational since March 2015. The site has produced 17.3GWh
(+0.8% vs budget) since acquisition to 31 March 2016. The
acquisition cost was GBP23.3m and the investment value at year end
was GBP22.2m, which is 5.8% of the portfolio value.
Cock Hill Farm
Location Wiltshire
Capacity 20.0MW
Regulatory Regime 1.4 ROCs
EPC Greencells
Panels Jinko
Inverter Huawei
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 17,278 17,278
Solar Irradiation vs
expectations (2.6%) (2.6%)
Energy Generation vs
Budget +0.8% +0.8%
Boxted Airfield
Boxted site is located north of Colchester in Essex on the now
disused Boxted Airfield. Boxted has a capacity of 18.8MW and was
acquired in March 2015, after it became operational. The site has
produced 18.6GWh (+3.0% vs. budget) since acquisition to 31 March
2016. The acquisition cost was GBP20.6m and the investment value at
year end was GBP20.1m, which is 5.2% of the portfolio value. The
site has been sympathetically installed and benefits from
wildflower seeding which has been specifically designed to enhance
the local wildlife population.
Boxted Airfield
Location Essex
Capacity 18.8MW
Regulatory Regime 1.4 ROCs
EPC Push Energy
Panels Yingli
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 18,632 18,632
Solar Irradiation vs
expectations (0.6%) (0.6%)
Energy Generation vs
Budget +3.0% +3.0%
Langenhoe
Langenhoe is located near Colchester in Essex and has a capacity
of 21.2MW. The plant has been operational since March 2015. The
site has produced 22.0GWh (+6.8% vs budget) since acquisition to 31
March 2016. The acquisition cost was GBP22.9m and the investment
value at year end was GBP21.5m, which is 5.6% of the portfolio
value. The site overlooks the Mersey estuary and has innovative
wildlife enhancement measures incorporated in to its design and
operation with specific support for both local bird and bumblebee
populations. The construction works also energised three previously
off-grid properties.
Langenhoe
Location Essex
Capacity 21.2MW
Regulatory Regime 1.4 ROCs
EPC Push Energy
Panels Yingli
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 21,990 21,990
Solar Irradiation vs
expectations +2.7% +2.7%
Energy Generation vs
Budget +6.8% +6.8%
Park View
Park View is located near Ashburton in Devon, situated at the
top edge of a valley with a capacity of 6.5MW. The site has
produced 4.9GWh (-1.3% vs budget) since acquisition to 31 March
2016. The acquisition of Park View was first announced in March
2015. The acquisition cost was GBP7.7m and the investment value at
year end was GBP7.3m, which is 1.9% of the portfolio value.
Park View
Location Devon
Capacity 6.5MW
Regulatory Regime 1.4 ROCs
EPC Ethical
Panels Astronergy
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 4,855 4,855
Solar Irradiation vs
expectations (5.0%) (5.0%)
Energy Generation vs
Budget (1.3%) (1.3%)
Croydon
Croydon is a plant located in South Cambridgeshire and has a
capacity of 16.5MW. The plant was acquired and has been operational
since March 2015. The site has produced 15.5GWh (+2.7% vs budget)
since acquisition to 31 March 2016. The acquisition cost was
GBP17.8m and the investment value at year end was GBP17.0m, which
is 4.4% of the portfolio value. The site also forms part of the
Company's biodiversity drive after being sown with wildflower seed
mix. The site will provide lengthy foraging seasons for bumblebees,
a vital and declining species.
Croydon
Location Cambridgeshire
Capacity 16.5MW
Regulatory Regime 1.4 ROCs
EPC Push Energy
Panels Yingli
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 15,546 15,546
Solar Irradiation vs
expectations +2.5% +2.5%
Energy Generation vs
Budget +2.7% +2.7%
Hawkers Farm
Hawkers Farm is a site located near Theale in Somerset with a
capacity of 11.9MW. The plant was acquired in April 2015 and has
been operational since March 2015. The site has produced 12.3GWh
(+3.2% vs budget) since acquisition to 31 March 2016. The asset is
located on a dairy farm and the site itself is being grazed by
sheep ensuring that the land stays in food production. The
acquisition cost was GBP14.5m and the investment value at year end
was GBP13.8m, which is 3.6% of the portfolio value.
Hawkers Farm
Location Somerset
Capacity 11.9MW
Regulatory Regime 1.4 ROCs
EPC Greencells
Panels Jinko
Inverter Huawei
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 12,324 12,324
Solar Irradiation vs
expectations (0.7%) (0.7%)
Energy Generation vs
Budget +3.2% +3.2%
Glebe Farm
Located not far from Wellingborough and partially on the old
airfield land that is now taken up by the Santa Pod Raceway, Glebe
Farm is one of the largest solar plants acquired by the Company
with a capacity of 33.7MW. The acquisition was completed in May
2015. The plant has been operational since March 2015. The site has
produced 26.0GWh (+10.0% vs budget) since acquisition to 31 March
2016. The acquisition cost was GBP40.5m and the investment value at
year end was GBP38.8m, which is 10.2% of the portfolio value.
Glebe Farm
Location Bedfordshire
Capacity 33.7MW
Regulatory Regime 1.4 ROCs
EPC Bejulo
Panels Canadian Solar
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 26,033 26,033
Solar Irradiation vs
expectations +2.0% +2.0%
Energy Generation vs
Budget +10.0% +10.0%
Bowerhouse
Bowerhouse is located near Banwell in Somerset and has a
capacity of 9.3MW. The plant was acquired in June 2015 and has been
operational since March 2015. The site has produced 6.4GWh (-6.8%
vs budget) since acquisition to 31 March 2016. The acquisition cost
was GBP11.1m and the investment value at year end was GBP10.5m,
which is 2.8% of the portfolio value.
Bowerhouse
Location Somerset
Capacity 9.3MW
Regulatory Regime 1.4 ROCs
EPC Ethical
Panels LDK
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 6,395 6,395
Solar Irradiation vs
expectations (4.1%) (4.1%)
Energy Generation vs
Budget (6.8%) (6.8%)
Wellingborough
Wellingborough is located near the town of Wellingborough in
Northamptonshire and has a capacity of 8.5MW. The plant was
acquired in June 2015 and has been operational since March 2015.
The site has produced 5.6GWh (+3.1% vs budget) since acquisition to
31 March 2016. The acquisition cost was GBP10.8m and the investment
value at year end was GBP9.9m, which is 2.6% of the portfolio
value.
Wellingborough
Location Northants
Capacity 8.5MW
Regulatory Regime 1.6 ROCs
EPC Lark Energy
Panels LDK
Inverter Free Sun
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 5,578 5,578
Solar Irradiation vs
expectations (3.1%) (3.1%)
Energy Generation vs
Budget +3.1% +3.1%
Birch Farm
Birch Farm is a 5.0MW site located near Colchester in Essex. The
plant was acquired in September 2015 and has been operational since
June 2015. The site has produced 1.6GWh (-1.0% vs budget) since
acquisition to 31 March 2016. The acquisition cost was GBP5.3m and
the investment value at year end was GBP5.5m, which is 1.4% of the
portfolio value. The site also enabled an energy supply to be
created at an adjoining recycling facility.
Birch Farm
Location Essex
Capacity 5.0MW
Regulatory Regime FiT
EPC Push Energy
Panels Yingli
Inverter Ingeteam
Operational Since Jun-15
YE March 2016 Since Acquisition
MWh Generated 1,590 1,590
Solar Irradiation vs
expectations (2.0%) (2.0%)
Energy Generation vs
Budget (1.0%) (1.0%)
Thurlestone Leicester
Thurlestone Leicester is located in Leicestershire and has a
capacity of 1.8MW. The plant was acquired in October 2015 and has
been operational since April 2013. The site has produced 0.3GWh
(-3.0% vs budget) since acquisition to 31 March 2016. The
acquisition cost was GBP2.3m and the investment value at year end
was GBP2.7m, which is 0.7% of the portfolio value. This asset is
the only rooftop component of the Company's portfolio providing
green energy to tenants of Social housing.
Thurlestone Leicester
Location Leicestershire
Capacity 1.8MW
Regulatory Regime FiT
EPC Stepnell
Panels Znshine Solar
Inverter Power-One
Operational Since Apr-13
YE March 2016 Since Acquisition
MWh Generated 326 326
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs
Budget (3.0%) (3.0%)
North Farm
North Farm is an 11.5MW site located in Dorset. The plant was
acquired in October 2015 and has been operational since March 2015.
The site has produced 3.1GWh (-9.7% vs budget) since acquisition to
31 March 2016. The acquisition cost was GBP14.5m and the investment
value at year end was GBP13.9m, which is 3.6% of the portfolio
value.
North Farm
Location Dorset
Capacity 11.5MW
Regulatory Regime 1.4 ROCs
EPC British Solar Renewables
Panels Jinko
Inverter Gamesa
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 3,097 3,097
Solar Irradiation vs
expectations (14.6%) (14.6%)
Energy Generation vs
Budget (9.7%) (9.7%)
Ellough Phase 2
Ellough Phase 2 is located in Suffolk and has a capacity of
8.0MW. The plant was acquired in November 2015 and has been
operational since March 2016. The acquisition cost was GBP8.0m and
the investment value at year end was GBP8.0m, which is 2.1% of the
portfolio value.
Ellough Phase 2
Location Ellough Phase 2
Capacity 8.0MW
Regulatory Regime 1.3 ROCs
EPC Lark Energy
Panels Hanwha
Inverter Free Sun
Operational Since Mar-16
YE March 2016 Since Acquisition
MWh Generated N/A N/A
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs N/A N/A
Budget
Hall Farm
Hall Farm is located in Leicestershire and has a capacity of
5.0MW. The plant was acquired in November 2015 and has been
operational since May 2016. The acquisition cost was GBP5.0m and
the investment value at year end was GBP5.0m, which is 1.3% of the
portfolio value.
Hall Farm
Location Hall Farm
Capacity 5.0MW
Regulatory Regime FiT
EPC Push Energy
Panels Hanwha
Inverter Ingeteam
Operational Since May-16
YE March 2016 Since Acquisition
MWh Generated N/A N/A
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs N/A N/A
Budget
Decoy Farm
Decoy Farm is a 5.0MW site located near Colchester in Essex. The
plant was acquired in November 2015 and has been operational since
January 2016. The acquisition cost was GBP5.2m and the investment
value at year end was GBP5.6m, which is 1.5% of the portfolio
value.
Decoy Farm
Location Lincolnshire
Capacity 5.0MW
Regulatory Regime FiT
EPC Push Energy
Panels Hanwha Q Cells
Inverter Ingeteam
Operational Since Jan-16
YE March 2016 Since Acquisition
MWh Generated N/A N/A
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs N/A N/A
Budget
Green Farm
Green Farm is located in Essex and has a capacity of 5.0MW. The
plant was acquired in November 2015 and has been operational since
December 2015. The acquisition cost was GBP5.8m and the investment
value at year end was GBP5.8m, which is 1.5% of the portfolio
value.
Green Farm
Location Green Farm
Capacity 5.0MW
Regulatory Regime FiT
EPC Moser Baer/Daylighting
Power
Panels Atersa
Inverter Power Electronics
Operational Since Dec-15
YE March 2016 Since Acquisition
MWh Generated N/A N/A
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs N/A N/A
Budget
Fenland
Fenland is located in Cambridgeshire and has a capacity of
20.4MW. The plant was acquired in January 2016 and has been
operational since March 2015. The site has produced 3.2GWh (+11.5%
vs budget) since acquisition to 31 March 2016. Fenland is part of
the Three Kings portfolio which has project level debt, the equity
acquisition cost was GBP7.6m and the investment value at year end
was GBP8.4m, which is 2.2% of the portfolio value.
Fenland
Location Cambridgeshire
Capacity 20.4MW
Regulatory Regime 1.4 ROCs
EPC Hanwha Q Cells
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 3,177 3,177
Solar Irradiation vs
expectations +7.8% +7.8%
Energy Generation vs
Budget +11.5% +11.5%
Green End
Green End is a 24.8MW site located in Cambridgeshire. The plant
was acquired in January 2016 and has been operational since March
2015. The site has produced 3.9GWh (+12.8% vs budget) since
acquisition to 31 March 2016. Green End is part of the Three Kings
portfolio which has project level debt, the equity acquisition cost
was GBP9.2m and the investment value at year end was GBP10.1m,
which is 2.6% of the portfolio value.
Green End
Location Cambridgeshire
Capacity 24.8MW
Regulatory Regime 1.4 ROCs
EPC Hanwha Q Cells
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 3,909 3,909
Solar Irradiation vs
expectations +5.7% +5.7%
Energy Generation vs
Budget +12.8% +12.8%
Tower Hill
Tower Hill is located in Gloucestershire and has a capacity of
8.1MW. The plant was acquired in January 2016 and has been
operational since March 2015. The site has produced 1.2GWh (+8.2%
vs budget) since acquisition to 31 March 2016. Tower Hill is part
of the Three Kings portfolio which has project level debt, the
equity acquisition cost was GBP3.0m and the investment value at
year end was GBP3.5m, which is 0.9% of the portfolio value.
Tower Hill
Location Gloucestershire
Capacity 8.1MW
Regulatory Regime 1.4 ROCs
EPC Hanwha Q Cells
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated 1,203 1,203
Solar Irradiation vs
expectations +1.7% +1.7%
Energy Generation vs
Budget +8.2% +8.2%
Branston
Branston is located in Lincolnshire and has a capacity of
18.9MW. The plant was acquired in March 2016 and has been
operational since March 2015. This solar PV plant is part of the
Radius portfolio whose acquisition of GBP47.5m was financed with
project level debt and whose equity investment value at year end
was GBP51.4m, which is 13.5% of the portfolio value.
Branston
Location Lincolnshire
Capacity 18.9MW
Regulatory Regime 1.4 ROCs
EPC Goldbeck
Panels REC
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated N/A N/A
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs N/A N/A
Budget
Great Wilbraham
Great Wilbraham is a 38.1MW site located in Cambridgeshire. The
plant was acquired in March 2016 and has been operational since
March 2015. This solar PV plant is part of the Radius portfolio
whose acquisition of GBP47.5m was financed with project level debt
and whose equity investment value at year end was GBP51.4m, which
is 13.5% of the portfolio value. This site is the largest in the
Company's portfolio.
Great Wilbraham
Location Cambridgeshire
Capacity 38.1MW
Regulatory Regime 1.4 ROCs
EPC Abakus Bouygues
Panels REC
Inverter Schneider
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated N/A N/A
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs N/A N/A
Budget
Berwick
Berwick is located in Sussex and has a capacity of 8.2MW. The
plant was acquired in March 2016 and has been operational since
March 2015. This solar PV plant is part of the Radius portfolio
whose acquisition of GBP47.5m was financed with project level debt
and whose equity investment value at year end was GBP51.4m, which
is 13.5% of the portfolio value. The site has an adjoining
community flower meadow and boards displaying information about the
site for use by local residents and schools.
Berwick
Location Sussex
Capacity 8.2MW
Regulatory Regime 1.4 ROCs
EPC Abakus Bouygues
Panels Renesola
Inverter SMA
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated N/A N/A
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs N/A N/A
Budget
Bottom Plain
Bottom Plain is a 10.1MW site located in Dorset. The plant was
acquired in March 2016 and has been operational since December
2014. This solar PV plant is part of the Radius portfolio whose
acquisition of GBP47.5m was financed with project level debt and
whose equity investment value at year end was GBP51.4m, which is
13.5% of the portfolio value.
Bottom Plain
Location Dorset
Capacity 10.1MW
Regulatory Regime 1.4 ROCs
EPC Abakus Bouygues
Panels Renesola
Inverter SMA
Operational Since Dec-14
YE March 2016 Since Acquisition
MWh Generated N/A N/A
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs N/A N/A
Budget
Emberton
Emberton is located in Buckinghamshire and has a capacity of
9.0MW. The plant was acquired in March 2016 and has been
operational since March 2015. This solar PV plant is part of the
Radius portfolio whose acquisition of GBP47.5m was financed with
project level debt and whose equity investment value at year end
was GBP51.4m, which is 13.5% of the portfolio value.
Emberton
Location Emberton
Capacity 9.0MW
Regulatory Regime 1.4 ROCs
EPC Goldbeck
Panels REC
Inverter Schneider
Operational Since Mar-15
YE March 2016 Since Acquisition
MWh Generated N/A N/A
Solar Irradiation vs N/A N/A
expectations
Energy Generation vs N/A N/A
Budget
Current and Long Term Power Prices
During the Company's second financial year, the wholesale power
market in the UK experienced further downward volatility which has
reduced revenues generated by the sale of electricity generated by
the portfolio. Both short- and medium-term electricity prices moved
downwards, as a result of, inter alia, lower-than-average winter
temperatures, declining commodity prices and regulatory
developments. Electricity spot prices fell from c.GBP40/MWh in
March 2015 to c.GBP34/MWh in March 2016 (UK baseload - day ahead).
In addition, the market consensus on long-term power prices has
also changed in the estimates produced by the Company's appointed
independent market consultant. The Investment Manager continuously
reviews multiple inputs from market contributors and leading
consultants and adjusts the Company's power price forecasts
periodically to reflect the latest market developments.
Since the Company's IPO in April 2014 the long-term power price
forecast used by the Company has been revised six times (August
2014 to April 2016) with a cumulative reduction of c.21% compared
to the assumptions employed at 31 March 2015 and c.30% as at IPO.
The Company's current long-term power price forecast implies an
average growth rate of approximately 2.3% in real terms over the
20-year period starting April 2016. The financial performance of
the Company and its NAV are sensitive to further positive and
negative movements in the short-, medium- and long-term power
prices. Detailed sensitivity analyses are provided in the Financial
Review section of the Annual Report and Audited Financial
Statements. It is worth noting that this exposure is significantly
mitigated by the balanced mix of revenues typical of the solar PV
plants acquired by the Company which, as at March 2017 are expected
to comprise c.60% of regulated revenues (ROCs and embedded
benefits, mainly linked to RPI) and c.40% of sale of electricity on
the wholesale market through PPAs.
