TIDMNESF
RNS Number : 9812G
NextEnergy Solar Fund Limited
21 November 2022
LEI: 213800ZPHCBDDSQH5447
21 November 2022
NextEnergy Solar Fund Limited
("NESF" or the "Company")
Interim Results for period ended 30 September 2022
NextEnergy Solar Fund, the specialist solar and energy storage
climate impact fund with a combined installed power capacity of
865MW, is pleased to announce it has today published its interim
results as at 30 September 2022.
Financial Highlights
-- +9.4p (c.8.3%) increase in Net Asset Value ("NAV") per
ordinary share to 122.9p over the six-month period (31 March 2022:
113.5p).
-- +GBP56.2m increase in ordinary shareholders' NAV to GBP724.7m (31 March 2022: GBP668.5m).
-- Earnings per ordinary share of 13.1p (30 September 2021: 7.74p).
-- Total Gearing (including preference shares) of 42% (31 March 2022: 42%).
-- Second interim dividend of 1.88p per ordinary share for the
quarter ended 30 September 2022 (30 September 2021: 1.79p).
-- Estimated cash dividend cover of 1.3x - 1.5x for FY22/23 (31 March 2022: 1.2x).
-- Total dividends paid of 3.76p per ordinary share in respect
of the six months ended 30 September 2022 (30 September 2021:
3.58p).
-- Target dividend of 7.52p per ordinary share for the year
ended 31 March 2023 (a year-on-year increase of 5%, above the 4.1%
calculated Retail Price Index ("RPI") rise for the 2021 calendar
year).
ESG Highlights
-- Released first standalone sustainability report, which
highlights NESF's contribution to biodiversity, climate change and
ethical supply chains through its operations.
-- Gained classification under Article 9 of the EU Sustainable
Finance Disclosure Regulation and EU Taxonomy Regulation.
-- Generated 639GWh of clean electricity during the six-month
period, contributing to the avoidance of 266,500 tonnes of CO(2) e
emission (30 September 2021: 539GWh, 229,000 tonnes of CO(2) e).
Equivalent to:
o Powering 354,274 UK homes for the six-month period (30
September 2021: 299,000). The rough equivalent of powering
Manchester and Newcastle combined.
o Removing 176,245 cars off the road for the six-month period
(30 September 2021: 151,260 cars).
Portfolio & Operational Highlights
-- Total installed capacity of 865MW(1) (31 March 2022: 865MW).
-- 99 (2) fully operating solar assets (31 March 2022: 99).
-- Portfolio generation outperformance of +6.1% against budget
for the period ended 30 September 2022 (30 September 2021: 1.1%),
translating into additional revenues of c.GBP4.9m (30 September
2021: GBP0.9m).
-- Secured a GBP60m increase to its existing GBP75m Revolving
Credit Facility ("RCF") with AIB Group (UK) p.l.c. &
NatWest.
-- Signed a two-year extension to its GBP70m RCF with Santander
UK to fund the investment pipeline.
Footnote:
(1) Excludes share in private infrastructure solar fund
(NextPower III ESG). Inclusion of NESF's share of NextPower III
would increase capacity by 21.7MW to 886.7MW.
(2) Newfield, a 0.18MW commercial rooftop solar asset, was
removed from the portfolio following termination of the lease by
the landlord during the period.
Energy Storage
-- Advanced our position in the energy storage sector by
increasing NESF's strategic joint venture partnership with energy
storage specialist EelPower to GBP300m in total via a 75% stake in
a new GBP200m Joint Venture Partnership vehicle ("JVP2").
-- Started construction on the Company's first 50MW battery
storage project in Fife, Scotland (expected to be energised and
grid-connected in the first half of 2023) through its pre-existing
Joint Venture Partnership vehicle with EelPower ("JVP1").
-- Commenced a co-located battery retrofit programme,
identifying potential sites across NESF's current UK operating
solar assets.
Private Solar Infrastructure Fund
-- Signed its second international co-investment with NextPower
III LP taking a 13.6% stake in a 210MW solar project currently
under construction in Santarém, Portugal.
Solar PV
-- Commenced construction works for Whitecross (36MW) and grid
preparation works for Hatherden (50MW).
-- Secured 15-year Contracts for Difference ("CfDs") for 100% of
the generating capacity of both new-build UK solar projects
post-construction.
Portfolio & Operational Highlights following the period
end
Energy Storage
-- Signed a GBP32.5m acquisition for the development rights for
a high-quality 250MW lithium-ion battery storage project in the
East of England via Joint Venture Partnership with a strategic
partner.
Updates to NAV assumptions
The Company has made the following updates to its valuation
assumptions for the 30 September 2022 NAV calculation:
-- The Company has applied a significant discount to the power
prices forecasts provided by its market consultants. This discount
has been applied to the unhedged generation volumes to account for
the possibility of a significant drop in market prices over the
period or of the introduction of price caps or windfall taxes.
-- An increase to the unlevered discount rate by 0.5% in
response to the increase in the risk-free rate.
Full details are disclosed in the relevant sections below.
NAV Movements
The main contributors to the increase in the Company's NAV from
31 March 2022 to 30 September 2022 were an increase in power price
forecast assumptions (+12.0p per ordinary share) driven by an
uplift in the short to medium term power forecasts provided by the
Company's three independent advisers and Power Purchase Agreements
("PPAs"), updated short-term inflation assumptions (+7.5p per
ordinary share), operating result net distributions to fund (+3.0p
per ordinary share) and the upward revaluation of the NextPower III
ESG ("NPIII ESG") investment (+0.9p per ordinary share).
31 March 2022 to 30 September 2022, NAV p/share movement:
NAV p/share at 31 March 2022 113.5p
Power price forecasts +19.5p
-------
Power price forecasts discount applied -7.5p
-------
Discount rate increase -3.7p
-------
Change in short-term inflation +7.5p
-------
Operating result net distributions to
fund +3.0p
-------
RCF drawdown(1) -9.1p
-------
New assets at cost(1) +5.1p
-------
Revaluation of NPIII Investment +0.9p
-------
Movements in residual value(2) -6.3p
-------
NAV p/share at 30 September 2022 122.9p
-------
Footnotes:
(1) RCF drawn to fund milestone payments relating to new assets
which are held at cost, as well as consideration for Project Lion
which was drawn before period end. Considering that the transaction
completed shortly after the period end, cash from the drawdown has
been included in NAV.
(2) Includes payment of dividend, provisions, and non-material
movements.
Inflation Linkage and Updates
c.50% of the Company's revenues are made up of government-backed
subsidies via ROCs and FITs, and this component of revenue
increases in-line with RPI, whilst the remaining revenues in the
portfolio are generated through the sale of budgeted power
generation into the market. This portion of revenues continues to
benefit from the sustained high power price environment and
increases the unsubsidised revenue portion of the portfolio.
The Company continues to be consistent in its inflation
assumption approach, using third party, independent inflation data
from the HM Treasury Forecasts and long-term implied rates from the
Bank of England for its UK assets. For international assets, IMF
forecasts are used.
