TIDMNESF
RNS Number : 0208L
NextEnergy Solar Fund Limited
11 May 2022
LEI: 213800ZPHCBDDSQH5447
11 May 2022
NextEnergy Solar Fund Limited
("NESF" or the "Company")
Unaudited Net Asset Value and Operational Update
NextEnergy Solar Fund, the specialist solar power renewable
energy investment company, is pleased to announce its unaudited Net
Asset Value ("NAV") as at 31 March 2022, and latest operational
update.
Financial Highlights
-- +9.1p (+8.7%) increase in unaudited NAV per ordinary share to
113.5p (31 December 2021: 104.4p).
-- Increase in unaudited Ordinary shareholders' NAV to GBP669m (31 December 2021: GBP615m).
-- Ordinary shareholders' unaudited Gross Asset Value ("GAV") of
GBP1,150m ( 31 December 2021: GBP1,094m).
-- Ordinary shareholder cumulative total return since IPO of 53.6% ( 31 December 2021: 50%)
-- Gearing (including preference shares) of 42% (31 December 2021: 44%).
-- 5.0% increase in target dividend to 7.52 pence per ordinary
share (FY21/22 7.16 pence per ordinary share).
-- The Company is predicting a dividend cover of between 1.3x
and 1.5x for the current financial year.
Portfolio Highlights
The Company continues to make strong progress with its pipeline,
identifying and delivering on opportunities to drive
diversification through international solar assets and energy
storage, whilst enhancing revenues, and adding NAV accretive
growth.
Energy storage:
-- First stand-alone 50MW battery asset is currently under
construction and is expected to be energised early 2023. The
battery will initially feature a one-hour duration system but has
been prepped for evolution to a two-hour duration in short
order.
-- The Company has sufficient pipeline to complete initial
target spend of GBP100m (250MW) through its joint venture with
Eelpower.
-- The Company has created a co-located battery retrofit
programme across its portfolio. Starting with North Norfolk, an
11MW, 1.6ROC asset located near to Cromer, on which the team have
developed a c.6MW two-hour duration battery which the business
intends to construct through the second half of 2022 into early
2023.
-- An additional four co-located battery locations have been
identified in the existing NESF solar portfolio and moved into
development stage as the team capitalise on the opportunities of
integration of short and ultimately long-duration storage into the
existing portfolio.
UK solar:
-- Construction of Whitecross, a 36MW subsidy free solar farm has begun in Lincolnshire.
-- The Company has also commenced with the grid connection works
and construction mobilisation phase of Hatherden, a 50MW subsidy
free solar farm.
-- These two subsidy free solar farms will complete the
Company's 150MW subsidy free solar allocation, and the Company
anticipates these assets to be energised for early 2023.
International solar:
-- The Company's first co-investment into a 50MW Spanish solar
plant "Agenor", made alongside the NextPower III
ESG international solar fund ("NPIII ESG"), is currently under
construction.
-- The Company has also recently announced its second
international co-investment into Santarem, a 210MW solar portfolio
in Portugal, alongside NPIII ESG which will be constructed across
2022 into 2023.
Net Asset Value
Summary of NAV key drivers for Q1 2022, p/share movement:
NAV at 31 December
2021 104.4p
Power Forecasts +5.6p
Power Purchase Agreements +0.8p
Inflation +3.3p
Operating Result +2.3p
RCF Drawdown -0.6p
Other(1) -2.3p
--------------------------- -------
NAV at 31 March 2022 113.5p
--------------------------- -------
(1) movements in residual value
The main contributor to the change in the Company's NAV during
the quarter was an increase in power price forecast assumptions
(+5.6p per ordinary share) driven by an uplift in the short to
medium term power curves provided by the Company's three
independent advisors. Other changes included updating short-term
inflation assumptions (+3.3p per ordinary share), reflecting the
latest HM Treasury and IMF forecasts, with long-term inflation
assumptions remaining unchanged at 2.25% from 2030 onwards, and an
uplift from power purchase agreements (+0.8p per ordinary
share).
There has been no change to the discount rate assumptions used
to value the assets.
The above NAV numbers are unaudited, and the Company will
publish an audited NAV as at 31 March 2022 as part of its final
results for the year.
Operational Highlights
-- Total installed capacity of 865MW.
-- 99 fully operating solar assets.