Power Purchase Agreements
The Company's electricity sales strategy is designed to maximise
revenues whilst mitigating the negative impact of short-term
fluctuations in the power markets. During the year, this strategy
allowed for the flexibility required by the rapid growth of the
portfolio, so that the Company could build significant scale to
then optimise the PPA terms on the entire portfolio. As at 31 March
2016, the Company had a mix of PPA with fixed prices for periods
ranging from three months to five years. As a result of these PPAs
as well as of the UK regulatory framework, the Company had a total
of 83% of its revenues linked to fixed power prices and ROCs until
March 2017 and 68% until 2021, by mitigating the risk of dividend
reductions from volatility in the power price market.
Taking into account the current level of performance of its
portfolio, the Company expects to be able to meet its long term
dividend targets even in a scenario in which power prices for the
period to 2033 were to fall 40% below current forecasts or where to
remain flat at current levels in nominal terms (i.e. not increased
even for inflation).
Financial Review
Overall the Company performed positively during the year.
Significant increases in the values of individual plants were
driven by excellent transactional achievements and asset-specific
over-performance. These positive factors have contributed to
mitigate the negative impact of declining wholesale energy prices
and regulatory changes throughout the year. The Company has met its
targets for dividend distribution and generation of surplus cash to
be re-invested in its portfolio or in further solar assets.
Dividends to Shareholders
During the year the Company paid the second interim dividend for
the financial period ended 31 March 2015 of 2.625p per Ordinary
Share and the first interim dividend for the year ended 31 March
2016 of 3.125p per Ordinary Share. A second interim dividend of
3.125p per Ordinary Share totalling GBP8,686,160 is expected be
paid to shareholders in July 2016. As a result, the Company will
achieve its target for total dividend distribution for the full
financial year ended 31 March 2016 of 6.25p per Ordinary Share. The
summary of all dividends paid by the Company until the Date of
Distribution of this annual report is set out in the table
below.
During the year the Company generated investment cash income of
GBP24.0m and had net operating costs of GBP3.6m. As a result, the
net dividend cover for the year was 1.2x. The table below provides
additional details and metrics.
Dividend Date of Payment Amount per Total Amount
Ordinary (GBPm)
Share (p)
First interim for December
year 14/15 2014 2.625 4,635,750
Second interim
for year 14/15 July 2015 2.625 6,309,188
First interim for December
year 15/16 2015 3.125 8,686,160
Total (Dividends
paid to date) 8.375 19,631,098
Second interim Expected
for year 15/16 July 2016 3.125 8,686,160
Investment Income Total (GBPm)
Investment Income
for year 15/16 24,046,160
Net operating costs 3,507,468
Net Investment 20,538,692 Gross Dividend Net Dividend
Income Cover Cover
Dividend paid during
the year 14,995,347 1.6 x 1.4 x
Dividend in relation
to the year 17,372,319 1.4 x 1.2 x
The Investment Manager currently estimates a 1.2x long- term
dividend cover (assuming refinancing of the existing short-term
debt positions with long-term debt at a conservative all-inclusive
fixed rate of 4.5%).
As stated in the Chairman's Statement, the Company is targeting
to pay a dividend of 6.31p per share for the 2016/17 financial
year. Following the Board's decision to move to a quarterly
dividend, as announced in April 2016, the forward looking dividend
calendar is set out in the table below:
Dividend for year Date of Expected Amount per Ordinary
16/17 Payment Share (p)
First interim September 2016 1.575
Second interim December 2016 1.575
Third interim March 2017 1.575
Fourth interim July 2017 1.585
Total 6.310
Operating Costs and Profits for the Year
The operating costs of the Company amounted to GBP3.5m, in line
with expectations. The profit before tax for the year ended 31
March 2016 was GBP2.0m and the earnings per share was 0.78p,
negatively impacted by reduction in fair value of investments.
The Company's ongoing charges for the year ended 31 March 2016
are 1.2%, lower than budgeted (1.3%) and lower than previous year
(1.5%). The budgeted ongoing charges ratio for the next year ending
31 March 2017 is 1.2%.
Valuation of the Investment Portfolio
The Investment Manager is responsible for carrying out the fair
market valuation of the Company's underlying investment portfolio,
as described in Note 5. The resulting fair market value of the
Company's investment portfolio is presented to the Company's Board
of Directors for their review and approval. The valuation is
carried out at least quarterly or more often if capital increases
or other relevant events arise. The valuation principles used are
based on a discounted cash flow methodology, and take into account
Invest Europe (formerly European Private Equity and Venture Capital
Association) guidelines.
The Investment Manager reviews multiple sources and inputs in
determining the fair market value of the underlying investments,
including analysing all announced solar transactions in the UK
during the year as well as undertaking a discounted cash flow
analysis of each investment made by the Company. The Investment
Manager exercises its judgement based on its expertise in the UK
solar PV market and in assessing the expected future cash flows
from each investment. In the discounted cash flow analysis, the
fair value for each operating asset is derived from the present
value of the investment's expected future cash flows, using
reasonable assumptions and forecasts for revenues and operating
costs, and an appropriate discount rate.
For solar PV plants not yet operational or where the completion
of the acquisition is not imminent at the time of valuation, the
acquisition cost is used as an appropriate estimate of fair
value.
The Board reviews the operating and financial assumptions,
including the discount rates, used in the valuation of the
Company's underlying portfolio and approves them based on the
recommendation of the Investment Manager. As part of the annual
audit, PricewaterhouseCoopers CI LLP ("PwC CI") reviews the
valuation model used by the Investment Adviser, including the
discount rate. The 'valuation' process comprises the analysis of
multiple factors, all relevant to ascertain the fair value of the
portfolio, including:
-- Discount rates applicable for other comparable infrastructure
assets classes or regulated energy sectors
-- CAPM (Capital Asset Pricing Model) analysis and risk premia over relevant risk free rates
-- Discount rates publicly disclosed by the Company's peers in the UK solar sector
-- Discount rates implied in the price at which comparable
transactions have been announced or completed in the UK solar
sector
Based on all of the above, the Company continues to adopt a 7.5%
discount rate for unlevered operating solar assets and started to
adopt a discount rate up to 8.5% for solar assets with project
level debt.
For those operating solar assets with fully-amortizing long-term
project level debt (the Radius portfolio comprising Branston,
Berwick, Bottom Plain, Emberton and Great Wilbraham, and the Three
Kings portfolio comprising Fenland, Green End and Tower Hill) the
Company has decided to adopt a higher discount rate to capture the
greater level of risk associated with the cash flows available to
equity investors after debt service. The appropriate level of risk
premium due to project level debt was evaluated taking into account
various factors for each specific asset including level of
financial gearing, maturity profile and cost of debt. As a result,
the discount rates applied to these projects range up to 8.5%.
The resulting weighted average discount rate for the Company's
portfolio is 7.7%.
The Company does not adopt Weighted Average Cost of Capital
("WACC") as a discount rate for its investments, as it believes
that the reduction in WACC deriving from introduction of long-term
debt financing does not reflect the greater level of risk to equity
investors associated with levered assets or levered portfolios.
However, the following sensitivity analysis was prepared to
illustrate the potential impact of using WACC as a discount rate.
The Company's pre-tax WACC as of 31 March 2016 is 5.8%, driven by
the low cost of debt of the short-term facilities. Assuming the
entire short-term debt position of the Company was refinanced with
long-term debt at a conservative all-inclusive rate of 4.5%, the
resulting pre-tax WACC would be 6.1%. Had the Company adopted this
pre-tax WACC of 6.1% as a discount rate for its portfolio, the NAV
per share would be 117.9p (i.e. 20% higher than current NAV). For
sake of comparison with other listed solar investment funds, had
the Company adopted a pre-tax WACC of 6.6% as a discount rate for
its portfolio, its NAV would be 111.3p per share (i.e. 13% higher
than current NAV).
The value uplift generated by the assets valued on a Discounted
Cash Flow ("DCF") basis is supported by an analysis performed by
the Investment Manager demonstrating how the Company's portfolio
(including all acquisitions since IPO) has been acquired through
transactions closed at prices lower than the market average by
approximately 2%. This analysis reviewed all publicly disclosed
information related to acquisition of UK solar assets since 2014
and included adjustments for project specific ROC banding and site
irradiation based on the Investment Manager's estimates and best
knowledge and publicly available PVGIS database. The market average
prices are then compared to each of the Company's completed
acquisitions and the summary result is then calculated as a
weighted average based on the installed MW capacity.
The DCF methodology implemented in the Portfolio Valuation
assumes a valuation time-horizon capped to the current terms of the
lease on the properties where each individual solar PV asset is
located. These leases have been typically entered into for a
25-year period from commissioning of the relevant PV plants
(specific terms may vary). However, the useful operating life of
the Company's portfolio of solar PV plants is expected to be longer
than 25 years. This is due to many factors, including: a) solar PV
plants with technology components similar to the ones deployed in
the Company's portfolio have demonstrated to be capable of
operating for over 40 years, with levels of technical degradation
lower than that assumed or guaranteed by the manufacturers; b)
local planning authorities have already granted initial planning
consents that do not expire and/or have granted permissions to
extend initial consented periods; and c) the Company owns rights to
inject electricity into the grid through connection agreements that
do not expire. The Company has begun extending the useful life of
its assets, mainly by extending the terms of the property leases
for some projects with the intention of extending leases for others
in due course.
As of 31 March 2016, the remaining weighted average lease
duration of the Company's portfolio was 25.7 years. In this
portfolio, the 33MW Glebe Farm is valued on the basis of an
extended remaining lease term of 34 years and the 5 assets in the
84MW Radius portfolio on an average lease term of 29.5 years. For
illustration purposes, should the entire portfolio of assets be
valued on a 35 years basis from connection (assuming current lease
terms) the Company's NAV would increase by c.11%.
As to the other main operating assumptions adopted in the DCF
valuation of the portfolio, the Company conservatively values each
solar PV plant on the basis of the minimum Performance Ratio
guaranteed by the vendor or on the basis of the Performance Ratio
estimated by the appointed technical adviser during due diligence.
These estimates are generally lower than the actual performance
ratios that the Company has been experiencing during subsequent
operations. The Investment Manager deems it appropriate to adopt
the actual Performance Ratio after two years of operating history,
when typically the plants have satisfied the Final Acceptance
tests. As of 31 March 2016, only three out of the 33 solar PV
plants in the investment portfolio had at least two years of
operating history, and their actual Performance Ratio was
crystallized into the relevant financial model, therefore
generating a material uplift in their valuation. As to the other 30
solar PV plants, these are expected to reach their two year
operating life milestone according to the calendar below, and the
Investment Manager currently expects to update the relevant
Performance Ratio inputs based on the actual performance observed
at that time.
Financial quarter ending 201 MW
June 2016:
Financial quarter ending 130 MW
September 2016:
Financial quarter ending 9 MW
December 2016:
Financial quarter ending 0 MW
March 2017:
Financial quarter ending 35 MW
June 2017:
For illustration purposes, had the entire portfolio of solar PV
assets be valued based on actual Performance Ratios observed from
date of commissioning until 31 March 2016, the Company's NAV would
have increased by c.GBP6m representing c.2.0p per share.
The Company's NAV is calculated on a quarterly basis based on
the valuation of the investment portfolio determined by the
Investment Manager and the overlay of other net assets provided by
the Administrator. It is then reviewed and approved by the Board of
Directors. All variables relating to the performance of the
underlying assets are reviewed and incorporated in the process of
identifying relevant drivers for the discounted cash flow
valuation. The portfolio valuation process and underlying drivers
are subject to a comprehensive review as part of the year-end audit
to ensure they are a true reflection of the expected operating
environment.
The Company experienced NAV growth during the year ended 31
March 2016 mainly driven by the issuance of new capital in
September 2015 for c.GBP38.8m and the acquisition of additional
investments during the year. As a result, NAV grew over the year
from GBP248.4m to GBP273.8m as at 31 March 2016.
The evolution of NAV per share during the year was affected by a
number of positive and negative factors. During the year NAV
decreased from 103.3p to 98.5p. As the Company reports its
financial results under IFRS 10 (see note 2(c)) the change during
the year in fair value of its assets drives the profit and loss of
the Company. The change in NAV per share in the year from 103.3p to
98.5p was mainly driven by the following factors:
-- The downward revisions in the forecasts for long-term power
prices adopted by the Investment Manager for a cumulative reduction
of c.21% compared to the assumptions employed at 31 March 2015;
-- The removal of LECs in the July 2015 Summer Budget, which
together with power price reductions had a cumulative negative
impact on NAV of 14.6p per share;
-- The value uplift generated by the Company completing
acquisitions on assets whose internal rate of return was higher
than the discount rate applied when valuing them on a discounted
cash flow basis;
-- The operating results achieved by the Company's solar PV plants; and
-- The cash dividends paid in July 2015 and December 2015 and the Company's operating costs.
NAV Bridge (Movement) (GBPm)
Opening NAV (March '15) 248.4
Further Capital Raising 38.8
Capital Raising Costs (0.5)
Dividends Paid to Investors (15.0)
Income from Investments 24.0
Change in Fair Value
of Investments (18.5)
Net Fund Costs (3.4)
Closing NAV (March '16) 273.8
An important driver for the movement in NAV was the revaluation
of the Investment Portfolio which accounted for GBP18.5m. This
represented the difference between the acquisition cost and closing
fair value of the portfolio at the end of the year. The revaluation
is summarised in the net changes in financial assets at fair value
in the Statement of Comprehensive Income.
The Company's investment portfolio is valued at GBP315.5m,
comprising 26 investments valued through discounted cash flow
methodology and three investments valued at investment cost. Among
the 26 investments, Radius (which is considered as one portfolio
investment consisting of five solar PV plants) was completed
shortly after 31 March 2016, but the contractual conditions in its
acquisition and financing agreements implied effective transfer of
ownership before the year end and as such is included in the
investment portfolio at year end. The valuation of the investment
portfolio is net of the project level debt (GBP45.4m project
financing advanced by Bayerische Landesbank to the 53MW Three Kings
portfolio (comprising Fenland, Green End and Tower Hill), acquired
by the Company in January 2016; and GBP55m project financing
arranged by Macquarie Infrastructure Debt Investment Solutions
("MIDIS") in conjunction with the acquisition of the 84MW Radius
portfolio signed by the Company in March 2016).
The three investments valued at investment cost (Ellough Phase
II, Green Farm and Hall Farm) comprise the investments in solar PV
plants for which the relevant milestones and technical tests had
not yet been finalised at the year end and as such their completion
was not deemed imminent. At the year end all of these three solar
PV plants were operational and the Investment Manager was in the
process of completing their acquisitions.
Directors' Investment Directors'
Movements
Valuation during the Valuation
year
31 March (GBP) 31 March
2015 2016
Investment (GBP) (GBP)
Higher Hatherleigh 8,957,377 6,907,206
Shacks Barn 9,711,376 7,993,437
Gover Farm 12,459,841 11,390,789
Bilsham 19,993,448 17,573,137
Brickyard 4,308,890 3,729,258
Ellough 20,987,800 18,780,284
Poulshot 16,254,521 15,347,350
Boxted Airfield 21,932,788 20,059,008
Langenhoe 24,619,753 21,517,834
Croydon 18,460,754 16,958,191
Condover 11,738,624 10,451,176
Llwyndu 9,383,685 9,010,754
Cock Hill Farm 23,622,062 22,214,893
Hawkers Farm 14,465,961 13,841,456
Glebe Farm 40,507,323 38,832,745
Park View 7,675,725 7,341,299
Bowerhouse 11,140,707 10,519,042
Wellingborough 10,842,840 9,911,957
Birch Farm 5,333,000 5,508,836
Thurlestone Leicester 2,318,948 2,713,983
North Farm 14,469,096 13,884,261
Ellough Phase 2(1) 8,047,967 8,047,967
Hall Farm(1) 4,980,825 4,980,825
Decoy Farm 5,160,698 5,557,217
Green Farm(1) 5,775,461 5,775,461
Fenland(3) 7,554,768 8,437,289
Green End(3) 9,151,362 10,091,867
Tower Hill(3) 3,001,869 3,507,200
Project Radius(3) 47,468,640 51,448,533
Total Investment Portfolio 157,686,548 242,639,561 382,333,255
Residual Net Assets
of NESH 474,324 (43,788,593)
Residual Net Assets
of NESH II (23,147,238)
Residual Net Assets
of NESH III 69,255
Residual Net Assets
of NESH IV 0
Total Investment in
Holding Company(2) 158,160,872 242,639,561 315,466,679
1. These investments were not yet completed as at 31 March 2016.
2. A summary of the total investment in the Holding Company is
provided in note 5 (Investments) of the Financial
Statements.
3. These investments have financial leverage at project level.
Sensitivity Analysis
Sensitivities on the Company's NAV and detailed disclosure on
the asset valuation methodologies are provided below and in note 12
(Financial instruments) of the Financial Statements.
In the previous reporting period, the sensitivity on energy
yield was driven by a P10/P90 probability analysis on solar
irradiation over 10 years, which is a technical standard employed
across the broader renewable energy asset class (particularly
relevant for Wind assets given the significant volatility of Wind
energy sources year on year). The Investment Manager, based on its
experience, considers that for solar PV assets more appropriate and
meaningful information is provided by the sensitivity analysis of
the aggregated effect of solar irradiation and technical
performance (in a reasonable range of -/+ 5% over the life of the
DCF valuation horizon). For reference purposes, the sensitivity
based on P10/P90 would have resulted in a -/+9.6% impact on
Portfolio valuation.
In addition to the above sensitivities on NAV, the Investment
Manager has performed further sensitivities on actual cash
generation. This analysis takes into account the impact of selected
changes in valuation assumptions over the twelve months to March
2017. In this analysis, should energy prices fall by a further 10%
from current forecasts, NESF would experience a reduction of only
2.6% in its net operating cashflows, such impact being mitigated by
the fixed price PPAs in place over the period. Also, should the
portfolio achieve an over performance of 5% throughout the twelve
months to March 2017 (whether due to higher solar irradiation or
asset management), total operating cashflows would increase by
6.6%. Conversely, these sensitivities on cash generation would have
similar but opposite results in their respective inverted
scenario.