Inflation rate (UK RPI) assumptions
30 September 30 June 2022 31 March 2022
2022
2023 12.40% 11.00% 8.00%
------------- ------------- --------------
2024 5.90% 4.20% 3.70%
------------- ------------- --------------
2025 3.60% 3.60% 3.30%
------------- ------------- --------------
2026 3.40% 3.90% 3.40%
------------- ------------- --------------
2027 3.90% 4.10% 3.30%
------------- ------------- --------------
2028-2030 3.00% 3.00% 3.00%
------------- ------------- --------------
2030 onwards 2.25% 2.25% 2.25%
------------- ------------- --------------
Discount Rate Assumptions
The Bank of England have implemented substantial further
increases to the base rate (1%) following the 0.5% increase between
31 March 2022 and 30 June 2022. In response to these market
conditions, the Company has increased its unlevered discount rate
by 0.5%. The below table reflects the discount rate assumptions for
the 30 September 2022 NAV calculation:
30 September
Premium 2022 31 March 2022
UK unlevered n/a 6.25% 5.75%
--------- ------------- --------------
UK levered 0.7-1.0% 6.95-7.25% 6.45-6.75%
--------- ------------- --------------
Italy unlevered (1) 1.5% 7.75% 7.25%
--------- ------------- --------------
Subsidy-free (uncontracted)
(2) 1.0% 7.25% 6.75%
--------- ------------- --------------
Life extensions (3) 1.0% 7.25-8.25% 6.75-7.75%
--------- ------------- --------------
Footnotes:
(1) Unlevered discount rate for Italian operating assets
implying 1.50% country risk premium.
(2) Unlevered discount rate for subsidy-free uncontracted
operating assets implying 1.0% risk premium.
(3) 1.0% risk premium for cash flows after 30 years where leases
have been extended.
Power Price Assumptions
Given the recent volatility in power prices and, at the time of
calculating the NAV, the possibility of a price cap or windfall tax
on renewable generation being implemented by the UK government, the
Company discounted the forward power prices as supplied by its
market consultants which it uses in the calculation of its NAV. The
Company does not consider that the short-term power price forecasts
are a reliable reflection of the power prices which are likely to
be received for future generation, therefore where prices have not
been fixed/hedged, forecast power prices are discounted to capture
this underlying uncertainty and to reduce risk associated with
future cash flows. The discounts outlined below were applied to the
Company's NAV analysis, leading to a reduction of 7.5p / share in
the Company's NAV.
Time period Discounts applied to unhedged portion of portfolio
power prices
Q4 2022 No discount has been applied
----------------------------------------------------
Q1 2023 50% discount
----------------------------------------------------
FY 2023/24 35% discount
----------------------------------------------------
FY 2024/25 25% discount has been applied in Summer 2024 price,
and 20% discount has been applied to Winter 2024
prices
----------------------------------------------------
FY 2025/26 10% discount
----------------------------------------------------
FY 2026/27 No discount has been applied
----------------------------------------------------
Windfall Tax
Following the period end, the UK Government announced initial
details of a windfall tax on low-carbon electricity generators in
the UK, as part of its Autumn Statement on the 17 November 2022.
Full details are expected to be clarified through the legislative
process during December 2022. Under the temporary tax, which takes
effect from 1 January 2023 and runs to 31 March 2028, low carbon
generators will pay a surcharge of 45% on in-scope revenues
exceeding GBP75/MWh. The tax will be calculated at group level for
each accounting year, based on aggregated generation and revenues
for that year, less an allowance of GBP10m.
Based on information available at the date of publication, the
Company considers that the methodology used to derive the Company's
NAV as at 30 September 2022, and based on the assumptions outlined
above, takes account of the potential impact of the windfall tax
levy.
The windfall tax will not be applied to the Company's government
subsidised revenues which makes up c.50% of the Company's total
revenue profile, it will also not be applicable to revenues
generated from energy storage assets, an area where the Company is
strategically positioned with a secured pipeline to rapidly expand
and diversify its future revenue sources.
Power Sales Strategy
To manage the sale of power into the electricity market,
NextEnergy Capital continues to utilise its specialist power sales
desk. This team actively manages the Company's power price
contracting strategy and activities. In the current environment,
the power sales desk has enabled the Company to mitigate market
price volatility whilst allowing optimum weighted average price by
forward hedging above forecast prices. Aggregating the amount of
revenue derived from subsidies and the power hedges, the Company
has a high degree of comfort around forward revenue projections and
strengthening dividend cover for the current financial year.
In addition to NESF's budgeted revenues from ROCs and FITs
(c.50%), the Company's hedging positions (covering 716MW UK
portfolio) as at 10 November 2022 were:
-- 2022/23: 93% of UK budgeted generation, (average fix price of GBP86MWh)
-- 2023/24: 74% of UK budgeted generation, (average fix price of GBP73MWh)
-- 2024/25: 44% of UK budgeted generation, (average fix price of GBP90MWh)
-- 2025/26: 13% of UK budgeted generation, (average fix price of GBP147MWh)
Future Pipeline
The Company has exclusivity over, or owns the project rights
for, the majority of its immediate pipeline of c.GBP500m domestic
and international assets across the solar and energy storage space.
This includes ownership of the development rights for a
high-quality 250MW lithium-ion battery storage project in the East
of England via JVP2, which when approved and constructed will be
one of the UK's largest operational standalone battery storage
assets.
Available Capital
The Company has capital to pursue its immediate pipeline,
including bringing online a secured 50MW battery storage project
and completing the construction of its post-subsidy solar assets.
Out of the total GBP205m Revolving Credit Facilities ("RCF")
available to the Company, c.GBP55m remains undrawn and available
for deployment as of the 30 September 2022. The Company's
investment policy allows a maximum of 50% total debt to Gross Asset
Value limit, which if required would provide the Company with
further flexibility of c.GBP136m to convert the Company's
attractive pipeline into NAV accretive and cash generating assets
to further strengthen and grow the portfolio.
ESG
The Company recently released its first, stand-alone
sustainability report. NextEnergy Solar Fund's commitment to ESG
and sustainability remains at the forefront of its strategy and
purpose, it is fully integrated into the Company's operating model
and remains a fundamental component of the investment process. As
the UK accelerates towards its net-zero targets by 2050, the
Company's Solar PV and Energy Storage assets will continue to play
a huge part in this transition and ensuring that the correct ESG
framework is in place, is crucial in driving this forward both on
the ground, and from an ESG reporting perspective.
Metric Units 30 September 2022 (HY
2023)
GHG avoided ktCO2e 266.5
----------------------- ----------------------
NOx avoided tonnes 241.5
----------------------- ----------------------
Sox avoided tonnes 444.5
----------------------- ----------------------
PM2,5 tonnes 20.8
----------------------- ----------------------
PM10 tonnes 5.1
----------------------- ----------------------
Fossil Fuels avoided tonnes oil equivalent 117.8
----------------------- ----------------------
million barrels 0.9
---------------------------------------------- ----------------------
In June 2022, the Company also published its first TCFD report,
which outlines the risks and opportunities as a result of the
physical and economic consequences of climate change. The full
report, alongside the Company's first sustainability report can be
found on the Company's website.