-- Portfolio generation outperformance of +1.9% for the
financial year ending 31 March 2022, translating into additional
revenues of c.GBP1.96m.
-- NEC's electricity sales desk continues to successfully manage
risk and opportunistically lock in above forecast power prices in
line with NESF's electricity sales strategy; NESF's hedging
positions (covering 716MW UK portfolio) as at 31 March 2022
were:
o 2022/23: 80%, average fix price of GBP71MWh
o 2023/24: 74%, average fix price of GBP73MWh
o 2024/25: 42%, average fix price of GBP86MWh
-- Irradia ti on levels exceeded expecta ti ons by 3.4% for the year ended 31 March 2022.
Power Sales Strategy
40% of the Company's revenue is generated from selling power
into the short-term power market. NextEnergy Capital's specialist
energy sales desk actively manage short and long duration power
price contracts. In the current environment, the energy sales desk
has enabled the Company to mitigate market price volatility whilst
allowing optimum weighted average price by forward hedging above
forecast prices. The Company also benefits from 60% of its revenue
coming from long term government subsidies that are RPI inflation
linked. Taken in aggregate with the amount of power hedged (as
noted above) this gives exceptional comfort around forward revenue
projections and strengthening dividend cover out over the coming
years.
Inflation
The Company continues to be consistent in its inflation
assumptions, using third party, independent inflation data from the
HM Treasury Forecasts and long-term implied rates from the Bank of
England estimates for its UK assets. For international assets, IMF
forecasts are used.
Future Pipeline :
-- The Company has exclusivity over an attractive pipeline of
GBP350m of domestic and international assets across the solar and
battery space.
-- The Company also continues to explore further co-investment
opportunities with NextPower III ESG, providing an additional pool
of international solar opportunities alongside some of the largest
blue-chip investors in the world.
Available Capital
The Company has capital to pursue its short-term immediate
pipeline, including bringing online it's identified battery storage
projects and completing the construction of its post-subsidy solar.
Out of the total GBP145m Revolving Credit Facilities ("RCF")
available to the Company, GBP49m remains undrawn and available for
deployment. The Company may look to raise capital in the near
future to fund attractive growth opportunities it has identified
and is pursuing.
Establishment of ESG Board Committee
The board is pleased to announce the establishment of the NESF
ESG Committee, which will be chaired by Josephine Bush, who has
extensive ESG experience. The committee will provide enhanced
governance to NESF ESG activities.
ESG and Energy Security
NESF qualifies under Article 9 of the Sustainable Finance
Disclosures Regulation ("SFDR"), and continues to provide its
annualised lifecycle emissions, estimated scope 1, 2 and 3 GHG
emissions. The GHG emissions data is provided by the Green
Investment Group (GIG) and is calculated using their Green Impact
methodology based on information provided by NextEnergy
Capital.
Around 5% of the UK's energy generation comes from solar power
and NESF has played a key part in this growth story providing
enough clean energy for over 300,000 UK homes on an annual basis.
NESF supports the UK in delivering energy security and independence
through its 91 individual operating solar assets in UK and the
Company is also in a strong position to continue to increase this
into the future with both new solar and battery assets.
NextEnergy Capital New Hire
NextEnergy Capital, NESF's investment manager, is pleased to
announce that it has further strengthened its team through the
hiring of Stephen Rosser as Investment Director and In-House Legal
Counsel. Stephen will play a key role in helping drive NESF's
continued growth strategy alongside the existing team, harnessing
his deep experience and understanding of the regulatory environment
in UK energy, adding further weight to the skillset of the team as
the fund brings new assets online. Stephen has previously led legal
teams for both Good Energy Group PLC and Centrica.
Market Outlook
The UK power market continues to experience sustained high
prices, driven predominantly by existing prevailing market
conditions around the supply of gas, which continue to look
challenging given recent macroeconomic and geo-political events.
This has brought into key focus the nation's energy security in
conjunction with accelerated Net Zero ambitions following
COP26.
Dividend Target
The board of NESF recently approved a target dividend of 7.52
pence per ordinary share, representing a 5.0% increase from the
previous year's dividend of 7.16 pence per ordinary share. This
increase is above the 4.1% calculated Retail Price Index ("RPI")
rise for the 2021 calendar year.