Since the Company's IPO in April 2014 the long-term power price
forecast used by the Company was revised six times (August 2014 to
April 2016) with a cumulative reduction of c.30%. For sake of
illustration, had the power price forecasts remained in line with
those at the time of the IPO, the Company's NAV would be 131.2p per
share.
Summary of Capital Raising and Capital Deployment
The Company completed five capital raisings since inception: its
IPO of 85.6m New Ordinary Shares in April 2014, a second issue of
91.0m New Ordinary Shares in November 2014, a placing of 4.0m New
Ordinary Shares in December 2014, a further 59.8m New Ordinary
Shares in February 2015 and a further placing of 37.6m New Ordinary
Shares in September 2015. All issues following the IPO have been
completed pursuant to the Placing Programme announced on 10
November 2014.
On 9 November 2015, the Company issued 30,850,000 New Ordinary
Shares to Cantor Fitzgerald at a price of 104.0p per Share under
the Placing Programme. On the same day, the New Ordinary Shares
were repurchased by the Company, at the same price, to be held in
treasury.
The NAV per Share and the net cash position of the Company have
not been affected by this transaction. This issuance and repurchase
transaction was undertaken to provide the Company with exibility to
raise additional capital in an ef cient and cost-effective manner
in due course. The shares purchased have been placed in treasury
and will be available to be sold out of treasury on a
non-pre-emptive basis, subject to shareholder approval, to meet
future market demand. The net proceeds of any sales of shares out
of treasury will provide the Company with additional capital to
enable it to take advantage of new investment opportunities. Shares
will only be sold out of treasury at a premium to the then
prevailing NAV per Ordinary Share.
Following the repurchase outlined above, the Company's issued
share capital comprised 308,807,105 Ordinary Shares and the total
number of voting rights in the Company was 277,957,105. The gure of
277,957,105 may be used by Shareholders and other investors as the
denominator for the calculations by which they will determine if
they are required to notify their interest in, or a change to their
interest in, the Company under the FCA's Disclosure and
Transparency Rules.
Date Equity Raised Equity Invested Time to Deployment
(GBPGBPm)
April 2014 85.6 c.95% by September c.4 months
2014
November/December 99.6 c.95% by January c.6 weeks
2014 2015
February 2015 61.4 c.100% by April c.6 weeks
2015
September 2015 38.8 c.100% by November c.6 weeks
2015
Date Debt Raised Lender Amount Deployed
(GBPGBPm)
July 2015 22.7 NIBC c.100%
November 2015 100.0 Macquarie c.93.5%
January 2016 45.4 Bayern Landesbank c.100%
March 2016 55.0 Arranged by c.100%
MIDIS
May 2016 20.0 Macquarie c.0%
Share Price Development
During the year the share price fell from 103.25p to 97.75p.
As a result of share price developments, and taking into account
dividends paid, NESF total shareholders return was 0.2% for the
year ended 31 March 2016 (and 3.2% since IPO). NAV total return for
the year was 1.1% (and 3.7% since IPO).
NESF shares are included in the FTSE All-Shares Index as well as
the FTSE Small Cap Index. Without taking into accounts dividends
paid, NESF shares outperformed its FTSE All-Shares benchmark by
2.4% during the period end and by 3.2% since IPO.
Financing and Cash Management
As of 31 March 2016, the Company had a total of GBP74.2m in
short-term financial debt outstanding, resulting from the
following:
-- GBP51.5m drawn under the two-year revolving credit facility
("RCF") advanced by Macquarie Bank Limited on 17 September 2014
(and subsequently syndicated for 40% to Santander) and extended to
a total of GBP100m on 30 October 2015 (and further extended to
GBP120m post year end); and
-- GBP22.7m drawn under the debt facility advanced by NIBC Bank
B.V ("NIBC") on 21 July 2015 to nance the acquisition of two assets
(Cock Hill and Llwyndu). The NIBC Facility has a 12-month duration,
with a further 12-month extension available. As of the Date of
Distribution of this annual report, the Company is executing the
extension of this facility with NIBC for a further 3 years. NIBC
previously nanced the construction of the two projects for the
vendor. The upfront costs to the Company favourably re ected NIBC's
previous involvement in and knowledge of the two projects and the
remaining terms of the facility are in line with current market
conditions.
In addition, during the year the Company made two investments in
solar PV portfolios with project level long-term fully-amortising
debt in place:
-- GBP45.4m project financing advanced by Bayerische Landesbank
to the 53MW Three Kings portfolio (comprising Fenland, Green End
and Tower Hill), acquired by the Company in January 2016; and
-- GBP55m project financing arranged by Macquarie Infrastructure
Debt Investment Solutions ("MIDIS") in conjunction with the
acquisition of the 84MW Radius portfolio signed by the Company in
March 2016
As a result, the total pro-forma debt position of the Company on
a look-through basis as of 31 March 2016 is GBP216.6m. This
represents a gearing of 44% in terms of total debt vs. Gross Asset
Value (which is equal to NAV plus total financial debt
outstanding). The corresponding average cost of debt is 3.5%. After
the end of the year, and as the Date of Distribution of this annual
report, the Company has further extended its RCF to a total of
GBP120m. The table below provides detailed information on the total
debt outstanding as of the Date of Distribution of this report:
Provider/Arranger Type Borrower Tranches Facility Amount Termination Applicable
Available Outstanding (including Rate
(GBP) (GBPm) options
to extend)
Revolving RCF
Macquarie Credit Fund/HoldCo - Tranche 1m Libor
& Santander Facility level A 31,500,000 25,000,000 17-Mar-17 + 2.75%
RCF 1m Libor
- Tranche +
B 68,500,000 68,500,000 17-Jun-17 (1.95-2.50)%
RCF 20,000,000 - 19-Nov-17 1m Libor
- Tranche +
C (1.95-2.50)%
Acquisition Fund/HoldCo 3m Libor
NIBC facility level 22,680,000 22,680,000 17-Jul-17 + 2.75%
(being
extended (being
to Jul-20) reduced
to
2.20%)
Radius
Fully-amortising Portfolio Inflation RPI
long-term level linked index
MIDIS debt debt Tranche 27,500,000 27,500,000 30-Sep-34 + 1.44%
Fixed
Tranche 27,500,000 27,500,000 30-Sep-34 4.11%
Three
Kings
Fully-amortising Portfolio
Bayern long-term level
LB debt debt 45,398,000 45,398,000 30-Jun-33 3.96%
Total 216,578,000
It is intended that the short-term facilities will be repaid
through one or a combination of the following: rollover of the same
short-term facilities, re nancing with a long-term debt facility
and/or further equity issuance. The Investment Manager is actively
working on the refinancing of the GBP120m RCF and has selected a
leading financial adviser to the Company to run a competitive
tender process with a view to finalise the refinancing during the
fourth quarter of 2016. The Investment Manager is also working with
NIBC with a view to extend the existing short-term debt facility
for a further 3 years and to potentially extend it to GBP50m to
finance the acquisition of further assets.
The Investment Manager has not charged any additional fees to
the Company in conjunction with the structuring, execution and
monitoring of any of these financial debt facilities.
The debt financing strategy of the Company is supported by
strong indications of support from equity investors for both
further capital increases to increase the Company's size and the
employment of financial leverage up to the 50% target level to
optimise equity returns. Additional comfort on the employment of
structural debt comes from the evidence of robust and increasing
appetite from institutional debt capital providers for long-term
dated securities backed by solar PV assets, with levels of gearing
that range up to 75-80% Loan to Value. This buoyant debt market is
supportive for highly geared debt strategies, which usually require
accepting long- term PPAs of up to 15 years at discount to market
price, a requirement that limits the overall revenue obtainable for
energy generated over such a term. However, the Investment Manager
negotiated debt financing agreements that left flexibility to the
Company to negotiate PPAs over time with a view to maximise
revenues.
As at 31 March 2016 the Company's total assets included cash
totalling GBP5.9m split between Barclays Bank PLC and Lloyds Bank
PLC.
Outlook
The UK solar PV market continued to experience exceptional
growth during the year, reaching a total installed capacity of 9.5
GW, an increase of 19% over the last twelve months. In addition,
the announcement of regulatory changes that introduced a phase-out
of the ROC and FiT regimes for new solar installations after 31
March 2016 caused a further acceleration in the rate of new
installations expected to be commissioned.
During the year the regulatory framework for UK solar PV
underwent signi cant changes:
On 8 July 2015 the Chancellor of the Exchequer introduced as
part of the Summer Budget 2015 the removal of the Climate Change
Levy exemption for renewable electricity generation, effective 1
August 2015. This has negatively impacted the valuation of the
portfolio and the Company's NAV (by an estimated 4p per share,
partly offset by a reduction in corporate tax rates introduced in
the same Summer Budget 2015, resulting in total impact of 3.2p per
share).
Over the course of 2015, the Department of Environment and
Climate Change (DECC) undertook a review of the subsidy regime for
renewable energy in the UK. The consultation process led to the
government bringing to an end the regime for ROCs in it is entirety
for Solar by 31 March 2017 where projects benefit from a grace
period; and significantly truncated the Feed in Tariff (FiT) regime
with a quota led approach to curtailing wide spread use. These
changes imply that growth in the solar installed base will be
curtailed. The government was clear throughout the consultation
process that changes would not be retrospective. At the conclusion
of the review the UK government confirmed that the subsidy regime
achieved at accreditation would be maintained for the original life
of the subsidy regime.
The Company believes that there remains a material pipeline of
opportunities for growth. The NEC Group continues to leverage its
long-standing experience as an investor and leading asset manager
in the solar sector to focus on reducing solar investment and
operating costs to meet a decreasing support and no-support market
in the future.
Over the next 12 months, the Company will benefit from the
pipeline of opportunities identified by the Developer, ranging from
large industrial scale plants in operation and benefiting from the
previous ROCs regimes, or under construction and benefiting from
the 1.3 ROCs or FiT regimes as well as portfolios of residential
and commercial rooftops. At the Date of Distribution of this annual
report the Investment Manager, together with the Developer, have
identified a pipeline of over c.540MW of short-term acquisition
targets and are actively developing further opportunities.
In addition to these further growth opportunities, in the mid-
to long-term period the Investment Manager intends to add value to
the Company's portfolio by optimising the technical and financial
performances of its assets and by extending the useful lifespan of
its plants. Furthermore, the Investment Manager remains fully
engaged in monitoring technological change in the energy sector and
is already exploring the feasibility of the application of energy
storage facilities to the Company's portfolio of solar PV plants.
Consequently, the Company is well-positioned to incorporate the
continuing innovation in energy technology and benefit from the
associated incremental returns and/or cost reductions in solar
energy generation and storage.
Description of the Principal Risks and Uncertainties
The Company has in place risk management procedures and internal
controls to monitor and mitigate the main risks faced as well as a
process to review the effectiveness of those controls. The
Investment Manager assists the Company in regularly identifying,
assessing and mitigating those risk factors likely to impact the
financial or strategic position of the Company. The Company's Risk
Matrix is regularly reviewed on at least a semi-annual basis, and
includes:
-- External and Market Risks
-- Investment Strategy
-- Investment Process and Management of Assets
-- Monitoring Process
-- Valuation Process
-- Financial and Accounting Process
-- Governance, Tax and Regulatory Compliance
Based on the Board's assessment, the main risks faced by the
Company are likely to be related to the following areas, the other
ones being less likely or less signi cant:
-- Uncertainty for the future regulatory framework for solar PV
in the UK and risk that as a consequence further planned
acquisitions do not take place, affecting the Company's growth
potential, or that regulatory changes may affect the profitability
and valuation of the current portfolio
-- Risk that the heightened competition for solar assets will
make it more dif cult for the Company to continue acquiring assets
at attractive values. This increased competition may be fuelled by
investors with aggressive nancial structures seeking lower returns
than the Company for the same solar PV assets
-- Exposure to the wholesale energy market impacts the prices
received for energy generated and revenues forecasted by the
operating assets of the company. This also exposes the company to a
risk of further reduction in forward price curves
-- The UK government held a referendum on 23 June 2016 for the
UK to vote either to remain in or leave the European Union. As a
result of the referendum, the majority of those voting elected to
leave the European Union ("Brexit"). The Investment Manager
believes Brexit is likely to have a very limited effect, if any at
all, on the Company's financial and operating prospects. The UK's
2008 Climate Change Act enshrines the Government's commitment to
reduce the country's greenhouse gas emissions by 80 per cent
compared to 1990 levels, and we do not think government will
introduce primary legislation to reverse this commitment as a
result of Brexit. Given the recent referendum result there is
uncertainty in the market around the impact of the vote, however we
currently have no reason to expect the availability of debt
financing in the UK solar sector to be affected significantly
following Brexit. In addition, the Company's exclusive focus on the
solar sector in the UK protects it from any adverse foreign
currency fluctuations emerging as a result of Brexit. Further
implications of Brexit on the Company are not identifiable at
present.
Post Year-End Update
Since 31 March 2016, the following relevant events occurred:
-- On 14 April 2016 the Company completed the acquisition of the
Radius portfolio. For this investment, the contractual conditions
of its acquisition and financing agreements implied an effective
transfer of ownership at time of exchange on 31 March 2016. As a
result, this investment has been valued in the investment portfolio
through the discounted cash flow methodology.
-- As at 31 March 2016, the Company had announced three other
investments that were operational but for which the relevant
contractual milestones and technical tests had not been achieved
(namely Hall Farm, Green Farm and Ellough Phase II) and as such
their completion was not deemed imminent. These three investments
have not been valued through discounted cash flow methodology in
the investment portfolio. As of the Date of Distribution of this
Annual Report and Audited Financial Statements, the Investment
Manager had completed the acquisition of Hall Farm on 7 April 2016
and was in the process of completing the other two investments
shortly.
-- On 17 May 2016 the Company extended its RCF with Macquarie
and Santander from GBP100m to GBP120m
NextEnergy Capital IM Limited
27 June 2016
Corporate Governance
Introduction
As a regulated Guernsey incorporated company with a Premium
Listing on the Official List and admitted to trading on the Main
Market for Listed Securities of the London Stock Exchange, the
Company is required to comply with the principles of the UK
Corporate Governance Code dated September 2014 ("UK Code").
The Board recognises the importance of a strong corporate
governance culture that meets the requirements of the UK Listing
Authority as well as other relevant bodies such as the Guernsey
Financial Services Commission and the Association of Investment
Companies (the "AIC").
As an AIC member, the Board has also considered the principles
and recommendations of the AIC Code of Corporate Governance ("AIC
Code") by reference to the AIC Corporate Governance Guide for
Guernsey Domiciled Investment Companies ("AIC Guide"). The AIC Code
addresses all the principles set out in the UK Code, as well as
setting out additional principles and recommendations on issues of
specific relevance to the Company. The AIC Code published in
February 2013, and updated in February 2015, addresses all of the
principles set out in the UK Code, and has been endorsed by the
Financial Reporting Council as ensuring investment company boards
fully meet their obligations to the UK Code and LR 9.8.6 of the
Listing Rules. Having adopted the AIC Code with effect from
Admission (25 April 2014), the Board has therefore assessed itself,
the Committees and performance of the Directors against the
parameters and principles outlined within the AIC Code for the year
ended 31 March 2016.
The Guernsey Financial Services Commission Finance Sector Code
of Corporate Governance ("GFSC Code") came into force in Guernsey
on 1 January 2012. The Company is deemed to satisfy the GFSC Code
provided that it continues to conduct its governance in accordance
with the requirements of the AIC Code, which incorporates the UK
Code.
The Board is of the view that throughout the year ended 31 March
2016, the Company has complied with the recommendations of the AIC
Code and the relevant provisions of the UK Code, except as set out
below:
-- The role of the chief executive,
-- Executive directors' remuneration,
-- The appointment of a Senior Independent Director,
-- The need for an internal audit function, and,
-- The appointment of a Remuneration, Nomination and Management Engagement Committee.
For the reasons set out in the AIC Guide, and as explained in
the UK Code, the Board considers that given the Company's current
size and the structure of the Board, these provisions are not
currently relevant or appropriate to the position of the
Company.
Chairman
Mr Lyon was appointed to the position of Chairman of the Board
on 22 January 2014. Mr Lyon is responsible for leading the Board in
all areas, including determination of strategy, organising the
Board's business and ensuring the effectiveness of the Board and
individual Directors in all aspects of their role. He also
endeavours to produce an open culture of debate within the Board
which facilitates the ability of the Board to make objective
decisions free from the interests of the Investment Manager and
Investment Adviser.
Prior to the Chairman's appointment, a job specification was
prepared which included an assessment of the time commitment
anticipated for the role. Discussions were undertaken to ensure the
Chairman was sufficiently aware of the time needed for his role,
and agreed to upon signature of his letter of appointment. Other
significant business commitments of the Chairman were disclosed to
the Company prior to appointment to the Board, and were publicly
disclosed in the Company's Prospectus dated 18 March 2014 relating
to the Company's listing and again in the Company's Prospectus
dated 10 November 2014 and further within the Supplementary
Prospectus dated 19 August 2015, both relating to the Company's
Placing Programme. There have not been any subsequent changes to
the Chairman's business commitments, as stated in the Prospectus,
that require to be declared. A summary of Mr Lyon's commitments can
be identified in his biography.
The effectiveness and independence of the Chairman is evaluated
on an annual basis as part of the Board's performance evaluation;
the Audit Committee Chairman is tasked with collating feedback and
discussing with the Chairman on behalf of the rest of the Board.
The Chairman is not subject to any relationships which may create a
conflict between his interests and those of the shareholders and
does not serve on any other investment company board managed by the
Investment Manager.
As per the Company's Articles all Directors, including the
Chairman, must disclose any interest in a transaction that the
Board and Committees will approve.
Board Independence and disclosure
The Board and Chairman confirm that they were selected prior to
the Company's launch and were able to assume all responsibilities
at an early stage, independent of the Investment Manager and
Investment Adviser.