Energy Storage Strategy
The market environment continues to be favourable for the
Company to explore the potential increase in energy storage within
the portfolio. Energy Storage is a complementary hedge to the
existing solar portfolio and will provide additional opportunities
around the Company's existing grid connections and experience in
securing import capacity and in realising operational assets.
Energy Storage will provide the Company with revenue, technology
and geographic diversification, whist offering highly attractive
return prospects from multiple revenue sources. NextEnergy Capital,
the Company's investment adviser, will be continuing to consult
investors over the coming weeks to seek support to increase the
Company's investment policy energy storage limit from 10% of GAV to
allow the Company to fully capture the energy storage growth
opportunities already backed by a secured strategic pipeline of
assets.
Market Outlook
Undoubtedly, macro-economic and political events have impacted
and will continue to impact the renewable sector in which the
Company operates. Mitigating risk and increasing visibility of
future cash flows remains a priority for the Company. In the
current economic climate, the Board continues to closely monitor
both macro and micro economic indicators and governmental
information to assess the potential future impact on the Company's
activities. Against this backdrop, NESF continues to offer strong
diversification and protection for investors in their portfolios,
in conjunction with helping accelerate Net Zero ambitions following
COP27 through the construction of new solar power plants and
battery storage assets in the UK. The Company's proposed increase
in its energy storage investment policy limit will help contribute
to increasing the UK's energy independence, help further increase
the penetration of much needed new renewables across the UK, and
provide additional diversification and returns for shareholders.
For the current financial year, NESF continues to target an
attractive dividend of 7.52p per ordinary share, supported by a
strong projected dividend cover.
Interim Report and Quarterly Factsheet
The 30 September 2022 interim report and quarterly factsheet are
available on the Company's website.
New Website Launched
The Company has launched a new website today providing
shareholders and wider stakeholders with enhanced navigation
functionality and easily accessible information.
Interim Results Presentation
There will be a webcast this morning at 9.30am hosted by the
investment adviser:
-- Michael Bonte-Friedheim (CEO and Founding Partner of NextEnergy Group)
-- Ross Grier (UK Managing Director, NextEnergy Capital)
To register for the webcast please use this link: NESF Interim
Results Presentation
The presentation will be followed by a Q&A session for
analysts. Questions may be submitted prior to the presentation via
email to ir@nextenergysolarfund.com or live during the event using
the webcast Q&A function. We will endeavour to answer submitted
questions during the Q&A section, if this is not possible due
to time constraints, we will follow up shortly after the
presentation.
A recording of the presentation will also be made available on
the Company website and the London Stock Exchange Spark page
shortly after the event.
Kevin Lyon, Chairman of NextEnergy Solar Fund commented:
"Against clear residual headwinds from a volatile domestic
energy market, NESF has delivered positive results, generating
steady revenue and a reliable and attractive dividend for its
shareholders from generation that supports the transition to a low
cost, low carbon energy system.
The Company remains supportive of a UK windfall tax on
extraordinary and excess profits brought about by external factors
including the war in Ukraine. We believe that investment in
renewable energy is key to solving our nations' current cost of
living crisis and long-term energy security, decarbonisation and
cost challenges. We would therefore make the case for a consistent
approach to the encouragement of reinvestment of proceeds into new
projects through associated tax relief so that equality is created
with the oil and gas sector. We believe that our NAV valuation
approach largely incorporates the potential impact on the Company
of the windfall tax that has recently been announced.
NESF has significantly increased electricity generation to
639GWh, a 19% increase from the same period last year. The Group
has also successfully increased its diversification, by making
notable strides in energy storage, having started construction on
the Company's first 50MW battery storage project through JVP1 in
Fife, Scotland. Going forward, energy storage holds an increasingly
important role in NESF's future strategy, providing the opportunity
for both diversification and growth. The Company is in an excellent
position through its joint venture partnerships with Eelpower, and
its existing co-located battery programme, to unlock value for
shareholders.
As a Company at the centre of carbon free energy security in the
UK, we were also very pleased to release our first standalone
sustainability report, which highlights NESF's contribution to
biodiversity, climate change and ethical supply chains through its
operations. These issues sit at the heart of what we do at NESF,
and it is a privilege to showcase the hard work that is being done
on these aspects.
As we continue to navigate a dynamic and turbulent energy market
in the UK, I am confident that NESF is well equipped, both
financially and with the necessary experience, to execute our
strategy to the benefit of our stakeholders."
Michael Bonte-Friedheim, CEO of NextEnergy Group said:
"We have continued to focus on delivering above-budget
technical, operational and financial performance from NESF's
portfolio, and are pleased with the portfolio's continuous
outperformance since the Company's IPO in 2014. In parallel,
strategic expansion was achieved in the energy storage sector and
internationally, positioning NESF for incremental growth in the
future.
The Company is well-placed to deliver value-enhancing growth,
further risk diversification and expansion beyond the UK's borders,
all the while ensuring the existing asset portfolio continues to
perform strongly.
ESG remains a key focus of all our activities, and our market
leadership in developing and implementing new initiatives across
our sites ensures we increase our contribution to de-carbonising
the power generation sector, increasing energy security and
independence, protect and grow biodiversity throughout our
portfolio and make positive contributions to the communities in
which we are active."
For further information:
NextEnergy Capital Group 020 3746 0700
Michael Bonte-Friedheim ir@nextenergysolarfund.com
Aldo Beolchini
Ross Grier
Peter Hamid (Investor Relations)
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 and energy storage climate impact
fund. The Company is structured as a renewable energy investment
company listed on the premium segment of the London Stock Exchange
that invests in utility-scale solar power plants and energy
storage. The Company may invest up to 30% of its gross asset value
in non-UK OECD countries, 15% in solar-focused private
infrastructure funds, and 10% in energy storage.
NESF currently has a diversified portfolio comprising of the
following:
Solar PV:
-- 99 operating solar assets across the UK and Italy (primarily
on agricultural, industrial, and commercial sites)
-- A 50MW co-investment into a Spanish solar project alongside
NextPower III ESG, currently under construction
-- A 210MW co-investment into a Portuguese solar project
alongside NextPower III ESG, currently under construction
-- A UK solar project under construction (Whitecross 36MW)
-- A ready-to-build UK solar project (Hatherden 50MW)
-- A $50m commitment into NextPower III ESG (a private solar
infrastructure fund providing exposure to both operating and under
construction, international solar assets)
Energy Storage:
Joint Venture Partnership with Eelpower:
-- A 50MW standalone battery storage project in Fife, Scotland,
currently under construction (part of a GBP300m joint venture with
Eelpower)
-- A portfolio of 250MW pre-construction standalone battery
storage projects in the East of England
Co-located programme:
-- First site identified for a 6MW co-located battery storage
project at North Norfolk Solar Farm and discussions are ongoing
with the local distribution network operator to confirm an
energisation date
The NESF portfolio has a combined installed power capacity of
865MW (excluding NextPower III MW on an equivalent look-through
basis).
As at 30 September 2022, the Company had an unaudited gross
asset value of GBP1,258m, being the aggregate of the net asset
value of the ordinary shares, the fair value of the preference
shares and the amount of NESF Group debt outstanding, and an
unaudited net asset value of GBP725m.
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 .
Article 9
NESF is classified under Article 9 of the EU Sustainable Finance
Disclosure Regulation and EU Taxonomy Regulation.