The target dividend increase is supported by the high degree of
visibility of the Company's 2023 revenues, primarily driven by its
active power price hedging strategy locking in c.83% of budgeted
generation at a fixed price for the 2023 financial year. When this
is added to the aforementioned proportion of revenues from subsidy
this gives more than 90% certainty to the revenue that the
portfolio is forecasted to generate from its operations. NESF's
high quality asset base has outperformed its generation targets in
every year since the fund's inception, this gives the management
team outstanding visibility over the strengthening dividend cover
out into the future.
Full Year Results
The Company intends to announce its full year audited results
for the financial year ended 31(st) March 2022 at the end of June.
Further information on the full year results presentation will be
announced shortly.
Kevin Lyon, Chairman of NextEnergy Solar Fund commented:
"This has been an excellent start to the calendar year for NESF
and we are pleased to provide an update that covers the current
position and exciting outlook for the Fund. NESF's unaudited NAV
per ordinary share for the quarter increased from 104.4p to 113.5p,
unaudited Ordinary shareholders' NAV increased by 8.7% to GBP669m.
The announced 5% dividend target increase is a combination of the
Fund's strong progress and a market characterised by sustained
higher power prices. We were also pleased to reveal the selection
of the site of our first co-located battery storage site in
Norfolk, UK, and to announce our co-investments in Spain and
Portugal.
ESG remains at the forefront of investors' minds and our newly
established and dedicated ESG committee, chaired by Josephine Bush,
who joined the NESF Board as a Non-Executive Director at the start
of the year, will continue to enhance our capabilities in this
field."
Michael Bonte-Friedheim, Group CEO of NextEnergy Group said:
"Over the course of 12 months there has been a dynamic shift in
the UK power market. W e saw exceptional support from COP26
promoting the continued roll out of renewable technology, alongside
increased market volatility, and record UK power prices. NESF's
portfolio continues to outperform operationally, providing vital
low-cost power generation to the UK in an environment of both
rising inflationary pressure, and increased focus on energy
security. NESF remains well placed to continue to deliver ordinary
shareholders with an attractive, inflation protected income and to
harness more of the exciting growth prospects the market
offers."
For further information:
NextEnergy Capital Group 020 3746 0700
Michael Bonte-Friedheim ir@nextenergysolarfund.com
Aldo Beolchini
Ross Grier
Peter Hamid (Investor Relations)
RBC Capital Markets 020 7653 4000
Matthew Coakes
Kathryn Deegan
Cenkos Securities 020 7397 8900
James King
William Talkington
Camarco 020 3781 8334
Owen Roberts
Eddie Livingstone-Learmonth
Ocorian Administration (Guernsey)
Limited 014 8174 2642
Kevin Smith
Notes to Editors(1) :
About NextEnergy Solar Fund
NESF is a specialist solar power renewable energy investment
company listed on the premium segment of the London Stock Exchange
that invests in utility-scale solar power plants and energy
storage. The Company may invest up to 30% of its gross asset value
in non-UK OECD countries, 15% in solar-focused private equity
structures, and 10% in energy storage.
NESF currently has a diversified portfolio comprising of the
following:
Solar PV:
-- 99 operating solar assets across the UK and Italy (primarily
on agricultural, industrial, and commercial sites)
-- A 50MW co-investment into a Spanish solar project alongside
NextPower III ESG, currently under construction
-- A 210MW co-investment into a Portuguese solar project
alongside NextPower III ESG, currently under construction
-- A subsidy-free UK solar project under construction (Whitecross 36MW)
-- A ready-to-build subsidy-free UK solar project (Hatherden 50MW)
-- A $50m commitment into NextPower III ESG (a private solar
infrastructure fund providing exposure to operating
andin-development international solar assets)
Energy Storage:
-- A 50MW standalone battery storage project in Fife, Scotland,
currently under construction (part of a 250MW joint venture with
Eelpower)
-- A 6MW co-located battery storage project at North Norfolk Solar Farm
The NESF portfolio has a combined installed power capacity of
865MW (excluding NextPower III MW on an equivalent look-through
basis).
As at 31 March 2022, the Company had an unaudited gross asset
value of GBP1,150million, being the aggregate of the net asset
value of the ordinary shares, the fair value of the preference
shares and the amount of NESF Group debt outstanding, and a net
asset value of GBP669million.