The Board is composed entirely of non-executive Directors, who
meet regularly to determine the Company's strategic direction,
review its financial performance and to oversee the performance of
the Investment Manager or service providers to scrutinise the
achievement of agreed goals and objectives, and monitor
performance. Through the Audit Committee they are able to ascertain
the integrity of financial information and confirm that all
financial controls and risk management systems are robust.
There is no management engagement committee appointed for the
Company as it is deemed that the size, composition and structure of
the Company would mean the process would be inefficient and
counter-productive. Therefore, the Board as a whole also fulfils
the functions of a management engagement committee and reviews and
analyses the actions, performance and judgments of the Investment
Manager and also the terms of the Investment Management Agreement.
Further to this the Board analyses and evaluates the performance of
other service providers on a regular basis. The Board will continue
to consider the need for a management engagement committee as the
needs and structure of the Company develop.
As part of the annual performance evaluation process, the
independence of each of the Directors was considered. Following the
annual performance evaluation, it was deemed that the Directors had
been proven to challenge the Investment Manager throughout the year
under review, as minuted and recorded, therefore for the purposes
of assessing compliance with the AIC Code, the Board as a whole
considers that each Director is independent of the Investment
Manager and free from any business or other relationship that could
materially interfere with the exercise of his independent judgment.
If required, the Board is able to access independent professional
advice. The Investment Manager is also requested to declare any
potential conflicts surrounding votes, share dealing and soft
commissions on an annual basis to the Board to help with the
assessment of investments.
Open communication between the Investment Manager and the Board
is facilitated by regular Board meetings, to which the Investment
Manager is invited to attend and update the Board on the current
status of the Company's investments, along with ad hoc meetings as
required.
Coming to mutual agreement on all decisions, it was agreed the
Board had acted in the best interests of the Company to the extent
that, if deemed appropriate a Director abstain or have his
objection noted and minuted.
Similar to the process outlined above for the appointment of the
Chairman, a job specification was prepared for each Directorship
which included an assessment of the time commitment anticipated for
the role to ensure each Director was aware of the time commitment
needed for the role. The Directors' other significant business
commitments were disclosed to the Company prior to appointment to
the Board, and were publicly disclosed in the Company's Prospectus
dated 18 March 2014 relating to the Company's listing and restated
in the Company's Prospectus dated 10 November 2014 and further
within the Supplementary Prospectus dated 19 August 2015 both
relating to the Company's Placing Programme. No subsequent changes
have required to be declared during the year. Each Director's
commitments can be identified in their biographies. Details of the
skills and experience provided by each director can also be found
in their biographies, alongside identification of the role each
Director currently holds in the Company.
The terms and conditions of appointment for non-executive
Directors are outlined in their letters of appointment, and are
available for inspection by any person at the Company's registered
office during normal business hours and at the AGM for fifteen
minutes prior to and during the meeting.
There is no executive director function in the Company; all
day-to-day functions are delegated to external service
providers.
Development
The Board believes that the Company's Directors should develop
their skills and knowledge through participation at relevant
courses. The Chairman is responsible for reviewing and discussing
the training and development of each Director according to
identified needs. Upon appointment, all Directors participate in
discussions with the Chairman and other Directors to understand the
responsibilities of the Directors, in addition to the Company's
business and procedures. The Company also provides regular
opportunities for the Directors to obtain a thorough understanding
of the Company's business by regularly meeting the Investment
Manager, members of the senior management team from the Investment
Adviser and other service providers, both in person and by
phone.
Balance of the Board and diversity policy
It is perceived that the Board is well-balanced, with a wide
array of skills, experience and knowledge that ensures it functions
correctly and that no single director may dominate the Board's
decisions. Having three Directors appointed ensures that during any
transition period, there are at least two Directors to provide
stability.
At this time, the Board has chosen not to adopt a formal
diversity policy for diversity. However, the Board recognises the
importance of diversity, including gender, for the effective
functioning of the Board and is committed to supporting diversity
in the boardroom. It is the Board's on-going aspiration to have a
well-diversified representation. The Board also values diversity of
business skills and experience because Directors with diverse
skills sets, capabilities and experience gained from different
geographical backgrounds enhance the Board by bringing a wide range
of perspectives to the Company. The Board believes that the current
mix of skills, experience, knowledge and age of the Directors is
appropriate to the requirements of the Company.
The Board has established an Audit Committee composed of all
members of the Board. The Chairman of the Board is included as a
Committee member to enable a full understanding of the issues
facing the Company, but would not be appointed as its Chair.
Annual performance evaluation
The Board's balance is reviewed on a regular basis as part of a
performance evaluation review. Using a pre-determined template
based on the AIC Code's provisions as a basis for review, the Board
undertook an evaluation of its performance and in addition, an
evaluation focusing on individual commitment, performance and
contribution of each Director was conducted. The Chairman then met
with each Director to fully understand their views of the Company's
strengths and to identify potential weaknesses. If appropriate, new
members would be proposed to resolve the perceived issues, or a
resignation sought. Following discussions and review of the
Chairman's evaluation by the other Directors, the Audit Committee
Chairman reviewed the Chairman's performance. Training and
development needs are identified as part of this process, thereby
ensuring that all Directors are able to discharge their duties
effectively.
Given the Company's size and the structure of the Board, no
external facilitator or independent third party was used in the
performance evaluation.
Re-election and Board tenure
There is currently no Nominations Committee for the Company as
it is deemed that the size, composition and structure of the
Company would mean the process would be inefficient and
counter-productive. The Board therefore undertakes a thorough
process of reviewing the skill set of the individual Directors, and
proposes new, or renewal of current, appointments to the Board.
Each director was required to be re-elected by shareholders at
the first Annual General Meeting of the Company and thereafter will
be submitted for re-election not less than once in every three year
period. Kevin Lyon is therefore submitting himself for re-election
at the AGM on 24 August 2016. Any director who has served on the
Board for longer than nine years will be subject to annual
re-election. Going forward, any director that is appointed to the
Board will be required to submit themselves for re-election at the
first Annual General Meeting following their appointment and
thereafter once every three years.
The Audit Committee Chairman and other Members of the Board
confirm that Kevin Lyon has proven his ability to fulfil all legal
responsibilities and to provide effective independent judgment on
issues of strategy, performance, resources and conduct. The Board
therefore has no hesitation in recommending to shareholders that
Kevin Lyon be re-elected.
It is anticipated that, should any Director have served on the
Board for nine or more years, their independence would not
automatically be considered to be compromised through length of
service, but it would be closely scrutinised and the Director would
be subject to annual election.
Appointment process
The appointment process for the Chairman and Directors at the
time of incorporation of the Company is described above. As no new
Director has been appointed since the Company's launch and the
Board believes there is no gap that currently needs to be filled,
no appointment process has been formalised. It is anticipated,
however, that the process will be led by the independent Directors
and will involve identifying gaps and needs in the Board's
composition and balance, including diversity, then reviewing the
skill set of potential candidates. For renewal of current
appointments, all Directors except the individual in question are
entitled to vote at the meeting. Similarly, no new nominations have
been made for the role of Chairman of the Board since prior to
launch.
Board and Board Committees
Matters reserved for the Board include a review of the Company's
overall strategy and business plans; approval of the Company's
interim and annual report; review and approval of any alteration to
the Company's accounting policies or practices and valuation of
investments; approval of any alteration to the Company's capital
structure; approval of dividend policy; appointments to the Board
and constitution of Board Committees; observation of relevant
legislation and regulatory requirements; and performance review of
key service providers. The Board also retains ultimate
responsibility for Committee decisions; every Committee is required
to refer to the Board, who will make the final decision.
Terms of reference containing a formal schedule of matters
reserved for the Board of Directors and its duly authorised
Committee has been approved and can be reviewed at the Company's
registered office.
The Board met 15 times during the year ended 31 March 2016; the
meeting attendance record is displayed further on in the Corporate
Governance Statement. The Company Secretary acts as the Secretary
to the Board.
As noted above, the Board fulfils the responsibilities typically
undertaken by a Management Engagement Committee and reviews the
actions and judgments of the Investment Manager and also the terms
of the Investment Management Agreement.
The Board looks to undertake an assessment of the Investment
Manager's scope and responsibilities as outlined in the service
agreement and prospectus on a formal basis every year. Discussions
on Investment Manager performance are also conducted regularly
throughout the year by the Board. Reviews of engagements with other
service providers to ensure all parties are operating
satisfactorily are also undertaken by the Board so as to ensure the
safe and accurate management and administration of the Company's
affairs and business and that they are competitive and reasonable
for shareholders.
As detailed in the Remuneration Report, the Board also fulfils
the duties and role of a Remuneration Committee. Full details as to
how the Board fulfils those duties can be found in the Remuneration
Report.
Audit Committee
The Board has established an Audit Committee composed of all the
independent members of the Board. The Chairman of the Board is
included as a Committee member to enable a full understanding of
the issues facing the Company, but cannot be Audit Committee
Chairman. The Audit Committee, its membership and its terms of
reference are kept under regular review by the Board, and it is
perceived all members have sufficient financial skills and
experience. Patrick Firth is Audit Committee Chairman.
The Audit Committee met three times during the year ended 31
March 2016; the meeting attendance record is displayed below. The
Company Secretary acts as the Secretary to the Audit Committee.
Owing to the size and structure of the Company, there is no
internal audit function. The Audit Committee has reviewed the need
for an internal audit function, and perceived that the internal
financial and operating control systems in place within the Company
and its service providers, as evidenced by the internal control
reports provided by the Administrator, give sufficient assurance
that a sound system of internal control is maintained that
safeguards shareholders' investment and Company assets.
The Audit Committee is intended to assist the Board in
discharging its responsibilities for the integrity of the Company's
financial statements, as well as aiding the assessment of the
Company's internal control effectiveness and objectivity of the
external auditors. Further information on the Audit Committee's
responsibilities is given in the report of the Audit Committee.
Formal terms of reference for the Audit Committee are available
at the registered office, and are reviewed on a regular basis.
Board and Committee meeting attendance
Individual attendance at Board and Committee meetings is set out
below:
Scheduled Ad hoc Board(2) Audit Committee
Board(1)
Kevin Lyon(1) 3 6 3
Patrick Firth 3 12 3
Vic Holmes 3 8 3
Total Meetings
for year 3 12 3
1 In place of the fourth quarterly scheduled board meeting, the
Board met with the Investment Adviser to conduct site visits of a
number of portfolio assets, receiving an informal update on the
portfolio at that time.
2 The ad hoc Board meetings are convened at short notice to deal
with administrative matters. In such cases, it is not always
feasible, or a necessity, for the Chairman of the Board to attend
such meetings, and he has participated as an observer by phone.
In addition to the scheduled quarterly and additional offshore
ad hoc meetings, the Directors and the Investment Manager have been
provided with a number of telephone and face to face investment
briefings by the Investment Adviser in order to keep the Directors
and the Investment Manager fully appraised and up to date with the
current investment status and progress.
Company Secretary
Reports and papers, containing relevant, concise and clear
information, are provided to the Board and Committees in a timely
manner to enable review and consideration prior to both scheduled
and ad-hoc specific meetings. This ensures that Directors are
capable of contributing to, and validating, the development of
Company strategy and management. The regular reports also provide
information that enables scrutiny of the Company's Investment
Manager and other service providers' performance. When required,
the Board has sought further clarification of matters with the
Investment Manager and other service providers, both by means of
further reports and in-depth discussions, in order to make more
informed decisions for the Company.
Under the direction of the Chairman, the Company Secretary
facilitates the flow of information between the Board, Committees,
Investment Manager and other service providers through the
development of comprehensive, detailed meeting packs, agendas and
other media. These are circulated to the Board and other attendees
in sufficient time to review the data.
Full access to the advice and services of the Company Secretary
is available to the Board; in turn, the Company Secretary is
responsible for advising on all governance matters through the
Chairman. The Articles and schedule of matters reserved for the
Board indicate the appointment and resignation of the Company
Secretary is an item reserved for the full Board. A review of the
performance of the Company Secretary is undertaken by the Board on
a regular basis.
Financial and Business Information
An explanation of the Directors' role and responsibility in
preparing the Annual Report and Audited Financial Statements for
the year ended 31 March 2016 is provided in the Statement of
Directors' responsibilities.
Further information enabling shareholders to assess the
Company's performance, business model and strategy can be sourced
in the Chairman's Statement, the Strategic Report and the Report of
the Directors.
Viability Statement
In accordance with provision C.2.2 of the 2014 revision of the
Code, the Directors have assessed the prospect of the Company over
a period of five years, which was selected for the following
reasons:
-- The Group's strategic review covers a five year period, and
-- If in the third or any subsequent financial year of the
Company the Ordinary Shares have traded, on average over that year,
at a discount in excess of ten per cent to the Net Asset Value per
Share, the Board shall propose a special resolution at the
Company's next annual general meeting that the Company ceases to
continue in its present form.
The five year strategic review considers the Group's cash flows,
dividend cover, and other financial ratios over the period. These
metrics are subject to sensitivity analysis which involves fixing a
number of the main assumptions underlying the forecast. Where
appropriate, this analysis is carried out to evaluate the potential
impact of the Group's principal risks actually occurring. The five
year review also makes certain assumptions about the impact of
unfavourable weather conditions and unfavourable electricity
markets and considers whether additional financing facilities would
be required.
Based on the results of this analysis, and subject to passing
any continuation vote, the Directors have a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the five year period of their
assessment up to and including 31 March 2021.
Principal Risk Management and Risk Control
Details of the Company's principal risks can be found in the
Financial Review.
Risk Management and Risk Control
The Board is required annually to review the effectiveness of
the Company's key internal controls such as financial, operational
and compliance controls and risk management. The controls are
designed to ensure that the risk of failure to achieve business
objectives is minimised, and are intended to provide reasonable
assurance against material misstatement or loss. Through regular
meetings and meetings of the Audit Committee, the Board seeks to
maintain full and effective control over all strategic, financial,
regulatory and operational issues. The Board maintains an
organisational and Committee structure with clearly defined lines
of responsibility and delegation of authorities.
As part of the compilation of the risk register for the Company,
appropriate consideration has been given to the relevant control
processes and that risk is considered, assessed and managed as an
integral part of the business. The Company's system of internal
control includes inter alia the overall control exercise,
procedures for the identification and evaluation of business risk,
the control procedures themselves and the review of these internal
controls by the Audit Committee on behalf of the Board. Each of
these elements that make up the Company's system of internal
financial and operating control is explained in further detail as
follows:
(i) Control environment
The Company is ultimately dependent upon the quality and
integrity of the staff and management of its Investment Manager,
its Investment Adviser and its Administration and Company
Secretarial service providers. In each case, qualified and able
individuals have been selected at all levels. The staff of both the
Investment Manager and Administrator, are aware of the internal
controls relevant to their activities and are also collectively
accountable for the operation of those controls. Appropriate
segregation and delegation of duties is in place.
The Audit Committee undertakes a review of the Company's
internal financial and operating controls on a regular basis. The
auditors of the Company, PricewaterhouseCoopers CI LLP, considers
internal control relevant to the Company's preparation and fair
presentation of the financial statements in order to design their
audit procedures, but not for the purpose of expressing an audit
opinion on the effectiveness of the Company's internal
controls.
The Board is made aware of the business controls of the
Investment Advisor and Investment Manager during periodic Board
Updates enabling oversight of the key business processes. The
Investment Advisor also provides an update of the control
environment for the HoldCo and SPVs to ensure the Board have
oversight of business controls for the entire Group.
In its role as a third-party fund administration services
provider, the Ipes Group, of which Ipes (Guernsey) Limited is a
part, produces an annual AAF 01/06 Assurance Report on the internal
control procedures in place within the Ipes Group, and this is
subject to review by the Audit Committee and the Board.
(ii) Identification and evaluation of business risks
Another key business risk is the performance of the Company's
investments. This is managed by the Investment Manager, which
undertakes regular analysis and reporting of business risks in
relation to the investment portfolio, and then proposes appropriate
courses of action to the Board for their review.
(iii) Key procedures
In addition to the above, the Audit Committee's key procedures
include a comprehensive system for reporting financial results to
the Board regularly, as well as quarterly impairment reviews of
loans (including reports on the underlying investment
performance).
Although no system of internal control can provide absolute
assurance against material misstatement or loss, the Company's
system is designed to assist the Directors in obtaining reasonable
assurance that problems are identified on a timely basis and dealt
with appropriately. It is the view of the Board that the controls
in relation to the Company's operating, accounting, compliance and
IT risks performed robustly throughout the year. In addition, all
have been in full compliance with the Company's policies and
external regulations, including:
-- Investment policy, as outlined in the IPO documentation;
-- Personal Account Dealing, as outlined in the Model Code;
-- Whistleblowing Policy;
-- Anti-Bribery Policy;
-- Applicable FCA Regulations;
-- Listing Rules, and Disclosure and Transparency Rules;
-- Treatment and handling of confidential information;
-- Conflicts of interest;
-- Compliance policies; and
-- Anti-Money Laundering Regulations.
Corporate Governance Statement
There were no protected disclosures made pursuant to the
Company's whistleblowing policy, or that of service providers in
relation to the Company, during the year ended 31 March 2016.
In summary, the Board considers that the Company's existing
internal financial and operating controls, coupled with the
analysis of risks inherent in the business models of the Company
and its subsidiaries, continue to provide appropriate tools for the
Company to monitor, evaluate and mitigate its risks.
Alternative Investment Fund Management Directive ("AIFMD")
The AIFMD, which was implemented across the EU on 22 July 2013
with the transition period ending on 22 July 2014, aims to
harmonise the regulation of Alternative Investment Fund Managers
("AIFMs") and imposes obligations on managers who manage or
distribute Alternative Investment Funds ("AIFs") in the EU or who
market shares in such funds to EU investors.
After seeking professional regulatory and legal advice, the
Company was established in Guernsey as a Non-EU AIF, appointing
NextEnergy Capital IM Limited to act as the Non-EU AIFM.
In accordance with AIFMD disclosure obligations, Note 5 provides
a summary of realised gains and losses.