NESF's sustainability-related disclosures in the financial
services sector in accordance with Regulation (EU) 2019/2088 can be
accessed on the ESG section of both the NESF website (
nextenergysolarfund.com/esg/ ) & 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 350 individual solar
plants for a capacity in excess of 2.4GW across it institutional
funds. www.nextenergycapital.com
-- NextEnergy Solar Fund ("NESF ") is a specialist solar and energy
storage climate impact fund, which is listed on the premium segment
of the London Stock Exchange. It currently has an installed capacity
of 865MW spread among 99 individual operating assets in the UK
and Italy, comprising an unaudited gross asset value of GBP1,258m.
NESF is one of the largest listed solar and energy storage investment
companies in the world.
-- NextPower II ("NPII") a private fund made up of 105 individual
operating solar power plants and an installed capacity of 149MW,
focused on consolidating the substantial, highly fragmented Italian
solar market. NPII was successfully divested in January 2022, a
2016 vintage vehicle that generated net IRRs in excess of its gross
target of 10-12%.
-- NextPower III ESG ("NPIII") is a private fund exclusively focused
on the international solar infrastructure sector, principally targeting
projects in carefully selected OECD countries, including the US,
Portugal, Spain, Chile, Poland and Italy. NPIII is a fund that
provides a positive social and environmental impact to the countries
it has and will invest into. NPIII completed its fundraise with
a total of $896m, including an SMA raised. The target of the fund
was $750m.
-- NextPower UK ESG ("NPUK") is a private unlevered fund investing
in greenfield subsidy-free solar projects, with PPA's, in the UK.
NPUK ESG recently announced its first close at GBP327 million,
which is over 65% of the funds target of GBP500 million. The UK
Infrastructure Bank is the cornerstone investor for the fund and
plans to invest up to GBP250 million 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 1.7GW. 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.8.3GW of both green and brownfield
project developments across global geographies.
Notes:
(1:) All financial data is unaudited at 30 September 2022, being
the latest date in respect of which NESF has published financial
information
Generating a more sustainable future
Interim Report
for the six months ended 30 September 2022
Our Objectives
Investment
To provide ordinary shareholders with attractive risk-adjusted
returns, principally in the form of regular dividends, through a
diversified portfolio of solar energy infrastructure assets with
the addition of complementary technologies, such as energy
storage.
Strategic Objectives
Investment
-- Expand and strengthen the portfolio in line with the
Company's Investment Policy.
-- Enhance growth and diversification through the introduction
of energy storage and international solar assets.
Operational
-- Consistently achieve operational outperformance of the
portfolio attributable to active asset management.
-- Pursue continuous improvement in the management of operating
costs associated with the portfolio.
Environmental
-- Contribute towards a net zero sustainable future and help
mitigate climate change.
-- Enhance local biodiversity for the surrounding areas where we
operate.
Society
-- Provide a positive social impact.
-- Continue to actively engage with and support the communities
located close to our solar assets.
Governance
-- Act in a manner consistent with our values of integrity,
fairness and transparency.
-- Maintain strong and constructive relationships with our
shareholders and other key stakeholders.
Performance Highlights
Financial Highlights(1)
NAV per ordinary share
as at 30 September 2022(1)
122.9p
(31 March 2022: 113.5p)
Ordinary shareholders'
NAV
as at 30 September 2022
GBP724.7m
(31 March 2022: GBP668.5m)
Financial Debt Gearing
as at 30 September 2022
(2)
27%
(31 March 2022: 25%)
Dividends per ordinary
share for the period
ended 30 September 2022
3.76p
(30 September 2021: 3.58p)
Cash dividend cover (pre-scrip
dividends) for the period
ended
30 September 2022
1.8x
(30 September 2021: 1.0x)
Total gearing as at 30
September 2022 (3)
42%
(31 March 2022: 42%)
NAV total return per
ordinary share for the
period ended 30 September
2022
11.6%
(30 September 2021: 7.9%)
Ordinary shareholder
total return for the
period ended 30 September
2022
11.0%
(30 September 2021: 3.8%)
Ordinary shareholder
annualised total return
since IPO
7.7%
(31 March 2022: 6.7%)
Operational Highlights
Total capacity installed
as at 30 September 2022
(5)
865MW
(31 March 2022: 865MW)
Total electricity generation
for the period ended
30 September 2022
639GWh
(30 September 2021: 539GWh)
Operating solar assets
as at 30 September 2022
(6 7)
99
(31 March 2022: 99)
Generation above budget
for the period ended
30 September 2022
6.1%
(30 September 2021: 1.1%)
ESG Highlights
Tonnes of CO2e emissions
avoided p.a. (4)
266,500
(30 September 2021: 229,000)
Equivalent UK homes powered
for one year (4)
354,274
(30 September 2021: 299,000)
1 Refer to the Alternative Performance Measures for calculation basis.
2 Financial debt gearing excludes the GBP200m preference shares.
3 Total gearing is the aggregate of financial debt, look through
debt and GBP200m of preference shares. The preference shares are
equivalent to non-amortising debt with repayment in shares.
4 www.greeninvestmentgroup.com/green-impact/green-investment-handbook .
5 Excluding share in private equity vehicle (NextPower III).
Inclusion of NESF's 6.21% share of NextPower III on a look through
equivalent basis would increase total capacity by 21.7MW to
887MW.
6 Not including the $50m commitment into private equity vehicle (Next Power III).
7 Newfield, a 0.18MW commercial rooftop solar asset, was removed
from the portfolio following termination of the lease by the
landlord during the period.
NextEnergy Solar Fund Overview
A SPECIALIST SOLAR AND ENERGY STORAGE CLIMATE IMPACT FUND WITH A
DIVERSIFIED HIGH-QUALITY PORTFOLIO, MANDATE FOR GROWTH AND A
DIVERSE PIPELINE OF NEW OPPORTUNITIES
ATTRACTIVE YIELD, TARGETING A TOTAL DIVID OF 7.52P PER ORDINARY
SHARE IN RESPECT OF THE YEARING 31 MARCH 2023, PAYABLE
QUARTERLY
MANAGED BY SOLAR SPECIALISTS:
-- NEXTENERGY CAPITAL, INVESTMENT MANAGER
-- WISEENERGY, ASSET MANAGER
BOTH LEADING MANAGERS IN THE SOLAR ENERGY INFRASTRUCTURE
SECTOR
DIVERSIFIED PORTFOLIO:
-- 99 OPERATING SOLAR ASSETS
-- 1 INTERNATIONAL PRIVATE EQUITY SOLAR FUND INVESTMENT
-- 2 EUROPEAN SOLAR CO-INVESTMENTS
-- JOINT VENTURE PARTNERSHIP FOCUSED ON UK STANDALONE ENERGY
STORAGE
POWERING THE EQUIVALENT OF 354,274 UK HOMES (EQUIVALENT TO
NEWCASTLE AND MANCHESTER) WITH RENEWABLE ENERGY FOR THE PERIOD
CONTINUED ASSET OUTPERFORMANCE SINCE IPO
Why Invest in NextEnergy Solar Fund?