NESF's investment objective is to provide ordinary shareholders
with attractive risk-adjusted returns, principally in the form of
regular dividends, by investing in a diversified portfolio of solar
energy and energy storage infrastructure assets. The majority of
NESF's long-term cash flows are inflation-linked via UK government
subsidies.
For further information on NESF please visit www.
nextenergysolarfund.com
Commitment to ESG
NESF is committed to ESG principles and responsible investment
which make a meaningful contribution to reducing CO2 emissions
through the generation of clean solar power. NESF will only select
investments that meet the requirements of NEC Group's Sustainable
Investment Policy. Based on this policy, NESF benefits from NEC's
rigorous ESG due diligence on each investment. NESF is committed to
reporting on its ESG performance in accordance with the UN
Sustainable Development Goals framework and the EU Sustainable
Finance Disclosure Regulation.
NESF has been awarded the London Stock Exchange's Green Economy
Mark and has been designated a Guernsey Green Fund by the Guernsey
Financial Services Commission.
NESF's sustainability-related disclosures in the financial
services sector in accordance with Regulation (EU) 2019/2088 can be
accessed on the ESG section of both the NESF website (
nextenergysolarfund.com/esg/ ) & NEC Group website (
nextenergycapital.com/sustainability/transparency-and-reporting/
).
About NextEnergy Group
NESF is managed by NextEnergy Capital, part of the NextEnergy
Group. NextEnergy Group was founded in 2007 to become a leading
market participant in the international solar sector. Since its
inception, it has been active in the development, construction, and
ownership of solar assets across multiple jurisdictions. NextEnergy
Group operates via its three business units: NextEnergy Capital
(Investment Management), WiseEnergy (Operating Asset Management)
and Starlight (Asset Development).
NextEnergy Capital
NextEnergy Capital comprises the Group's investment management
activities. To date, NEC has invested in over 325 individual solar
plants for a capacity in excess of 2.3GW across it institutional
funds.
www.nextenergycapital.com
-- NextEnergy Solar Fund ("NESF") is a solar infrastructure
investment company focused on the UK and other OECD countries,
which is listed on the premium segment of the London Stock
Exchange. It currently owns 865MW spread among 99 individual assets
in the UK and Italy, comprising an unaudited gross asset value of
GBP1,150m. NESF is one of the largest listed solar energy
investment companies in the world.
-- NextPower II ("NPII") a private fund made up of 105
individual operating solar power plants and an installed capacity
of 149MW, focused on consolidating the substantial, highly
fragmented Italian solar market. NPII was successfully divested in
January 2022, a 2016 vintage vehicle that generated net IRRs to its
investors in excess of 25%, versus a gross target of 10-12%.
-- NextPower III ESG ("NPIII ESG") is a private fund exclusively
focused on the international solar infrastructure sector,
principally targeting projects in carefully selected OECD
countries, including the US, Portugal, Spain, Chile, Poland and
Italy. NPIII ESG is a fund that provides a positive social and
environmental impact to the countries it has and will invest into.
NPIII completed its fundraise with a total of $896m, including a
SMA raised. The target of the fund was $750m.
-- NextPower UK ESG ("NPUK ESG") is a private unlevered fund
investing in greenfield subsidy-free solar projects, with PPA's, in
the UK. NPUK ESG was launched in December 2021. The UK
Infrastructure Bank is providing financing to the initial seed
assets of the fund, and plans to invest up to GBP250m, half of the
fund's total target fund size, on a match-funding basis.
WiseEnergy
WiseEnergy(R) is NextEnergy Capital Group's operating asset
manager. WiseEnergy is a leading specialist operating asset manager
in the solar sector. Since its founding, WiseEnergy has provided
solar asset management, monitoring and technical due diligence
services to over 1,300 utility-scale solar power plants with an
installed capacity in excess of 2.2GW. WiseEnergy clients comprise
leading banks and equity financiers in the energy and
infrastructure sector.
www.wise-energy.com
Starlight
Starlight is NextEnergy Group's development company that is
active in the development phase of solar projects. It has developed
over 100 utility-scale projects internationally and continues to
progress a large pipeline of c.2.5GW of both green and brownfield
project developments across global geographies.
Notes:
(1:) All financial data is unaudited as at 31 March 2022, being
the latest date in respect of which NESF has published financial
information
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