The Investment Manager does not receive an additional fee, to
that stated in Note 15, as a result of acting as the AIFM. The
Board of the Investment Manager received an aggregate fee of
GBP2,615,662 for the year ended 31 March 2016.
The marketing of shares in AIFs that are established outside the
EU (such as the Company) to investors in that EU member state is
prohibited unless certain conditions are met. Certain of these
conditions are outside the Company's control as they are dependent
on the regulators of the relevant third country (in this case
Guernsey) and the relevant EU member state entering into regulatory
co-operation agreements with one another.
Currently, the National Private Placement Regime ("NPPR")
provides a mechanism to market Non-EU AIFs that are not allowed to
be marketed under the AIFMD domestic marketing regimes. The Board
is utilising NPPR in order to market the Company, specifically in
the UK, the Republic of Ireland and the Netherlands. The Board is
working with the Company's advisers to ensure the necessary
conditions are met, and all required notices and disclosures are
made under NPPR. Eligible AIFMs will be able to continue to use
NPPR until at least 2018, and until at least 2016 NPPR will be the
sole regime available to market in the EU. After 22 July 2015, a
non-EU marketing passport may be introduced, but this depends on a
number of conditions being satisfied (as set out in the AIFMD and
its Regulations).
Any regulatory changes arising from implementation of AIFMD (or
otherwise) that limit the Company's ability to market future issues
of its shares may materially adversely affect the Company's ability
to carry out its investment policy successfully and to achieve its
investment objective, which in turn may adversely affect the
Company's business, financial condition, results of operations, NAV
and/or the market price of the Ordinary Shares.
The Board, in conjunction with the Company's advisers, will
continue to monitor the development of AIFMD and its impact.
The Board has considered the disclosure obligations under
Articles 22 and 23 and can confirm that the Investment Manager
company complies with the various organisational, operational and
transparency obligations.
Foreign Account Tax Compliance Act ("FATCA") and the OECD Common
Reporting Standards ("CRS")
FATCA became effective on 1 January 2013 and is being gradually
implemented internationally. The legislation is aimed at
determining the ownership of US assets in foreign accounts and
improving US Tax compliance with respect to those assets.
More than 90 jurisdictions, including all 34 member countries of
the Organisation for Economic Co-operation and Development ("OECD")
and the G20 members, have committed to implement the Common
Reporting Standard for automatic exchange of tax information
("CRS"). Building on the model created by FATCA, the CRS creates a
global standard for the annual automatic exchange of financial
account information between the relevant tax authorities.
The Board in conjunction with the Company's service providers
and advisers will ensure the Company's compliance with FATCA and
CRS's requirements to the extent relevant to the Company
Dialogue with Shareholders
The Directors place a great deal of importance on communication
with shareholders. The Investment Manager and Brokers, aim to meet
with large shareholders at least annually, together with the
Investment Adviser, and calls are undertaken on a regular basis
with shareholders. The Board also receives regular reports from the
Brokers on shareholder issues. Publications such as the Annual
Report and Audited Financial Statements, and Quarterly Factsheets
are reviewed and approved by the Board prior to circulation, and
are widely distributed to other parties who have an interest in the
Company's performance, and are available on the Company's
website.
All Directors are available for discussions with shareholders,
as and when required.
Constructive use of AGM
The Notice of AGM is sent out at least 20 working days in
advance of the meeting. All shareholders have the opportunity to
put questions to the Board or Investment Manager, either formally
at the Company's Annual General Meeting, informally following the
meeting, or in writing at any time during the year via the Company
Secretary. The Company Secretary is also available to answer
general shareholder queries at any time throughout the year.
By order of the Board
Kevin Lyon
Chairman
27 June 2016
Biographical Information of the Directors
Kevin Lyon
(Independent Non-Executive Director and Chairman)
Mr Lyon is a qualified Chartered Accountant, with over 30 years
of experience in private equity and senior director positions in a
number of different companies. He spent approximately 17 years with
the 3i Group, responsible for their core private equity business
across the UK, with a team of 10 Directors and 40 executives. Mr
Lyon is currently chairman of Drilling Systems Ltd, a designer and
manufacturer of simulators for the oil and gas industry, of Inoapps
Ltd, a vendor of Oracle software and of ROVOP, an independent
provider of subsea remotely operated vehicle services. He was
former chairman of Smart Metering Systems plc, Valiant Petroleum
plc, RBG, Wyndeham Press Group, Craneware plc, Incline GTS and
Ambrian plc and was a Non-Executive Director on Booker plc, David
Lloyd Leisure, and Phase 8. He won the Institute of Directors
Scotland, Non-Executive Director of the Year Award in March 2013.
Mr Lyon graduated from Edinburgh University in 1982 and has
attended management courses at INSEAD, IESE and Ashridge.
Patrick Firth
(Independent Non-Executive Director and Audit Committee
Chairman)
Mr Firth is a non-executive director of the Company. He
qualified as a Chartered Accountant with KPMG Guernsey in 1991 and
is also a member of the Chartered Institute for Securities and
Investment. Patrick is a director of a number of management
companies, general partners and investment companies including
Riverstone Energy Limited, JZ Capital Partners Limited, ICGLongbow
Senior Secured UK Property Debt Investments Limited, DW Catalyst
Fund Ltd. (all four of which are London listed) and GLI Finance
Limited. He has worked in the fund industry in Guernsey since
joining Rothschild Asset Management C.I Limited in 1992 before
moving to become Managing Director at Butterfield Fund Services
(Guernsey) Limited (subsequently Butterfield Fulcrum Group
(Guernsey) Limited), a company providing third party fund
administration services, where he worked from April 2002 until June
2009. Mr Firth is a former Chairman of the Guernsey Investment Fund
Association (GIFA) and is currently Chairman of the Guernsey
International Business Association (GIBA) Council. He is a resident
of Guernsey.
Vic Holmes
(Independent Non-Executive Director)
Mr Holmes is qualified Chartered Certified Accountant and a
non-executive Director of the Company. He has been involved in
financial services for over 30 years. In 1986, Mr Holmes joined the
board of Guernsey International Fund Management Limited, Guernsey's
largest fund administration company. In 1990, he was appointed
managing director of the newly established Irish based Baring Asset
Management subsidiary, providing international fund administration
services from a Dublin base. He continued in that position until
2003, when he was appointed head of fund administration services
for the Baring Asset Management group of companies, providing
services out of London, Dublin, Guernsey, Isle of Man and Jersey.
Subsequent to the acquisition of the Baring Asset management
Financial Services Group by Northern Trust in 2005, he was
appointed country head of Northern Trust's Irish businesses and, in
2007, he returned to Guernsey to assume the position of
jurisdictional head of Northern Trust's Channel Island businesses.
Since 1986, Mr. Holmes has served on a wide range of fund-related
boards, based mainly in Guernsey and Ireland, but also in the UK,
and the Cayman Islands. Mr Holmes' current directorships include
Permira Holdings Limited, Generali Worldwide Insurance Company
Limited, Picton Property Income Limited Highbridge Multi-Strategy
Fund Limited, (both London listed) DBG Management GP (Guernsey)
Limited, and a range of Ashmore funds. Mr Holmes was the first
chairman of what is now known as the Irish Fund Industry
Association which he was instrumental in establishing in 1991, and
served as chairman of the Executive Committee of the Guernsey
Investment Fund Association from April 2013 to April 2015. He is a
resident of Guernsey.
Statement of Directors Responsibilities
The Directors are responsible for preparing financial statements
for each financial period which give a true and fair view, in
accordance with applicable laws and regulations, of the state of
affairs of the Company and of the profit and loss of the Company
for that period.
The Companies (Guernsey) Law, 2008 requires the Directors to
prepare financial statements for each financial period. The
financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). In preparing
the financial statements, the Directors are required to:
-- Select suitable accounting policies and apply them consistently;
-- Make judgements and estimates that are reasonable and prudent;
-- State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- Prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The maintenance and integrity of the Company's website is the
responsibility of the Directors. Legislation in Guernsey governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with The Companies (Guernsey) Law,
2008 as amended. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Each of the Directors confirms that, to the best of their
knowledge:
-- They have complied with the above requirements in preparing the financial statements;
-- There is no relevant audit information of which the Company's auditors are unaware;
-- All Directors have taken the necessary steps that they ought
to have taken to make themselves aware of any relevant audit
information and to establish that the auditors are aware of said
information;
-- The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company; and
-- The Chairman's Statement, Report of the Directors and
Corporate Governance Statement include a fair review of the
development and the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
The 2014 UK Corporate Governance Code, as adopted through the
AIC Code by the Company, also requires Directors to ensure that the
Annual Report and Audited Financial Statements are fair, balanced
and understandable. In order to reach a conclusion on this matter,
the Board has requested that the Audit Committee advise on whether
it considers that the Annual Report and Audited Financial
Statements fulfils these requirements. The process by which the
Committee has reached these conclusions is set out in the Audit
Committee Report. Furthermore, the Board believes that the
disclosures set out in the annual report provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
Having taken into account all the matters considered by the
Board and brought to the attention of the Board for the year ended
31 March 2016, as outlined in the Corporate Governance Statement,
Strategic Report and the Audit Committee Report, the Board has
concluded that the Annual Report and Audited Financial Statements
for the year ended 31 March 2016, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company's performance, business
model and strategy.
For NextEnergy Solar Fund Limited
Kevin Lyon
Chairman
27 June 2016
Report of the Directors
The principal activities and investment objectives of the
Company are to provide investors with a sustainable and attractive
dividend that increases in line with RPI over the long term by
investing exclusively in a diversified portfolio of solar PV assets
that are located in the UK. The Company's principal activities and
investment objectives are detailed more fully in the Strategic
Report.
The structure of the Group, as detailed fully in the Strategic
Report, facilitates the holding of and management of the Company's
assets to enable the Company to pursue its principal activities and
objectives.
Dividends
For details regarding the Dividend Policy applied by the
Company, please refer to the Chairman's Statement.
During the year, the Company has declared two dividends
totalling GBP17,372,319 relating to the year ended 31 March 2016 as
follows:
-- 3.125 pence per share declared on 26 November 2015, to
shareholders on the register on 4 December 2015 and paid on 18
December 2015; and
-- 3.125 pence per share declared on 28 June 2016, to
shareholders on the register on 8 July 2016 and paid on 22 July
2016
Capital
As part of the Company's initial public offering (the "IPO"),
completed on 25 April 2014, 85,600,000 ordinary shares of the
Company, with an issue price of 100 pence per share, were admitted
to the premium segment of the UK Listing Authority's Official List
and to trading on the Main Market of the London Stock Exchange.
Since the IPO the Ordinary Shares in issue has increased to
277,957,105 as a result of further share issues made pursuant to
the current Placing Programme. The Placings and Offers for
Subscription made under the placing programme are as follows:
Date Description New Ordinary Number of
Shares Issued Shares in
Issue
Initial Public
25 April 2014 Offering 85,600,000 85,600,000
19 November Issue of Shares
2014 -Placing 85,316,434 170,916,434
Issue of Shares
- Offer 5,683,566 176,600,000
23 December Issue of Shares
2014 - Placing 4,000,000 180,600,000
27 February Issue of Shares
2015 - Placing 55,356,358 235,956,358
Issue of Shares
- Offer 4,393,642 240,350,000
30 September Issue of Shares
2015 -Placing 37,607,105 277,957,105
6 November Issue of Shares
2015 - Placing 30,850,000 308,807,105
Transaction
in Own Shares
6 November - buy back
2015 to Treasury 30,850,000 277,957,105
Revolving Credit Facility
Details on the Company's revolving credit facility can be seen
in the Financial Review.
Business Review
As at the Date of Distribution of this Annual Report and Audited
Financial Statements the Company had announced the acquisition of
33 solar PV plants for a total of 414 MW and a total investment
value of c. GBP481m, representing 169% of the equity proceeds
raised since its IPO in April 2014 and will utilise its revolving
credit facility to finance any amounts not covered by its available
equity funding and to fund further investment opportunities.
Full details of the Company's performance during the year ended
31 March 2016, its position at that date and the Company's future
developments are detailed in the Chairman's Statement, the
Strategic Report and the Investment Manager's Report.
Substantial Interests
As of 31 May 2016, the Company is aware of the following
material shareholdings:
Name Ordinary shares % shareholding
purchased at 31 May 2016
Prudential plc
group of companies 69,495,459 25%
Artemis Investment
Management LLP
on behalf of discretionary
funds under management 53,998,379 19.43
Investec Wealth
& Investment Limited 38,745,335 13.94
Baillie Gifford 15,937,500 5.73
Smith & Williamson 12,522,737 4.51
Directors and Directors' Interests in Shares
The Directors who have served throughout the year ended 31 March
2016 were Kevin Lyon, Patrick Firth and Vic Holmes. All Directors
retired and were re-elected at the first annual general meeting of
the Company held on 19 June 2015. Going forward each Director who
has been appointed will be required to be elected at the next
annual general meeting and all Directors will be required to submit
themselves for re-election once every three years.
The Directors' interests in shares are shown below:
Name Ordinary shares Ordinary shares
at 31 March 2016 at 31 March 2015
Kevin Lyon 60,000 60,000
Patrick Firth 20,000 20,000
Vic Holmes 10,000 10,000
Corporate Governance
The Corporate Governance Statement sets out in detail the code
of corporate governance against which the Company reports. It also
sets out the Company' compliance with the relevant principals and
any reasons for deviations from the code. Finally, it includes
details regarding the Audit Committee, its composition and terms of
reference.
Going Concern
The Company's business activities and factors likely to affect
its performance, position and prospects are set out in the
Strategic Report. Further to this, the Strategic Report provides
further information on the financial position of the Company, its
cash flows, liquidity and borrowing facilities.
The Board is satisfied that the Company has sufficient resources
available to be able to manage the Company's business effectively
and pursue the Company's principal activities and investment
objectives.
The Directors have a reasonable expectation that the Company has
sufficient resources available to continue as a going concern for
the foreseeable future. As such, the Directors are happy to adopt
the going concern basis of accounting in preparing these financial
statements.
Investment Manager and Service Providers
The Investment Manager during the year was NextEnergy Capital IM
Limited (the "Investment Manager"), incorporated in Guernsey with
registered number 57740 and regulated by the GFSC. The Investment
Manager has appointed NextEnergy Capital Limited ("the Investment
Adviser"), an English limited company which is regulated by the
Financial Conduct Authority ("FCA"), to provide investment advice
pursuant to an Investment Advisory Agreement.
The Company's brokers during the year were Cantor Fitzgerald
Europe, Macquarie Capital (Europe) Limited and Shore Capital and
Corporate Limited.
The Company's and Investment Manager's Administrator and Company
Secretary during the year was Ipes (Guernsey) Limited (the
"Administrator").
Share Repurchase/Treasury Shares
Under section 315 of the Companies (Guernsey) Law, 2008 (as
amended from time to time) the Company is entitled to hold shares
acquired by market purchase as treasury shares. Up to 10% of the
issued share capital may be held in treasury and either sold in the
market or cancelled.
On 6 November 2015, 30,850,000 shares had been repurchased and
held in Treasury. Authority to purchase Ordinary Shares to be held
in Treasury / Cancellation was sought and obtained at the first
annual general meeting of the Company held on 19 June 2015 and will
expire at the conclusion of the second annual general meeting of
the Company, at which point it is envisaged that the Directors will
propose to extend the authority.
Annual General Meeting
The Company's Annual General Meeting is convened for 10.30 a.m.
on 24 August at the offices of Ipes (Guernsey) Limited, 1 Royal
Plaza, Royal Avenue, St Peter Port, Guernsey, GY1 2HL.
Accountability and Audit
The respective responsibilities of the Directors and the
Auditors in connection with the financial statements are set out in
the Statement of Directors Responsibilities.
Independent Auditors
Our independent Auditors, PricewaterhouseCoopers CI LLP, have
indicated their willingness to remain in office. The Directors will
place a resolution before the Annual General Meeting to re-appoint
them as independent Auditors for the ensuing year, and to authorise
the Directors to determine their remuneration.
Disapplication of Pre-emption Rights
Resolution 6 will be proposed as a special resolution at the AGM
to provide the Directors with an annual authority to disapply
pre-emption rights in respect of up to 27,795,711 shares,
equivalent to 10% of the current issued share capital (excluding
shares held in treasury at the date of this Annual Report), when
issuing shares and/or selling shares from treasury for cash. This
authority will expire at the conclusion of the AGM in 2017. Any
future issues, or sales of shares from treasury, will only be
undertaken at a premium to the prevailing NAV per share.
Purchase of the Company's Securities
As part of the discount control mechanisms, the Board may
undertake share buy-backs (subject to the limitations to be set out
in Resolution 7 in the Notice of the Annual General Meeting of the
Company and all other applicable laws and regulations) Resolution 7
will be proposed as a special resolution at the AGM to provide the
Company with an authority to purchase, through the market, up to
14.99% of the issued share capital. Shares repurchased by the
Company may be held within treasury and resold or cancelled. Annual
shareholder approval will be sought to renew this authority. This
authority will expire at the conclusion of the AGM in 2017.
Whether the Company buys back any shares, and the timing and the
price paid on any such purchase, will be at the discretion of the
Directors. The Directors will consider repurchasing shares in the
market if they believe it to be in shareholders' interests, in
particular as a means of correcting any imbalance between supply of
and demand for the shares. Any purchase of shares will be in
accordance with the Articles and the Listing Rules in force at the
time.
Recommendation
Your Board considers each of the AGM resolutions to be in the
best interests of the Company and its members as a whole.
Accordingly, your Board recommends that shareholders should vote in
favour of each of the resolutions to be proposed at the Annual
General Meeting, as they intend to do in respect of their own
beneficial shareholdings amounting to 90,000 shares.
By order of the Board
Kevin Lyon
Chairman
27 June 2016
Directors Remuneration Report
Remuneration Policy and Components
The Board endeavours to ensure the remuneration policy reflects
and supports the Company's strategic aims and objectives throughout
the year under review. It has been agreed that, as all the
Directors are independent and non-executive, a separate
Remuneration Committee would provide little extra in the way of
governance and therefore, the functions of the Remuneration
Committee are undertaken by the full Board as detailed in the
Prospectus. Furthermore, with the Board comprising of only three
members it would prove somewhat onerous to establish a separate
Remuneration Committee. The Board will review the need for the
Company to establish a Remuneration Committee as the needs and
structure of the Board and the Company develop.