ABUNDANT CLEAN ENERGY SOURCE
-- Enough solar energy hits the Earth in a single hour to power
the energy needs of the entire human population for a year.
-- Solar is the cheapest form of renewable energy generation and quickest to construct.
RELIABLE INVESTMENT WITH ATTRACTIVE GROWTH PROSPECTS
-- Provides a regular attractive dividend for income seeking investors.
-- Offers a natural hedge against inflation with a high
proportion of regulated revenues linked to RPI.
-- Large diversified operating portfolio with incremental growth
prospects through the introduction of complementary technologies,
such as energy storage.
PROVEN AND STABLE TECHNOLOGY
-- Reliable and predictable source of electricity due to high
consistency in yearly irradiation and minimal moving parts.
-- Long useful life (25-40 years) with high proportion of
contracted cash flows from operating solar assets.
COST-EFFECTIVE ELECTRICITY GENERATION
-- Active portfolio management provides prudent cost of
operation, maintenance and replacement of assets.
-- Solar technology has benefited from a significant reduction
in costs, falling over 90% in the last ten years. Subsidy-free
solar assets are economically competitive and provide attractive
financial returns.
CLIMATE CHANGE SOLUTION
-- Fundamental to achieving a more sustainable future by
accelerating the transition to clean and sustainable energy.
-- Meaningful contribution to reducing CO(2) e emissions
throughthe generation and storage of clean electricity, reducing
reliance on fossil fuels across the grid.
-- Investment in solar provides significant biodiversity
benefits to the local surrounding areas.
Strategic Report
Chairman's Statement
"The Company is strategically positioned for its next wave of
growth and diversification, with energy storage set to play a very
important role within the portfolio. NESF continues to offer
shareholders, both current and prospective, an attractive
investment opportunity. Recent equity market conditions, driven by
macroeconomic and political events, have created an attractive
share price entry point, trading at a discount to the Net Asset
Value per share.
The Board and I are pleased to report that the Fund continues to
outperform on a technical, financial and operational basis,
enhancing dividend cover and supporting the dividend target of
7.52p per share for the financial year.
The Company's growth strategy aims to contribute to energy
security and independence, drive lower costs for consumers, and
reduce the carbon emitted by the energy sector. Further capital
will be required to fund our growth trajectory. For this to occur,
it will require government regulatory and policy certainty in order
to attract incremental funding for the Company and the renewable
energy sector more broadly.
The Company continues to benefit from the skillset of its
Investment Adviser, NextEnergy Capital, where in the past six
months, they have delivered new and unique opportunities, to ensure
the Company adds shareholder value into the future.
NESF continues to increase ESG transparency and reporting for
investors with the release of the Company's first standalone
sustainability report. We are also immensely proud to be classified
as an Article 9 Fund under the EU SFDR and Taxonomy Regulation,
ensuring that the Company's ESG disclosures are industry --
leading" .
I am pleased to present the Interim Report for NextEnergy Solar
Fund Limited (the "Company", "Fund" or "NESF") for the six months
ended 30 September 2022.
The period under review has continued to experience sustained
elevated power prices, increasing inflation rates, political
instability and a cost-of-living crisis across the UK. Despite
these challenges, the current environment presents a very
attractive backdrop for investment in renewables, as increasing
energy supply and independence is essential in the UK and globally,
which will in turn reduce costs for consumers.
Solar and energy storage assets have a critical role to play in
terms of providing energy security and reducing reliance on
volatile global power markets and burning of fossil fuels. In
addition, governments around the world continue to drive forward
their net zero targets and ambitions, with the production of clean
energy playing a key role in helping to achieve these. NESF is in a
strong position to provide solutions to the issues caused by
traditional energy sources and to take advantage of the
opportunities associated with the energy transition in the UK and
across Europe.
Earlier this month, the Company published its first standalone
sustainability report. The report goes beyond the Company's
immediate sustainability obligations by providing in-depth details
on the Company's sustainability journey, its unique approach to
biodiversity, and its industry leading ESG initiatives, that
deliver a real environmental and social impact.
The record high power prices have been driven by increased
demand following the re-opening of economies post-Covid and high
gas prices resulting from restrictions on Russian oil and gas
associated with the conflict in Ukraine. High-power prices are
forecast to continue in the short to medium-term and are a driving
factor in the current high inflationary environment.
The Company remains supportive of a UK windfall tax on
extraordinary and excess profits brought about by external factors
including the war in Ukraine. We believe that investment in
renewable energy is key to solving our nations' current cost of
living crisis and long-term energy security, decarbonisation and
cost challenges. We would therefore make the case for a consistent
approach to the encouragement of reinvestment of proceeds into new
projects through associated tax relief so that equality is created
with the oil and gas sector. We believe that our NAV valuation
approach largely incorporates the potential impact on the Company
of the windfall tax that has recently been announced.
The Board believes that the Company is in a strong position to
provide both an attractive opportunity for investors and to make an
impactful contribution towards energy security and independence
across the UK, through its continued production of clean
electricity and deployment of new clean generation and storage
assets which make a positive impact to the UK economy and underpin
efforts to tackle climate change.
For the period ended 30 September 2022, the Ordinary Shareholder
Total Return was 11.0% (30 September 2021: 3.8%) and the ordinary
share Net Asset Value ("NAV") total return was 11.6% (30 September
2021: 7.9%). The Board is delighted that NESF was promoted to the
FTSE 250 index on 16 September 2022.
Since IPO, the NESF portfolio has continued to outperform
budgeted generation, whilst continuing to deliver on its
electricity sales hedging strategy to remove short term price
volatility and strengthen the Company's dividend cover position.
Furthermore, NESF continues to play a part in tackling global
climate change and enhancing local biodiversity, as well as helping
to reduce the use of fossil fuels in generating electricity in the
UK and further afield.
Results and Key Events
The Company has made progress towards its growth goals whilst
continuing to offer financial stability during the period.
NextEnergy Capital Limited (the "Investment Adviser"), continues to
provide dedicated support to the Company. During the period ended
30 September 2022, the Company:
-- Achieved dividend cover of 1.8x and expecting to be fully
covered with an estimated dividend cover of between 1.3x - 1.5x for
the year ending 31 March 2023;
-- Continued to implement its electricity sales strategy to
increase the certainty of revenue streams by reducing power price
volatility;
-- Secured a GBP60m increase to its existing GBP75m Revolving
Credit Facility ("RCF") with AIB Group (UK) p.l.c. ("AIB") &
NatWest, in addition to signing a two-year extension to its GBP70m
RCF with Santander UK to fund the investment pipeline (both at
favourable rates);
-- Signed its second international co-investment with NextPower
III LP taking a 13.6% stake in a 210MW solar project currently
under construction in Santarém, Portugal;
-- Commenced a co-located battery retrofit programme,
identifying potential sites across NESF's current UK operating
solar assets;
-- Advanced its position in the energy storage sector by
increasing its strategic joint venture partnership with energy
storage specialist EelPower Limited to GBP300m in total via a 75%
stake in a new GBP200m Joint Venture Partnership vehicle
("JVP2");
-- Started construction on the Company's first 50MW battery
storage project in Fife, Scotland (expected to be energised and
grid connected in the first half of 2023) through its pre-existing
Joint Venture Partnership vehicle with EelPower Limited
("JVP1");
-- Commenced construction works for Whitecross (36MW) and grid
preparation works for Hatherden (50MW) and secured Contracts for
Difference ("CfDs") for 100% of the generating capacity of both
new-build UK solar projects; and
-- Gained classification under Article 9 of the EU Sustainable
Finance Disclosure Regulation and EU Taxonomy Regulation.
Following the period end, the Company:
-- Acquired the development rights for a high-quality 250MW
lithium-ion battery storage project in the East of England through
JPV2 for GBP32.5m; and
-- Released its first standalone sustainability report, which
highlights NESF's contribution to biodiversity, climate change and
ethical supply chains through its operations.
Dividend Target
NESF has a progressive annual dividend policy, and when
appropriate, the Board considers increasing the target dividend
paid to shareholders. To date the Board has increased the target
dividend at least in line with yearly UK RPI every year since the
Company listed in 2014. In April 2022, the Board of NESF approved a
target dividend of 7.52 pence per ordinary share for the year
ending 31 March 2023, representing a 5.0% increase from the
previous year (compared with 4.1% calculated RPI rise published by
the Office for National Statistics ("ONS") for the 2021 calendar
year).
The Company has achieved all annual dividend targets whilst
maintaining a covered dividend since IPO.
Standalone Battery Storage
The Company's first 50MW battery storage project through JVP1 is
currently under construction in Fife, Scotland. The project will
initially operate at 1 hour duration. The Company intends to
increase the duration of the project to 2 hours and current
construction works include the infrastructure necessary for that
extension. In September 2022, the Company announced that it had
advanced its position in the energy storage sector through a new
GBP200m JVP2 with Eelpower Limited ("Eelpower"). JVP2 reflects the
successful relationship built with Eelpower, offering enhanced
terms by increasing NESF ownership to 75%, with Eelpower holding
the remaining 25%.
Following the period end, the Company announced its first
investment through JVP2. The Company acquired the development
rights for a high-quality 250MW lithium-ion battery storage project
in the East of England. The project has already secured planning
permission and further demonstrates the value delivered through its
relationship with Eelpower. Once constructed this will take the
total current announced standalone battery storage projects in the
portfolio to 300MW.
Full construction of the project remains subject to shareholder
and FCA approval as the Company's existing policy is limited to 10%
of Gross Asset Value into energy storage. The Company will be
consulting investors over the coming months to seek support to
increase its energy storage limit to allow the Company to fully
capture the energy storage growth opportunities available to
it.
Co-Located Battery Storage
In April 2022, post the year end, NESF announced a new co --
located battery storage retrofit programme across the Company's 91
UK operating solar farms. As part of this programme the first site
for a co-located battery project was identified, extending the
existing 11MW North Norfolk solar farm to include a 6MWh/12MWh
battery system. Planning permission for the co-located battery
system has been secured and the Company is in discussions with the
local distribution network operator to confirm an energisation
date. An additional four potential locations for co-located battery
storage systems have been identified to date and are being
progressed into development stage.
Co-Investments
As a result of being an investor in NextPower III LP ("NPIII", a
NextEnergy Capital managed private equity solar infrastructure fund
that invests in OECD markets globally), NESF benefits from co --
investment opportunities through direct stakes in solar assets
alongside large international institutional investors on a no fee,
no carry basis. This is particularly beneficial as it provides the
Company with access to an attractive new pipeline of potential
international assets not available to other market participants or
investors. Energisation of the Company's first co-investment, a
Spanish 50MW solar project, Agenor Hive S.L.U ("Agenor"), is
expected to occur in 2023.
In May 2022, the Company announced a second co-investment in
Portugal, Santarém. The Company acquired a 13.6% stake in the 210MW
solar asset in Portugal for a consideration of EUR22.5m.
Energisation of this project is expected to take place in 2023.
Once energised, Santarém is expected to benefit from a long-term
PPA for the sale of electricity which is currently being negotiated
with a creditworthy counterparty. Co-investments with NextPower III
have thus already amounted to a total of c.EUR33.5m alongside the
Company's US$50m commitment to NextPower III.
Continued Growth in UK Solar
The Company also commenced construction of Whitecross, a 36MW
utility solar asset, located in Lincolnshire. The original
construction date of the asset was deferred from H2 2021 due to
supply chain risks post Covid-19 which have been sufficiently
addressed. The asset is now expected to be energised during Q1 2023
and will generate enough renewable electricity each year to power
approximately 10,000 households.
During the period, the Company commenced grid connection works
and construction mobilisation phase at Hatherden, a 50MW
subsidy-free solar farm.
The two projects, Whitecross and Hatherden, have been selected
to be part of the fourth CfD Allocation Round (AR4). The CfDs last
for 15-years, are index linked to inflation (CPI) annually, and are
scheduled to commence from 31 March 2025 at the AR4 solar PV strike
price of GBP45.99/MWh (set in 2012 equivalent prices).
Whitecross and Hatherden form part of a selection of
subsidy-free projects totaling 150MW and including High Garret
(8.4MW), Hall Farm 2 (5.4MW) as well as Staughton (50MW). The
successful selection of the 150MW subsidy-free portfolio
demonstrates the Company's ability to respond efficiently and
effectively to a changing UK solar market through its expertise in
identifying opportunities and maximising risk-adjusted returns.
During the period, NESF also added a 0.18MW commercial rooftop
solar asset, Holiday Inn, to its portfolio. It is part of an
agreement made with the renewable energy developer, Zestec. The
asset is located on a Holiday Inn in Nottinghamshire and benefits
from an attractive 25-year power purchase agreement ("PPA") for
100% of its generated volume.
NAV and Operating Results
At the period end, the ordinary shareholders' NAV was GBP724.7m
equivalent to 122.9p per ordinary share (31 March 2022: GBP668.5m,
113.5p per ordinary share). The substantial change in NAV over the
six-month period reflects a large increase in power price forecasts
(+12.0p per ordinary share) despite discounting the power curves
for the inherent uncertainty and an upward revision in short-term
inflation forecasts (+7.5p per ordinary share). The above NAV
drivers were offset by a 0.5% discount rate increase to unlevered
operating UK solar assets in the context of increasing UK long-term
gilt yields, driven by the Bank of England ("BoE") base rate
increases to +2.25% during the period (-3.7p per ordinary
share).
Profit and comprehensive income for the period was GBP77.1m (30
September 2021: GBP45.5m) with earnings per ordinary share of 13.1p
(30 September 2021: 7.74p). Cash dividend cover (pre-scrip
dividends) was 1.8x (30 September 2021: 1.0x).
As at 30 September 2022, NESF had an annualised Ordinary
Shareholder Total Return since IPO of 7.7% (31 March 2022: 6.7%)
and an annualised NAV total return since IPO of 9.1% (31 March
2022: 8.0%). At the period end, the NESF share price was 111.0p,
which was a 9.7% discount to the NAV per ordinary share of
122.9p.