Remuneration is set by the Board with details of remuneration of
the Board as per Directors' Letters of Appointment and as set out
in the Prospectus. No external remuneration consultants were
appointed during the year under review.
The aggregate remuneration and benefits in kind of the Directors
in respect of the Company's year ended 31 March 2016 which will be
payable out of the assets of the Company has not exceeded
GBP153,000 per annum. It is the Company's policy to determine the
level of Directors' fees, having regard for the level of fees
payable to non-executive Directors in the industry generally, the
role that individual Directors fulfil in respect of
responsibilities related to the Board and Audit Committee and the
time dedicated by each Director to the Company's affairs. Base fees
are set out below.
Base Fees Per annum GBP
Kevin Lyon - Chairman 60,000
Patrick Firth - Audit Committee
Chairman 33,000
Vic Holmes - Non-Executive
Director 30,000
Total Directors' Fees 123,000
In accordance with the Articles of Incorporation the Board may
determine that additional remuneration may be paid, from time to
time, to any one or more Directors in the event such Director or
Directors are requested by the Board to perform extra or special
services on behalf of the Company. In accordance with this
provision and in recognition of the additional work the Directors
have done in connection with the Placing Programme, it was agreed
that each Director is entitled to receive an additional fee of
GBP5,000 on completion of the Initial Placing, and a further
additional fee of GBP5,000 on completion of the second Issue
pursuant to the Placing Programme.
As outlined in the Articles of Association, the Directors shall
also be paid all reasonable travelling, hotel and other expenses
properly incurred by them in attending and returning from meetings
of the Directors or any committee of the Directors or general
meetings of the Company or in connection with the business of the
Company. The total amount of Directors' expenses paid for the year
ended 31 March 2016 is GBP1,024 (31 March 2015 - GBP710).
No amount has been set aside or accrued by the Company to
provide pension, retirement or other similar benefits for the
Directors.
No Director has any entitlement to pensions, paid bonuses or
performance fees, has been granted share options or been invited to
participate in long-term incentive plans. No loans have been taken
on behalf of a Director by the Company.
None of the Directors has a service contract with the Company.
Each of the Directors has entered into a letter of appointment with
the Company dated 22 January 2014, and was subject to election at
the first Annual General Meeting, or as determined in line with the
Company's Articles, and re-election at subsequent Annual General
Meetings in accordance with the Company's Articles and all due
regulations and provisions. The Directors do not have any interests
in contractual arrangements with the Company or its investments
during the year under review, or subsequently. Each appointment can
be terminated in accordance with the Company's Articles and without
compensation. As outlined in the letters of appointment, each
appointment can be terminated by:
(i) Resignation by the director by giving written notice (6
months for the Chairman and 3 months for the remaining Directors)
to the Board;
(ii) A resolution of the Shareholders;
(iii) Disqualification from acting as Director under the Law or
Company's Articles, without notice;
(iv) Acting otherwise in accordance with the Company's Articles
Directors' and Officers' liability insurance cover is maintained
by the Company but is not considered a benefit in kind nor
constitutes a part of the Directors' remuneration. The Company's
Articles indemnify each Director, Secretary, agent and officer of
the Company, former or present, out of assets of the Company in
relation to charges, losses, liabilities, damages and expenses
incurred during the course of their duties, in so far as the law
allows and provided that such indemnity is not available in
circumstances of fraud, wilful misconduct or negligence.
Directors' Fees
The Directors received the following fees during the year under
review, totalling GBP123,000 (2015: GBP176,575):
Director Additional Total fee
Director remuneration for the
fee paid for Total fee period from
for the extra/special for the 22 January
year ended services year 2014 to
31 March GBP GBP 31 March
2016 2015
GBP GBP
Kevin Lyon 60,000 - 60,000 81,500
Patrick
Firth 33,000 - 33,000 49,325
Vic Holmes 30,000 - 30,000 45,750
Aggregate
Fees 123,000 - 123,000 176,575
By order of the Board
Kevin Lyon
Chairman
27 June 2016
Audit Committee Report
The Board is supported by the Audit Committee, which was
established at a meeting of the Board of Directors held on 30 June
2014 and comprises of all of the Directors. Patrick Firth is
Chairman of the Audit Committee. The Chairman of the Board is a
member of the Audit Committee, to enable his greater understanding
of the issues facing the Company. The Board has considered the
composition of the Audit Committee and is satisfied it has
sufficient recent and relevant skills and experience. All three
Directors are qualified accountants.
Role and Responsibilities
The primary role and responsibilities of the Audit Committee are
clearly defined in the Audit Committee's terms of reference,
available at the registered office and the Company's website,
including:
-- Monitoring the integrity of the financial statements of the
Company and any formal announcements relating to the Company's
financial performance, and reviewing significant financial
reporting judgements contained within said statements and
announcements;
-- Reviewing the Company's internal financial controls, and the
Company's internal control and risk management systems;
-- Monitoring and reviewing the independence, objectivity and
effectiveness of the external auditors, taking into consideration
relevant regulatory and professional requirements;
-- Making recommendations to the Board in relation to the
appointment, re-appointment and removal of the external auditors
and approving their remuneration and terms of engagement, which in
turn can be placed before the shareholders for their approval at
the Annual General Meeting;
-- Developing and implementing the Company's policy on the
provision of non-audit services by the external Auditors, as
appropriate;
-- Reviewing the arrangements in place to enable employees of
the Investment Manager or any other adviser to, in confidence,
raise concerns about possible improprieties in matters of financial
reporting or other matters insofar as they may affect the
Company;
-- Providing advice to the Board on whether the annual financial
statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company's performance, business model and strategy;
-- take into account the new provision of going concern basis of
accounting that Directors should state whether they considered it
appropriate to adopt the going concern basis of accounting in
preparing the annual and half-yearly financial statements, and to
identify any material uncertainties to the Company's ability to
continue to adopt this approach over a period of at least twelve
months from the date of approval of the financial statements;
-- take into account the recommendation of providing a longer
term viability statement in respect of a broader assessment of the
Company's long-term solvency and liquidity. Such statement to
explain in the annual report how Directors have assessed the
prospects of the Company, over what period and why they consider
that period to be appropriate and whether they have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of
assessment, and
-- Reporting to the Board on how the Committee discharged all
relevant responsibilities at each Board meeting.
The Committee met three times during the year under review;
individual attendance of Directors is outlined in Corporate
Governance. The main matters discussed at those meetings were:
-- Establish the audit requirements for the Company;
-- Terms of Reference for the Committee to present to the Board for consideration;
-- Detailed review of the Half Year Report and Accounts and
recommendation for approval by the Board;
-- Review and approval of the interim review plan of the external Auditors;
-- Discussion of reports from the external Auditors following their interim reviews;
-- Review and approval of the annual audit plan of the external Auditors; and
-- Review of the Company's key risks and internal controls.
The Committee has assessed the effectiveness and independence of
the external Auditors following the conclusion of the 31 March 2015
audit process. The Committee has also reviewed and considered the
whistleblowing policy in place for the Investment Adviser and other
service providers, and is satisfied the relevant staff can raise
concerns in confidence about possible improprieties in matters of
financial reporting or other matters insofar as they may affect the
Company.
Significant Issues in Relation to the Financial Statements
Following discussions with the Investment Manager, Investment
Adviser and the external Auditors, the Committee determined that
the key risks connected with the preparation of the financial
statements of the Company related to:
-- Management override of controls - in line with the
requirements of International Standards on Auditing ("ISA") issued
by the International Auditing and Assurance Standards Board;
-- Existence of investments - existence of the assets provides a
higher inherent risk given the nature of purchasing a solar farm.
There is an initial commitment to purchase while the solar farm is
under construction, however final payment is only made when the
asset is fully operational.
-- Investment Valuation - valuation of the assets provides a
higher inherent risk as the valuations are based upon models which
require complex and subjective judgements or estimates for inputs
into the model.
Existence of Investments
In conjunction with the auditors, the Committee updated its
understanding and evaluated the internal controls in place for
assessing ownership and existence at the reporting date including
any significant judgements or estimates made.
The Committee has access to and reviews the key transaction
documents as well reviewing the agreements for the commitment to
purchase new solar farms by NextEnergy Solar Holdings Limited (the
UK subsidiary of the Company, or "UK HoldCo"), with particular
focus on initial recognition of the farms as assets of the UK
HoldCo. This included discussion between the Investment Manager and
the Investment Adviser.
For operational assets, the Committee has reviewed transactions
and balances which support the assertions of existence and
ownership at the SPV level and also of the ownership of each SPV to
the UK HoldCo and in turn the UK HoldCo to the Company.
Investment Valuation
The Audit Committee considers, in detail, those assumptions that
are subject to judgement and that have a material impact on the
valuation of the assets. During this process the Audit Committee
challenges the assumptions employed by the Investment Adviser and
Investment Manager monitors the changes in these assumptions over
time. The key assumptions include but are not limited to:
-- Inflation rates and other macroeconomic factors
-- Discount rates and other valuation methodologies
-- Operating performance and costs assumptions
-- Power price assumptions
The Investment Manager discusses and agrees valuation
assumptions with the Committee and provides suitable rationale for
changes to the same.
Internal Controls and Risk Management
The Board is ultimately responsible for the Company's systems of
internal control and for reviewing its effectiveness. Under the
Committee's Terms of Reference, responsibility has been delegated
to the Committee for monitoring the Company's internal financial
controls, and the Company's internal control and risk management
systems. The Committee maintains a risk matrix which is reviewed
and, where necessary, amended and updated at each meeting and
reports on any changes to the Board at the next available
opportunity for the Board's consideration.
The Internal Controls and Risk Management process is detailed
more fully in the Corporate Governance Statement.
Internal Audit
The Audit Committee considers at least once a year whether or
not there is a need for an internal audit function. Currently it
does not consider there to be a need for an internal audit
function, given that there are no employees in the Company and all
outsourced functions are with parties who have their own internal
controls and procedures.
Review of External Audit Process Effectiveness
The Audit Committee communicated regularly with the Investment
Manager, Investment Adviser and Administrator to obtain a good
understanding of the progress and efficiency of the audit process.
Similarly, feedback in relation to the efficacy of the Investment
Manager, Investment Adviser and other service providers in
performing their relevant roles was sought from relevant involved
parties, including the audit partner and team. The external Auditor
is invited to attend the Audit Committee meetings at which the
semi-annual and annual accounts are considered, and meetings are
also held with the Auditors to meet and discuss any matters with
the Audit Committee members without the presence of the Investment
Adviser, Investment Manager or the Administrator.
The Committee conducted a review of PwC CI, as external Auditors
following the conclusion of the previous period end audit process
and in doing considered:
-- The quality of service, the Auditors' specialist expertise,
the level of audit fee, identification and resolution of any areas
of accounting judgement, and quality and timeliness of papers
analysing these judgements;
-- Review of the audit plan presented by the Auditors, and when
tabled, the final audit findings report;
-- Meeting with the auditors regularly to discuss the various papers and reports in detail;
-- Furthermore, interviews of appropriate staff in the
Investment Manager, Investment Adviser and Administrator to receive
feedback on the effectiveness of the audit process from their
perspective; and
-- Compilation of a checklist with which to provide a means to
objectively assess the Auditors' performance.
The Audit Committee is satisfied with PwC CI's effectiveness and
independence as Auditor having considered the degree of diligence
and professional scepticism demonstrated by them. Having carried
out the review described above and having satisfied itself that the
Auditor remains independent and effective, the Audit Committee has
recommended to the Board that PwC CI be reappointed as Auditor for
the year ending 31 March 2017.
Auditors' Tenure and Objectivity
The Company intends to develop an audit tender policy which the
Board will consider after five years from the appointment date of
the current auditor. A review of policy will therefore occur in the
second half of 2019, subject to regular reviews by the Board and
shareholder approval.
The Company's current Auditors, PwC CI, have acted in this
capacity since the Company's inaugural meeting on 22 January 2014.
As detailed above the Committee will review the Auditors'
performance following the conclusion of the year end audit process
and will continue to do so on a regular basis to ensure the Company
receives an optimal service. Subject to annual appointment by
shareholder approval at the Annual General Meeting, the appointment
of the auditor is formally reviewed by the Audit Committee on an
annual basis. The auditors are required to rotate the audit partner
every five years, and the current partner has been in place since
the Company's launch.
PwC CI will regularly update the Audit Committee on the rotation
of audit partners, staff, level of fees, details of any
relationships between the Auditors, the Company and its investment
portfolio, and also provides overall confirmation of its
independence and objectivity. There are no contractual obligations
that restrict the Company's choice of Auditors.
During the year ended 31 March 2016, PricewaterhouseCoopers LLP
("PwC UK") has not provided any material non-audit services to the
Company.
Conclusions in Respect of the Financial Statements
The production and the audit of the Company's Annual Report and
Audited Financial Statements is a comprehensive process requiring
input from a number of different contributors. In order to reach a
conclusion on whether the Company's Annual Report and Audited
Financial Statements are fair, balanced and understandable, as
required under the UK Corporate Governance Code dated September
2014, the Board has requested that the Audit Committee advise on
whether it considers that the Annual Report and Audited Financial
Statements fulfils these requirements as detailed in the
Committee's terms of reference. In outlining its advice, the Audit
Committee has considered the following:
-- The comprehensive documentation that is in place outlining
the controls in place for the production of the annual report,
including the verification processes in place to confirm the
factual content;
-- The detailed reviews undertaken at various stages of the
production process by the Investment Manager, Investment Adviser,
Administrator, Auditor and the Audit Committee that are intended to
ensure consistency and overall balance;
-- Controls enforced by the Investment Manager, Investment
Adviser, Administrator and other third party service providers to
ensure complete and accurate financial records and security of the
Company's assets;
-- The existence and content of a satisfactory control report
produced by the Ipes Group that has been reviewed and reported upon
by a reputable audit firm to verify the effectiveness of the
internal controls of the Administrator, such as the Audit and
Assurance Faculty (AAF) Report.
As a result of the work performed, the Audit Committee has
concluded and reported to the Board that the Annual Report and
Audited Financial Statements for the year ended 31 March 2016,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
performance, business model and strategy. The Board's conclusions
in this respect are set out in the Responsibility Statement of the
Directors.
Patrick Firth
Audit Committee chairman
27 June 2016
Independent Auditors' Report to the Members of NextEnergy Solar
Fund Limited
Report on the Financial Statements
We have audited the accompanying financial statements of
NextEnergy Solar Fund Limited ("the Company") which comprise the
statement of financial position as of 31 March 2016 and the
statement of comprehensive income, the statement of changes in
equity and the statement of cash flows for the year then ended and
a summary of significant accounting policies and other explanatory
information.
Directors' Responsibility for the Financial Statements
The Directors are responsible for the preparation of financial
statements that give a true and fair view in accordance with
International Financial Reporting Standards and with the
requirements of Guernsey law. The Directors are also responsible
for such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with International Standards on Auditing. Those Standards require
that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditors' judgement, including
the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements give a true and fair
view of the financial position of the Company as of 31 March 2016,
and of its financial performance and its cash flows for the year
then ended in accordance with International Financial Reporting
Standards and have been properly prepared in accordance with the
requirements of The Companies (Guernsey) Law, 2008.
Report on other Legal and Regulatory Requirements
We read the other information contained in the Annual Report and
consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the
financial statements. The other information comprises only the
Report of the Directors, Highlights, Corporate Summary, Chairman's
Statement, Strategic Report, Corporate Social Responsibility,
Investment Manager's Report, Financial Review, Corporate
Governance, Biographical Information of the Directors, Statement of
Directors' Responsibilities, Directors' Remuneration Report, Audit
Committee Report, Corporate Information and Notice of Annual
General Meeting.
In our opinion the information given in the Report of the
Directors is consistent with the financial statements.
This report, including the opinion, has been prepared for and
only for the Company's members as a body in accordance with Section
262 of The Companies (Guernsey) Law, 2008 and for no other purpose.
We do not, in giving this opinion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
which we are required to review under the Listing Rules:
-- the directors' statement in relation to going concern. As
noted in the directors' statement, the directors have concluded
that it is appropriate to adopt the going concern basis in
preparing the financial statements. The going concern basis
presumes that the Company has adequate resources to remain in
operation, and that the directors intend it to do so, for at least
one year from the date the financial statements were signed. As
part of our audit we have concluded that the directors' use of the
going concern basis is appropriate. However, because not all future
events or conditions can be predicted, these statements are not a
guarantee as to the Company's ability to continue as a going
concern;
-- the directors' statement that they have carried out a robust
assessment of the principal risks facing the Company and the
directors' statement in relation to the longer-term viability of
the Company. Our review was substantially less in scope than an
audit and only consisted of making inquiries and considering the
directors' process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether the statements
are consistent with the knowledge acquired by us in the course of
performing our audit;
-- the part of the Corporate Governance Statement relating to
the Company's compliance with the ten further provisions of the UK
Corporate Governance Code specified for our review; and
-- certain elements of the report to shareholders by the Board on directors' remuneration.
Evelyn Brady
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants and Recognised Auditor
Guernsey, Channel Islands
27 June 2016
Financial Statements
Statement of Comprehensive Income
For the year ended 31 March 2016
1 April 2015 20 December
to 2013 to 31
31 March March 2015
Notes 2016 (GBP) (GBP)
Income
Investment income 24,046,160 -
Net changes in fair value
of financial assets at
fair value through profit
or loss 5 (18,503,991) 10,570,553
Total net income 5,542,169 10,570,553
Expenditure
Management fees 15 2,615,662 1,210,566
Legal and professional
fees 490,324 515,130
Administration fees 201,152 152,500
Directors' fees 18 123,000 176,575
Audit fees 14 75,000 50,000
Regulatory fees 72,652 70,638
Insurance 31,194 14,134
Sundry expenses 6,595 73,375
Marketing and Advertising - 30,917
Total expenses 3,615,579 2,293,835
Operating profit 1,926,590 8,276,718
Finance income 108,111 257,931
Profit and comprehensive
income for the year/period 2,034,701 8,534,649
Earnings per share 0.78p 9.13p
There were no potentially dilutive instruments in issue at 31
March 2016.