Power Prices
The dramatic increases in UK and European wholesale power prices
from the previous year has sustained during the current period. The
volatility is attributable to reduced gas supply following the
conflict in Ukraine, which was exacerbated by pre-existing low
levels of gas storage across the EU. UK electricity prices remain
extremely volatile and forecasts estimate power price approaching
GBP500/MWh for early winter 2023 and prices around GBP250/MWh more
than one year beyond the valuation date.
Given the recent volatility in power prices and, at the time of
calculating the NAV, the possibility of a price cap or windfall tax
on renewable generation being implemented by the UK government, the
Company discounted the forward power prices as supplied by its
market consultants which it uses in the calculation of its NAV. The
Company does not consider that the short-term power price forecasts
are a reliable reflection of the power prices which are likely to
be received for future generation. Therefore, where prices have not
been fixed/hedged, forecast power prices are discounted to capture
this underlying uncertainty and to reduce risk associated with
future cash flows. The discounts applied to the Company's NAV
analysis lead to a reduction of 7.5p / share in the Company's NAV.
Further details of the discounts applied to forecast power prices
can be found in the Investment Adviser's Report.
Of the Company's revenues during the period, 51.4% were derived
from government subsidies and long-term PPAs and, at the end of the
period, the average remaining weighted life of the subsidies was
12.5 years.
The remaining 48.6% of the Company's revenues were derived from
selling the electricity generated to carefully selected
counterparties in the open market and, therefore, are exposed to
market power price movements until the price has been locked
('hedged'). The Asset Manager's electricity sales desk is focused
on securing the best terms for NESF's electricity sales. This
flexible approach is designed to protect against adverse short-term
price movements whilst also enabling the Company to secure
attractive fixed prices for specified future time periods which
provide increasing certainty on dividend cover.
Looking forward to the next three financial years, as at 10
November 2022, the Company has agreed pricing covering 83% of the
total portfolio (716MW).
-- 93.3% of UK budgeted generation for the 2022/23 financial
year (average fix price of GBP86.2MWh);
-- 74.1% of UK budgeted generation for the 2023/24 financial
year (average fix price of GBP72.9MWh);
-- 44.3% of UK budgeted generation for the 2024/25 financial
year (average fix price of GBP89.7MWh); and
-- 13.0% of UK budgeted generation for the 2025/26 financial
year (average fix price of GBP147.2MWh).
Portfolio Performance
Energy generated during the period was 639 GWh (30 September
2021: 539GWh) and the portfolio achieved a generation
outperformance of 6.1% (30 September 2021: 1.1%), increasing
revenues by an estimated GBP4.9m against budget (30 September 2021:
GBP0.9m). During the period, solar irradiation across the portfolio
was 9.9% above budget (30 September 2021: 2.3%).
The Company's UK portfolio performed above expectations with
generation outperformance of 6.4% (30 September 2021: 1.1%) and the
Italian portfolio performed above expectations with generation
outperformance of 1.6% (30 September 2021: 3.3%).
Debt Strategy
At the period end, the Company announced that it had increased
the commitments available under its Revolving Credit Facility
("RCF") with AIB Group (UK) p.l.c. ("AIB") & NatWest from
GBP75m to GBP135m. The additional commitments have been agreed on
attractive terms with a margin of 120bps over SONIA ("Sterling
Overnight Index Average"), available until June 2024. The Company
also signed a two-year extension to its GBP70m RCF with Santander
UK to fund the investment pipeline.
As at 30 September 2022, the Company had GBP200m of preference
shares (31 March 2022: GBP200m). The Company's subsidiaries also
had financial debt outstanding of GBP336m, inclusive of NextPower
III debt of GBP5.9m (31 March 2022: GBP283m).
Of the financial debt, GBP179.6m represented two long-term fully
amortising debt facilities, GBP150.2m was drawn under two RCFs and
GBP5.9m was the look-through debt in relation to the US$50m
commitment into NextPower III.
At the period end, the Company's subsidiaries had GBP54.8m (30
September 2021: GBP86m) undrawn from two RCFs and the Company had a
cash balance of c.GBP11.7m (30 September 2021: GBP4.3m).
The total financial debt represented 27% of Gross Asset Value
("GAV") as at 30 September 2022 (31 March 2022: 26%). At the same
reporting date, the total gearing comprising the total financial
debt and the preference shares represented 42% of GAV (31 March
2022: 42%) within the 50% limit contained within the investment
policy.
Dividends Paid
The Directors have approved a second interim dividend of 1.88p
per ordinary share, which will be paid on 31 December 2022 to
ordinary shareholders on the register as at the close of business
on 17 November 2022. Following the payment of the second interim
dividend, the Company will have paid total dividends of 3.76 per
ordinary share in respect of the six months ended 30 September 2022
(30 September 2021: 3.58p).
Six months ended: Cash dividends Scrip dividend Total distributions
30 Sept 2022 GBP20.9m GBP0.7m GBP21.6m
30 Sept 2021 GBP19.6m GBP1.3m GBP20.9m
The Company continues to offer a scrip dividend alternative as
approved by ordinary shareholders at the 2022 Annual General
Meeting ("AGM"), details of which can be found on the Company's
website (nextenergysolarfund.com).
Environmental, Social and Governance (ESG)
NESF's commitment to ESG and sustainability remains at the
forefront of its strategy and purpose. The Investment Adviser,
NextEnergy Capital, is a signatory of the United Nations'
Principles for Responsible Investments and integrates ESG
principles into all aspects of the NextEnergy Group's investment
and asset management processes. NESF incorporates ESG factors into
all investment decisions by implementing the Investment Adviser's
Sustainable Investment Policy throughout the investment process,
from preliminary screening through to risk management during the
ownership phases.
Net Zero Alignment
Aligned with the Company's commitment to support the UK
Government's net zero ambitions presented at COP26, NESF's
portfolio, during the period ended 30 September 2022, generated 639
GWh of clean electricity, contributing to the avoidance of 266,500
tonnes of CO2e emissions (30 September 2021: 229,000, tonnes CO2e)
and equivalent to powering 354,274 UK homes for six months (30
September 2021: 299,000). This is roughly equivalent to powering a
city with 836,087 inhabitants (e.g. Manchester and Newcastle
combined) or removing 176,245 cars off the road for six months (30
September 2021: 151,260 cars). The above data has been calculated
by the Green Analytics team of the Green Investment Group, a
third-party climate related data provider.
Biodiversity Net Gain
NESF's 91 UK solar assets provides a great opportunity to
achieve biodiversity net gain ("BNG") across our operational sites
through the implementation of the Universal Biodiversity Management
Plan programme. The Investment Manager is actively engaged with the
Department for Environment Food & Rural Affairs ("Defra")
through consultation on the development of the BNG Site Register
and continues to work closely throughout the planning process to
ensure that the development pipeline is compliant with the
Environment Act 2021 and any pending secondary legislation for
BNG.
The importance of applying mitigation hierarchy is well
understood across all aspects of NESF's investment lifecycle, from
mergers and acquisitions, to planning, development, construction
and operational management of the assets. The Investment Manager is
engaged with applying environmental governance to ensure consistent
application of biodiversity controls, which also considers on-site
biodiversity opportunities such as encouraging wildflower meadows,
installing bug hotels, partnering with local beekeepers and other
initiatives to improve the local biodiversity, as well as local
community programmes. Please refer to the Sustainability report on
the NESF website:
nextenergysolarfund.com/esg/transparency-and-reporting/.