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 financial
statements.
Statement of Financial Position
As at 31 March 2016
Notes 2016 (GBP) 2015 (GBP)
Non-current assets
Investments 5,12 315,466,679 158,160,872
Total non-current assets 315,466,679 158,160,872
Current assets
Cash and cash equivalents 5,937,663 90,217,126
Trade and other receivables 13,000 69,482
Total current assets 5,950,663 90,286,608
Total assets 321,417,342 248,447,480
Current liabilities
Trade and other payables 137,825 88,942
Investment payable 6 47,468,639 -
Total current liabilities 47,606,464 88,942
Net assets 273,810,878 248,358,538
Equity
Share Capital and Premium 8 314,956,625 244,459,639
Treasury shares 8 (32,084,000) -
Reserves (9,061,747) 3,898,899
Total equity attributable
to shareholders 273,810,878 248,358,538
Net assets per share -
(pence) 9 98.5p 103.3p
The accompanying Notes are an integral part of these financial
statements.
The financial statements were approved and authorised for issue
by the Board of Directors on 27 June 2016 and signed on its behalf
by:
Patrick Firth Vic Holmes
Director Director
Statement of Changes in Equity
For the year ended 31 March 2016
Share
Capital Treasury Retained Total
and Premium shares earnings Equity
(GBP) (GBP) (GBP) (GBP)
For the period 1 April
2015 to 31 March 2016
Shareholders' equity
at 1 April 2015 244,459,639 - 3,898,899 248,358,538
Profit and comprehensive
income for the year - - 2,034,701 2,034,701
Shares issued 70,496,986 (32,084,000) - 38,412,986
Dividends paid - - (14,995,347) (14,995,347)
Shareholders' equity
at 31 March 2016 314,956,625 (32,084,000) (9,061,747) 273,810,878
For the period 20
December 2013 to 31
March 2015
Shareholders' equity
at 20 December 2013 - - - -
Profit and comprehensive
income for the period - - 8,534,649 8,534,649
Shares issued 244,459,639 - - 244,459,639
Dividends paid - - (4,635,750) (4,635,750)
Shareholders' equity
at 31 March 2015 244,459,639 - 3,898,899 248,358,538
The accompanying Notes are an integral part of these financial
statements.
Statement of Cash Flows
For the period ended 31 March 2016
1 April 20 December
2015 to 2013
to 31
31 March March
2016 2015
Cash flows from operating
activities Notes (GBP) (GBP)
Profit and comprehensive
income for the year/period 2,034,701 8,534,649
Adjustments for:
Purchase of investments (128,341,159) (147,590,319)
Change in fair value on investments 5 18,503,991 (10,570,553)
Finance income (108,111) (257,931)
Operating cash flows before
movements in working capital (107,910,578) (149,884,154)
Changes in working capital
Movement in trade receivables 56,482 (69,482)
Movement in trade payables 48,883 88,942
Net cash used in operating
activities (107,805,213) (149,864,694)
Cash flows from investing
activities
Finance income 108,111 257,931
Net cash generated from investing
activities 108,111 257,931
Cash flows from financing
activities
Proceeds from issue of shares 8 38,412,986 244,459,639
Dividends paid 10 (14,995,347) (4,635,750)
Net cash generated from financing
activities 23,417,639 239,823,889
Net movement in cash and
cash equivalents during year/period (84,279,463) 90,217,126
Cash and cash equivalents
at the beginning of the year/period 90,217,126 -
Cash and cash equivalents
at the end of the year/period 5,937,663 90,217,126
The accompanying Notes are an integral part of these financial
statements.
Notes to the Audited Financial Statements
For the year ended 31 March 2016
1. General Information
NextEnergy Solar Fund Limited ("the Company") was incorporated
with limited liability in Guernsey under the Companies (Guernsey)
Law, 2008, as amended, on 20 December 2013 with registered number
57739, and is regulated by the GFSC as a registered closed-ended
investment company. The registered office and principal place of
business of the Company is 1, Royal Plaza, Royal Avenue, St Peter
Port, Guernsey, Channel Islands, GY1 2HL.
On 16 April 2014, the Company announced the results of its
initial public offering, which raised net proceeds of GBP85.6
million. The Company's ordinary shares were admitted to the premium
segment of the UK Listing Authority's Official List and to trading
on the Main Market of the London Stock Exchange as part of its
initial public offering which completed on 25 April 2014.
Subsequent fund raisings also took place on the 19 November 2014
raising GBP94.0m, 19 December 2014 raising GBP4.1m, 27 February
2015 raising GBP60.7m and 30 September 2015 raising GBP38.4m,
increasing total equity to GBP282.9m as at 31 March 2016 (31 March
2015: GBP244.4m). Details can be found in note 8. Treasury Shares
of GBP32.1m were also raised on 6 November 2015.
The Company seeks to provide investors with a sustainable and
attractive dividend that increases in line with retail price index
over the long-term by investing in a diversified portfolio of solar
Photovoltaic ("PV") assets that are located in the UK. In addition,
the Company seeks to provide investors with an element of capital
growth through the reinvestment of net cash generated in excess of
the target dividend in accordance with the Company's investment
policy.
The Company currently makes its investments through holding
companies and Special Purpose Vehicles, which are wholly-owned by
the Company. The Company controls the investment policy of each of
the holding companies and its wholly-owned Special Purpose Vehicles
in order to ensure that each will act in a manner consistent with
the investment policy of the Company.
The Company has appointed NextEnergy Capital IM Limited as its
Investment Manager ("the 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 GFSC and is a member of the NEC Group. The
Investment Manager is licensed and regulated by the GFSC and will
act as the Alternative Investment Fund Manager of the Company.
The Investment Manager has appointed NextEnergy Capital Limited
as its Investment Adviser ("the Investment Adviser") pursuant to
the Investment Advisory Agreement. The Investment Adviser is a
company incorporated in England with registered number 05975223 and
is authorised and regulated by the FCA.
The financial statements are presented in pounds sterling
because that is the currency of the primary economic environment in
which the Company operates.
2. Significant accounting policies
a) Basis of preparation
The financial statements, which give a true and fair view, have
been prepared on a going concern basis in accordance with
International Financial Reporting Standards ("IFRS").
The financial statements have been prepared on the historical
cost basis, except for the revaluation of certain investments and
financial instruments. Historical cost is generally based on the
fair value of the consideration given in exchange for the assets.
The principal accounting policies adopted are set out below. These
policies have been consistently applied.
Fair value is the price that would be received on sale of an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an
asset or liability, the Company takes into account the
characteristics of the asset or liability if market participants
would take those characteristics into account when pricing the
asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in these financial
statements is determined on such a basis.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based on the
degree to which inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety which are described as follows:
Level 1 inputs are quoted prices in active markets for identical
assets or liabilities that the Company can access at the
measurement date
Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly
Level 3 inputs are unobservable inputs for the asset or
liability.
b) Going concern
The Directors have reviewed the current and projected financial
position of the Company making reasonable assumptions about future
performance. The key areas reviewed were:
-- Timing of future investment transactions
-- Expenditure commitments
-- Forecast income and cashflows
The Company has cash and short-term deposits as well as
projected positive income streams and an available credit facility
(see note 19) and as a consequence the Directors have, at the time
of approving the financial statements, a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future. Accordingly they have adopted
the going concern basis of preparation in preparing the financial
statements.
c) Basis of non-consolidation
The Company has 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
the Statement of Comprehensive Income rather than consolidate them.
There are four Holding Companies, NextEnergy Solar Holding Limited,
NextEnergy Solar Holding II Limited, NextEnergy Solar Holding III
Limited and NextEnergy Solar Holding IV Limited, collectively the
"HoldCos". The HoldCos are also direct investment entities and as
described under IFRS 10 value their investments at fair value.
Characteristics of an investment entity
Under the definition of an investment entity, as set out in the
standard, the entity should satisfy all three of the following
tests:
I. Obtains funds from one or more investors for the purpose of
providing those investors with investment management services;
and
II. 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
III. Measure and evaluate 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:
I. the Company has multiple investors and obtains funds from a
diverse group of shareholders who would otherwise not have access
individually to investing in solar energy infrastructure due to
high barriers to entry and capital requirements;
II. the Company's purpose is to invest funds for both investment
income and capital appreciation. The Company's investments have
indefinite lives however the underlying assets do not have an
unlimited life and therefore minimal residual value and therefore
will not be held indefinitely; and
III. the Company measures and evaluates the performance of all
of its investments on a fair value basis which is the most relevant
for investors in the Company. Management use fair value information
as a primary measurement to evaluate the performance of all of the
investments and in decision making.
The Directors are of the opinion that the Company has all the
typical characteristics of an investment entity and therefore meet
the definition set out in IFRS 10.
The Directors believe the treatment outlined above provides the
most relevant information to investors.
d) Taxation
Under the current system of taxation in Guernsey, the Company is
exempt from paying taxes on income, profit or capital gains.
Therefore, income from investments in UK solar PV plants is not
subject to any further tax in Guernsey, although these investments
are subject to tax in the UK.
e) Segmental reporting
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 power, in a single economic
environment, being the United Kingdom. The financial information
used by the Chief Operating Decision Maker to manage the Company
presents the business as a single segment.
f) Dividends
Dividends to the Company's shareholders are recognised when they
become legally payable. In the case of interim dividends, this is
when paid. In the case of final dividends, this is when approved at
the Annual General Meeting.
g) Investment Income
Investment income from financial assets at fair value through
profit or loss is recognised in the Statement of Comprehensive
Income within investment income when the Company's right to receive
payments is established.
Finance income comprises interest earned on cash held on
deposit. Finance income is recognised on an accruals basis.
h) Expenses
All expenses are accounted for on an accruals basis.
i) Cash and cash equivalents
Cash and cash equivalents includes deposits held at call with
banks and other short-term deposits with original maturities of
three months or less.
j) Trade and other payables
Trade and other payables are initially recognised at fair value,
and subsequently where necessary re-measured at amortised cost
using the effective interest method.
k) Financial instruments
Financial assets and liabilities are recognised in the Company's
Statement of Financial Position when the Company becomes a party to
the contractual provisions of the instrument. Financial assets are
derecognised when the contractual rights to the cash flows from the
instrument expire or the asset is transferred and the transfer
qualifies for derecognition in accordance with IAS 39 Financial
instruments: Recognition and measurement.
Investments
Investments are recognised when the Company has control of the
asset. Control is assessed considering the purpose and design of
the investments including any options to acquire the investments
where these options are substantive. The options are assessed for
factors including the exercise price and the incentives for
exercise. Investments are designated upon initial recognition to be
accounted for at fair value through profit or loss in accordance
with IFRS 13. After initial recognition, investments at fair value
through profit or loss are measured at fair value with changes
recognised in the Statement of Comprehensive Income.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the Statement of Financial Position when there is a
legally enforceable right to offset the recognised amounts and
there is an intention to settle on a net basis or realise the asset
and settle the liability simultaneously.
m) Share capital and share premium
Ordinary shares are classified as equity. Costs directly
attributable to the issue of new shares (that would have been
avoided if there had not been a new issue of new shares) are
written-off against the value of the ordinary share premium.
3. New and revised standards
The following accounting standards and interpretations which
have not been applied in these financial statements were in issue
but not yet effective:
IFRS 7 (amendments) Financial Instrument: Disclosure
IFRS 9 Financial Instruments (revised,
early adoption permitted)
IFRS 10 and IAS 28 Sale or Contribution of Assets
between an Investor and its Associate
or Joint Venture
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IAS 1 Disclosure Initiative
IAS 7 Additional disclosure of changes
in liabilities arising from financial
activities
IAS 16 and IAS 38 Clarification of Acceptable Methods
of Depreciation and Amortisation
IAS 27 Equity Method in Separate Financial
Statement
The Directors do not expect that the adoption of the accounting
standards, amendments and interpretations listed above will have a
material impact on the financial statements of the Company in
future periods.
4. Critical accounting judgements and key sources of estimation
uncertainty
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) Investments at fair value through profit or loss
The Company's investments are measured at fair value for
financial reporting purposes. The Board of Directors has appointed
the Investment Manager to produce investment valuations based upon
projected future cashflows. These valuations are reviewed and
approved by the Board. The investments are held through Special
Purpose Vehicles, a list of subsidiaries is included in note 7.
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 investments at fair value through profit or loss, whose fair
values include the use of Level 3 inputs, are valued by discounting
future cash flows from investments to the Company at a discount
rate when the assets are operational. The discount rate applied in
the 31 March 2016 valuation was 7.5% (31 March 2015: 7.5%). 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. Investments in solar PV plants 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.
There are other critical accounting estimates (discussed in note
12), Level 3 financial instruments.
Level 3 investments amount to GBP315,466,679 (31 March 2015:
GBP157,686,548) and consist of 33 investments in solar PV plants
(held indirectly through the HoldCo's) (31 March 2015: 14 (held
indirectly through one HoldCo)), all of which have been valued on a
look through basis (except for those solar plants not yet
operational) based on the discounted cash flows of the solar PV
plants and the residual value of net assets at the HoldCo level.
Level 3 valuations are reviewed regularly by the Investment Manager
who reports to the Board of Directors on a periodic basis. The
Board considers the appropriateness of the valuation model and
inputs, as well as the valuation result.
b) Significant judgement: consolidation of entities
The Directors have concluded that the Group controls Ellough
Phase 2, Green Farm, Hall Farm and project Radius (Emberton, Bottom
Plain, Berwick, Great Wilbreham and Branston) even though it does
not hold 100% ownership of these entities as at 31 March 2016. This
is because the Group has contracted to acquire these investments
before year end and has subsequently completed on these
acquisitions post year end. They are therefore included within
investments as at year end.
The Company, under the Investment Entity Exemption rule, holds
its investments at fair value.
The table below sets out information about significant
unobservable inputs used at 31 March 2016 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
Unlisted investments reconcile to the Closing Investment Portfolio
Value as per the Investments table in note 5.
Description Fair value Valuation Unobservable Input Sensitivity
at 31 March technique input value to change
2016 (GBP) in significant
unobservable
inputs
Discounted The estimated
cash flows fair value
based on would
underlying increase
valuation if the
of residual discount
assets rate was
at the lower
Unlisted four hold Discount and vice
investments 363,529,002 cos. rate 7.50% versa.
Investments 18,804,253 Cost n/a n/a n/a
held at cost
Residual (66,866,576) Adjusted n/a n/a n/a
value of net asset
net assets value attributable
at HoldCo's to the
Company
at fair
value
Total 315,466,679 n/a n/a n/a
5. Investments
The Company owns the Investment Portfolio through its
investments in NextEnergy Solar Holdings Limited, NextEnergy Solar
Holdings II Limited, NextEnergy Solar Holdings III Limited and
NextEnergy Solar Holdings IV Limited. This is comprised of the
Investment Portfolio and the Residual Net Assets of the Holding
Companies. The Total Investments at fair value are recorded under
Non-Current Assets in the Statement of Financial Position.
Year ended Period ended
31 March 31 March
Total Investments 2016 (GBP) 2015 (GBP)
Brought forward cost of investments 147,590,319 -
Total investment acquired in the
period 175,809,798 147,590,319
Carried forward cost of investments 323,400,117 147,590,319
Brought forward unrealised gains/(losses)
on valuation 10,570,553 -
Movement in unrealised gains on
valuation (18,503,991) 10,570,553
Carried forward unrealised gains/(losses)
on valuation (7,933,438) 10,570,553
Total Investments at fair value 315,466,679 158,160,872
The total change in the value of the investments in the Holding
Companies are recorded through profit and loss in the Statement of
Comprehensive Income.
6. Investment payable
As at 31 As at 31
March 2016 March 2015
(GBP) (GBP)
Project Radius investment payable (47,468,639) -
Total investment payable (47,468,639) -
On 31 March 2016 the Company agreed the purchase of Project
Radius. The acquisition is part funded by a debt facility arranged
by Macquarie Infrastructure Debt Investment Solutions (MIDIS) on
behalf of NextEnergy Solar Holding IV Limited for GBP55.0m. As at
31 March 2016 the facility was undrawn pending completion of the
acquisition.
7. Subsidiaries
The Company holds investments through subsidiary companies which
have not been consolidated as a result of the adoption of IFRS 10:
Investment entities exemption to consolidation. Below is the legal
entity name for the Holding Companies and the remaining legal
entities owned indirectly through the investment in the holding
companies. The country of incorporation is also their principal
place of business.
Ownership Ownership
Direct at at
Country or Indirect Principal 31 March 31 March
Name of Incorporation Holding Activity 2016 2015
Berwick Solar Park
Ltd UK Indirect SPV 100% 0%
BL Solar 2 Limited
UK UK Indirect SPV 100% 100%
Bottom Plain Solar
Park UK Indirect SPV 100% 0%
Bowerhouse Solar
Limited UK Indirect SPV 100% 0%
Branston Solar
Park Ltd UK Indirect SPV 100% 0%
Ellough Solar 2
Ltd UK Indirect SPV 0% 0%
Emberton Solar
Park Ltd UK Indirect SPV 100% 0%
Empyreal Energy
Ltd UK Indirect SPV 0% 0%
ESF Llwyndu Ltd UK Indirect SPV 100% 0%
Fenland Renewables
Ltd UK Indirect SPV 100% 0%
Glebe Farm SPV
Limited UK Indirect SPV 100% 0%
Glorious Energy
Limited UK Indirect SPV 100% 100%
Great Wilbraham
Solar Park Ltd UK Indirect SPV 100% 0%
Green End Renewables
Ltd UK Indirect SPV 100% 0%
Greenfields (A)
Limited UK Indirect SPV 100% 0%
Hanwha UK Solar
1 Ltd UK Indirect SPV 100% 0%
NESF - Ellough
LTD UK Indirect SPV 100% 100%
NextEnergy Solar
Holding II Limited UK Direct HoldCo 100% 0%
NextEnergy Solar
Holding III Limited UK Direct HoldCo 100% 0%
NextEnergy Solar
Holding IV Limited UK Direct HoldCo 100% 0%
NextEnergy Solar
Holding Limited UK Direct HoldCo 100% 100%
NextPower Ellough
LLP UK Indirect SPV 100% 100%
NextPower Gover
Farm Ltd UK Indirect SPV 100% 100%
NextPower Higher
Hatherleigh Ltd UK Indirect SPV 100% 100%
NextPower Radius
Ltd UK Indirect SPV 100% 0%
NextPower Shacks
Barn Ltd UK Indirect SPV 100% 100%
North Farm Solar
Park Limited UK Indirect SPV 100% 0%
Push Energy (Birch)
Ltd UK Indirect SPV 100% 0%
Push Energy (Boxted
Airfield) Ltd UK Indirect SPV 100% 100%
Push Energy (Croydon)
Ltd UK Indirect SPV 100% 100%
Push Energy (Decoy)
Ltd UK Indirect SPV 100% 0%
Push Energy (Hall)
Ltd UK Indirect SPV 0% 0%
Push Energy (Langenhoe)
Ltd UK Indirect SPV 100% 100%
SSB Condover Ltd UK Indirect SPV 100% 0%
ST Solarinvest
Devon 1 Limited UK Indirect SPV 100% 0%
Sunglow Power Limited UK Indirect SPV 100% 100%
Thurlestone-Leicester
Solar Ltd UK Indirect SPV 100% 0%
Tower Hill Farm
Renewables Ltd UK Indirect SPV 100% 0%
Trowbridge PV Ltd UK Indirect SPV 100% 0%
Wellingborough
Solar Limited UK Indirect SPV 100% 0%
8. Share capital and reserves
Share issuance Number Gross Issue Share
of amount Costs premium
shares raised (GBP) (GBP)
(GBP)
Issued on 20 December
2013 1 1 - 1
Issued on 25 April
2014 85,600,000 85,600,000 - 85,600,000
Cancellation of founder's
share on 24 October
2014 (1) (1) - (1)
Issued on 19 November
2014 91,000,000 95,459,000 (1,399,246) 94,059,754
Issued on 19 December
2014 4,000,000 4,120,000 (43,565) 4,076,435
Issued on 27 February
2015 59,750,000 61,405,075 (681,625) 60,723,450
Total issued at 31
March 2015 240,350,000 246,584,075 (2,124,436) 244,459,639
Issued on 30 September
2015 37,607,105 38,848,139 (435,153) 38,412,986
Issued on 6 November
2015 30,850,000 32,084,000 - 32,084,000
Total issued at 31
March 2016 308,807,105 317,516,214 (2,559,589) 314,956,625
The Company currently has one class of ordinary share in issue.
All the holders of the ordinary shares, excluding Treasury Shares,
which total 277,957,105 are entitled to receive dividends as
declared from time to time and are entitled to one vote per share
at meetings of the Company.
Treasury shares
On 6 November 2015 the Company issued 30,850,000 new ordinary
shares which the Company purchased at a price of 104.0p per share.
The shares purchased have been placed in treasury. The Treasury
shares are not entitled to receive dividends and do not hold any
voting rights.
Retained reserves
Retained reserves comprise the retained earnings as detailed in
the Statement of Changes in Equity.
9. Earnings per share
Year ended Period
31 March ended
2016 31 March
2015
Profit and comprehensive income
for the year/period (GBP) 2,034,701 8,534,649
Weighted average number of ordinary
shares 259,256,304 93,525,375
Earnings per ordinary share - pence 0.78p 9.13p
10. Dividends
Year ended Period
31 March ended
Amounts recognised as distributions 2016 (GBP) 31 March
to equity holders: 2015 (GBP)
Interim dividend for the period
ended 30 September 2014 of 2.625p
per share, paid 17 December 2014 - 4,635,750
Interim dividend for the period
ended 31 March 2015 of 2.625p per
share, paid on 30 July 2015 6,309,188 -
Interim dividend for the period
ended 30 September 2015 of 3.125p
per share, paid on 18 December 2016 8,686,159 -
Total 14,995,347 4,635,750
11. Net assets per ordinary share
As at As at
31 March 31 March
2016 2015
Shareholders' equity (GBP) 273,810,878 248,358,538
Number of ordinary shares (excluding
Treasury shares) 277,957,105 240,350,000
Net assets per ordinary share -
pence 98.5p 103.3p
12. Financial instruments
Capital management
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
shareholders. In accordance with the Company's investment policy,
the Company's principal use of cash (including the proceeds of the
IPO) has been to fund investments as well as ongoing operational
expenses.
The Board, with the assistance of the Investment Manager,
monitors and reviews the broad structure of the Company's capital
on an ongoing basis. The capital structure of the Company consists
entirely of equity (comprising issued capital, reserves and
retained earnings).
The Company is not subject to any externally imposed capital
requirements.
Financial risk management objectives
The Board, with the assistance of the Investment Manager,
monitors and manages the financial risks relating to the operations
of the Company through internal risk reports which analyse
exposures by degree and magnitude of risk. These risks include
market risk (including price risk and currency risk), credit risk
and liquidity risk. The Company has minimal interest rate risk.
Market risk
The value of the investments held by the Company is affected by
the discount rate applied to the expected future cash flows and as
such may vary with movements in interest rates, inflation, power
prices, market prices and competition for these assets.
Currency risk
The Company operates and invests solely in the UK and therefore
is not exposed to currency risk as all assets and liabilities are
in pounds sterling, the Company's functional and presentational
currency.
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in a financial loss to the
Company.
The Company does not have any significant credit risk exposure
to any single counterparty in relation to trade and other
receivables. On-going credit evaluation is performed on the
financial condition of accounts receivable. As at 31 March 2016
there were no receivables considered impaired.
At investment level, the credit risk relating to significant
counterparties is reviewed on a regular basis and potential
adjustments to the discount rate are considered to recognise
changes to these risks where applicable.
The Company maintains its cash and cash equivalents across two
separate banks to diversify credit risk. These are subject to the
Company's credit monitoring policies including the monitoring of
the credit ratings issued by recognised credit rating agencies.
Short
Credit term Total
rating fixed as at
Standard Cash deposits 31 March
31 March 2016 & Poor's (GBP) (GBP) 2016 (GBP)
Long -
A-
Short
Barclays Bank PLC - A-2 4,621,568 - 4,621,568
Long -
A
Short
Lloyds Bank PLC - A-1 1,316,095 - 1,316,095
Total 5,937,663 - 5,937,663
Credit Cash Short Total
rating term as at
Standard (GBP) fixed 31 March
& Poor's deposits 2015
31 March 2015 (GBP) (GBP)
Long -
A-
Short
Barclays Bank PLC - A-2 7,682,146 81,226,000 88,908,146
Long -
A
Short
Lloyds Bank PLC - A-1 1,308,980 1,308,980
Total 8,991,126 81,226,000 90,217,126
Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they fall due. The Board of
Directors has established an appropriate liquidity risk management
framework for the management of the Company's short-, medium- and
long-term funding and liquidity management requirements. The
Company manages liquidity risk by maintaining adequate reserves by
monitoring forecast and actual cash flows and by matching the
maturity profiles of assets and liabilities.
The table below 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.
Between Between
Up to 3 and 1 and
3 months 12 months 5 years Total
31 March 2016 (GBP) (GBP) (GBP) (GBP)
Assets
Cash and cash equivalents 5,937,663 - - 5,937,663
Trade and other receivables 13,000 - - 13,000
Liabilities
Investment Payable (47,468,639) - - (47,468,639)
Trade and other payables (137,825) - - (137,825)
Total (41,655,801) - - (41,655,801)
Up to 12 months 5 years
3 months (GBP) (GBP) Total
31 March 2015 (GBP) (GBP)
Assets
Cash and cash equivalents 90,217,126 - - 90,217,126
Trade and other receivables 69,482 - - 69,482
Liabilities
Trade and other payables (88,942) - - (88,942)
Total 90,197,666 - - 90,197,666
Valuation methodology
The Directors have satisfied themselves as to the methodology
used, the discount rates and key assumptions applied, and the
valuation. All completed investments are at fair value through
profit or loss and are valued using a discounted cash flow
methodology. Investments which are not yet completed are held at
fair value, where the cost of the investment is used as an
appropriate approximation of fair value.
Discount rates
The discount rates used for valuing each renewable
infrastructure investment are based on both the industry discount
rate and on the specific circumstances of each project. The risk
premium takes into account risks and opportunities associated with
the investment earnings.
The discount rates used for valuing the investments in the
Portfolio are as follows:
31 March 31 March
2016 2015
Weighted Average discount rate 7.70% 7.50%
Range of discount rates (unlevered 7.50% to
- levered) 8.50% N/A
A change to the weighted average discount rate by plus or minus
0.5% has the following effect on the valuation.
Total Portfolio
Discount rate +0.5% change value -0.5% change
Fair value at 31 March
2016 (GBP) (14.6m) 382.3m 15.7m
Fair value - percentage
movement (3.8%) 4.1%
Fair value at 31 March
2015 (GBP) (6.3m) 157.7m 6.6m
Fair value - percentage
movement (4.0%) 4.2%
Power price
NEC Group continuously reviews multiple inputs from market
contributors and leading consultants and adjust the inputs to the
power price forecast when a conservative approach is deemed most
appropriate. Current estimates imply an average rate of growth of
electricity prices of approximately 2.3% in real terms and a long
term inflation rate of 2.5%.
A change in the forecast electricity price assumptions by plus
or minus 10% has the following effect on the valuation.
Total Portfolio
Power price -10% change value +10% change
Fair value at 31 March
2016 (GBP) (19.7m) 382.3m 19.6m
Fair value - percentage
movement (5.2%) 5.1%
Fair value at 31 March
2015 (GBP) (7.3m) 157.7m 7.1m
Fair value - percentage
movement (4.6%) 4.5%
Energy generation
The portfolio's aggregate energy generation yield depends on the
combination of solar irradiation and technical performance of the
solar PV plants. The table below shows the sensitivity of the
Portfolio valuation to a sustained increase or decrease of energy
generation by plus or minus 5% over the DCF valuation horizon.
5% Under Total Portfolio
Energy generation performance value 5% Out performance
Fair value at 31 March
2016 (GBP) (24.6m) 382.3m 24.3m
Fair value - percentage
movement (6.4%) 6.4%
Fair value at 31 March
2015 (GBP) (8.8m) 157.7m 8.6m
Fair value - percentage
movement (5.6%) 5.5%
Inflation rates
The Portfolio valuation assumes long-term inflation of 2.50% per
annum for investments (based on UK RPI). A change in the inflation
rate by plus or minus 0.5% has the following effect on the
valuation.
Total Portfolio
Inflation rate -0.5% change value +0.5% change
Fair value at 31 March
2016 (GBP) (16.7m) 382.3m 17.6m
Fair value - percentage
movement (4.4%) 4.6%
Fair value at 31 March
2015 (GBP) (4.2m) 157.7m 4.3m
Fair value - percentage
movement (2.7%) 2.7%
Operating costs
The table below shows the sensitivity of the Portfolio to
changes in operating costs by plus or minus 10% at project company
level.
Total Portfolio
Operating costs +10% change value -10% change
Fair value at 31 March
2016 (GBP) (6.3m) 382.3m 6.3m
Fair value - percentage
movement (1.6%) 1.6%
Fair value at 31 March
2015 (GBP) (1.9m) 157.7m 2.5m
Fair value - percentage
movement (1.2%) 1.6%
Tax rates
The UK corporation tax assumption for the Portfolio valuation
was 20% to 2017, 19% to 2020, and 18% thereafter in accordance with
the UK Government announced reductions.
13. Financial assets and liabilities not measured at fair
value
Cash and cash equivalents are level 1 items on the fair value
hierarchy. Current assets and current liabilities are Level 2 items
on the fair value hierarchy. The carrying value of current assets
and current liabilities approximates fair value as these are
short-term items.
14. Audit fees
The analysis of the auditor's remuneration is as follows:
Year ended Period
31 March 31 March
2016 GBP 2015 (GBP)
Fees payable to the auditor for
the audit of the Company's 31 March
2016 financial statements 75,000 -
Fees payable to the auditor for
the audit of the Company's 31 March
2015 financial statements - 50,000
Total audit fees 75,000 50,000
15. Management fee
The Investment Manager is entitled to receive an annual fee,
accruing daily and calculated on a sliding scale, as follows
below:
-- for the tranche of NAV up to and including GBP200m, 1% of the
Net Asset Value ("NAV") of the Company.
-- for the tranche of NAV above GBP200m and up to and including GBP300m, 0.9% of NAV.
-- for the tranche of NAV above GBP300m, 0.8% of NAV.
For the year ended 31 March 2016 the Company has incurred
GBP2,615,662 in management fees of which GBPnil was outstanding at
31 March 2016. For the period ending 31 March 2015 the Company
incurred GBP1,210,566 in management fees of which GBPnil was
outstanding at 31 March 2015.
16. Related parties
The Investment Manager, NextEnergy Capital IM Limited, is a
related party due to having common key management personnel with
the subsidiaries of the Company. All management fee transactions
with the Investment Manager are disclosed in note 15.
The Investment Adviser, NextEnergy Capital Limited, is a related
party due to sharing common key management personnel with the
subsidiaries of the Company. There are no advisory fee transactions
between the Company and the Investment Adviser.
The Operating Asset Manager, WiseEnergy (GB) Limited, is a
related party due to sharing common key management personnel with
the subsidiaries of the Company. Each of the operating subsidiaries
of the Company entered into an asset management agreement with
WiseEnergy (GB) Limited. The total value of recurring and one-off
services paid to the Operating Asset Manager during the reporting
year amounted to GBP1,449,044 (31 March 2015: GBP167,487).
NextPower Development Limited is a related party due to sharing
common key management personnel with the subsidiaries of the
Company. There are no advisory fee transactions between the
Company, its subsidiaries and NextPower Development Limited.
The Directors of the Company and their shareholding is stated in
the Report of the Directors.
17. Controlling party
In the opinion of the Directors, on the basis of shareholdings
advised to them, the Company has no immediate nor ultimate
controlling party
18. Remuneration of the Directors
The remuneration of the Directors was GBP123,000 for the year
(for the period 20 December 2013 to 31 March 2015: GBP176,575)
which consisted solely of Directors fees.
19. Revolving credit and debt facilities
In September 2014 NextEnergy Solar Holding Limited entered into
a revolving credit facility with Macquarie Bank Limited
(subsequently 40% of which was syndicated to Santander) for up to
GBP31.5m and extended to GBP100.0m in October 2015 (and further
extended to GBP120.0m post year end). As at 31 March 2016 GBP51.5m
of the facility was drawn (31 March 2015: undrawn). As part of the
revolving credit facility agreement Macquarie Bank Limited and
Santander hold a charge over the assets of NextEnergy Solar Holding
Limited.
In July 2015, NextEnergy Solar Holdings II Limited, a subsidiary
of the Company, agreed a loan with NIBC Bank N.V. ("NIBC") for
GBP22.7m ("NIBC Facility").
In January 2016, NextEnergy Solar Holdings III Limited, a
subsidiary of the Company, acquired a portfolio of three operating
plants totalling 53MWp for GBP61.7m which had a long term
fully-amortising project financing of GBP45.4m in place.
On 31 March 2016 NextEnergy Solar Holdings IV Limited, a
subsidiary of the Company agreed the purchase of Project Radius.
The acquisition is part funded by a debt facility entered between
NextEnergy Solar Holding IV Limited and Macquarie Bank Limited for
GBP55.0m. As at 31 March 2016 the facility was undrawn.
Subsequently, on 14th April 2016 the facility was fully drawn down
to complete the acquisition of the Radius portfolio. As part of the
debt facility agreement Macquarie Bank Limited holds a charge over
the assets of NextEnergy Solar Holding Limited.
20. Investment Commitments
The Company has the following commitments to its
investments.
As at As at
31 March 31 March
2016 GBP 2015 (GBP)
Total Commitments - 106,674,782
In the HoldCo, the prior year contingent commitments became
payable when their respective contractual terms were met, usually
when the asset becomes fully operational and accredited. The Board
assesses control including the consideration of the options. Once
an investment is assessed as being controlled it is included in
NextEnergy Solar Fund Limited at fair value with a corresponding
obligation to pay. At the prior year end, the amounts not yet paid
were as above. The fair value of these liabilities approximates the
fair value of the investments and were included in the prior year
calculation as described in note 12.
21. Events after the reporting period
On 14 April 2016 the Company completed the acquisition of the
Radius portfolio. For this investment, the contractual conditions
of its acquisition and financing agreements implied an effective
transfer of ownership at time of exchange on 31 March 2016. As a
result, this investment has been fair valued in the investment
portfolio through the discounted cash flow methodology.
As at 31 March 2016, the Company had announced three other
investments that were operational but for which the relevant
contractual milestones and technical tests had not been achieved
(namely Hall Farm, Green Farm and Ellough Phase II,) and as such
their completion was not deemed imminent. These three investments
have not been fair valued through discounted cash flow methodology
in the investment portfolio and are being held at cost where cost
is an approximation of the fair value at year end. As of the Date
of Distribution of this Annual Report and Audited Financial
Statements, the Investment Manager had completed the acquisition of
Hall Farm on 7 April 2016 and was in the process of completing the
other two investments shortly.
On 17 May 2016, the revolving credit facility was extended from
GBP100m to GBP120m. Other than these, there have been no events to
report on after the end of the reporting period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEWESWFMSEDM
(END) Dow Jones Newswires
June 28, 2016 02:01 ET (06:01 GMT)
Nextenergy Solar (LSE:NESF)
Gráfico Histórico do Ativo
De Jun 2024 até Jul 2024
Nextenergy Solar (LSE:NESF)
Gráfico Histórico do Ativo
De Jul 2023 até Jul 2024