Supply Chain Management
As detailed in the Company's Sustainability Report, the
Investment Adviser's Head of ESG, Giulia Guidi, chairs the SEUK
task group on Responsible Sourcing and has been at the forefront of
a collaborative industry initiative between SEUK and SPE to promote
responsible production in the solar sector's supply chain since
2021. The Solar Stewardship Initiative (SSI) was launched in
October 2022 with the Investment Adviser acting not only as a
sponsor and supporter, but also playing a key role as a coordinator
of the SSI launch for SEUK. NESF continues to strengthen its supply
chain risk management, whereby the ESG, procurement, construction
and investment teams work together to ensure that contractors and
suppliers abide by the adviser's code of conduct and ESG
standards.
Positive Social Contribution
NESF contributes to local growth and development wherever its
assets are located. The Company is dedicated to ensuring
best-practice labour standards are applied by all its contractors.
In addition to the ESG activities on behalf of NESF and other
clients, the NextEnergy Group continues to donate at least 5% of
its net profits to the NextEnergy Foundation ("Foundation"), which
was established in 2017. The Board and I are proud that NESF
supports the Foundation. The Foundation participates proactively in
the global effort to reduce carbon emissions, provide clean power
sources in regions where they are not available and contribute to
poverty alleviation. To find out more information please scan the
QR code below.
EU Taxonomy and Sustainable Finance Disclosure Regulation
NESF complies with the requirements of the EU Taxonomy and
Sustainable Finance Disclosure Regulation ("SFDR"). The Company's
legal adviser has confirmed that NESF is classified under Article 9
of the SFDR, as the Company is marketed in the EU and has
sustainable investment as its objective. The Company's sustainable
investment objectives arise from its contribution to climate change
mitigation, addressed through its focus on investments in solar
assets and battery storage assets. In addition, the Company has a
robust ESG integrated process which is aligned with the "Do Not do
Significant Harm" (DNSH) criteria of the EU Taxonomy, and
implements strong safeguard on social, community and human right
impact across its value chain. In light of this classification,
NextEnergy Group has made the relevant disclosures (SDFR Annex III
and V) for NESF, available on the Company's website
(nextenergysolarfund.com).
Task Force on Climate-Related Financial Disclosures
NESF recognises the importance of reporting on the impacts of
climate change and has been an official supporter of the goals of
the Task Force on Climate-related Financial Disclosures ("TCFD")
since September 2019. The Company has included the Company's full
TCFD report on pages 46-51 of 31 March 2022 annual report and has
also disclosed the report as a stand-alone document on its
website.
Appreciation
The Board would like to thank the Investment Adviser and its
employees for their hard work, continuing to deliver substantial
value to the Company's ambitions to deliver sustained high
performance and significant positive impact.
Outlook
The Board, Investment Manager and Investment Adviser believe
that the market environment continues to be favourable for the
Company and will be consulting investors over the coming months to
seek support to increase its energy storage limit to allow the
Company to fully capture the energy storage growth opportunities
available to the Fund.
Undoubtedly, macro-economic and political events have impacted
and will continue to impact the renewable sector in which the
Company operates. Mitigating risk and increasing visibility of
future cash flows remains a priority for the Fund. The increase in
power price volatility during the calendar year and in forward
pricing has underlined the benefit and value of the Company's
hedging strategy through the Investment Adviser's active
electricity trading desk. The price for electricity is driven by
several factors that are inherently difficult to predict but is
ultimately dependent on supply and demand. In the current unstable
economic climate, the Board continues to closely monitor both macro
and micro economic indicators and governmental information to
assess the potential future impact on the Company's activities.
ESG integration continues to be a core part of NESF's business
strategy, ensuring that the Fund not only delivers on climate
mitigation (i.e. carbon emission avoided), but it also contributes
to biodiversity, community benefits and a more transparent supply
chain. The implementation of the ESG policy is integrated into NESF
investment decisions and across the whole value chain. Thanks to an
ESG expertise, the Company continues to lead the industry by
example, from its commitment towards biodiversity net gain, its
strong transparency and reporting practices, as well as its
extensive engagement with industry associations, NGOs and experts
to advance the sustainable energy transition. The COP27 climate
change conference and upcoming COP15 biodiversity conference will
set out ambitious plans on a global stage to take action towards
achieving the world's collective climate goals as agreed under the
2015 Paris Agreement, and addressing the critical importance of
biodiversity, further supporting the need for robust ESG
integration throughout the Company.
NESF continues to consolidate its leadership position in the
growing UK long-term corporate PPA market, building upon the
landmark 100MW Camden acquisition with PPA off taker AB InBev. This
PPA market can provide long-term, reliable cashflows for the
Company, whilst supporting large corporates' energy needs through
their desire to consume renewable green energy and to help tackle
climate change.
NESF is continually monitoring its power price hedging
strategies in a volatile market for the sale of electricity from
assets to secure attractive risk-adjusted returns.
The Company continues to identify additional co-located battery
storage opportunities through its retrofit programme, in addition
to its existing joint ventures with Eelpower for standalone battery
storage. Working closely with leading delivery partners in the UK
battery sector, NESF expects that co-location of battery storage
systems alongside the Company's existing solar portfolio will
provide additional asset, technology and revenue diversification,
whilst also accessing the attractive future revenue opportunities
that battery storage systems present.
The Company has a strong pipeline of international growth
opportunities on a direct and co-investment basis, as well as its
pipeline of electricity storage assets in the UK. The pipeline has
been composed to complement the existing portfolio, diversify some
asset-specific/market risks, and enhance shareholder returns.
NESF is aiming to extend the useful life of two further assets
during the current financial year, adding to the 35 UK assets
(337MW) which have already secured extensions since IPO. These
extensions will be value accretive by increasing long-term
revenues.
The Company has demonstrated that it can be resilient to the
volatility that the Covid-19 pandemic and Ukraine conflict has
posed, and the Company remains well placed to continue to meet its
investment objectives and harness growth opportunities in the
future which are in line with the Company's strategic goals.
Finally, as demonstrated at last year's COP26 conference, the UK
is setting an example to the rest of the world on how economies can
change their energy mix to tackle climate change. The next six
months provide an exciting opportunity for NESF as it continues to
invest in both solar assets and energy storage. The Board strongly
believes that the Company is making a real difference to the UK
energy landscape and looks forward to helping deliver both global
net zero goals and value to our shareholders.
Kevin Lyon,
Chairman
18 November 2022
Investment Adviser's Report
NextEnergy Group is a leading specialist solar and energy
storage investment manager and asset manager. The NextEnergy Group
is responsible for the acquisition and management of the Company's
portfolio, including the sourcing and structuring of new
investments and advising on the Company's financing strategy. It
has c.$2.9bn of assets under management and employs over 250 people
worldwide.
Investment Adviser's Investment Committee
The Investment Adviser's Investment Committee comprises Michael
Bonte-Friedheim, Aldo Beolchini, Giulia Guidi and Ross Grier, who
have in excess of 70 years' combined industry experience.
Michael Bonte-Friedheim is Founding Partner and CEO of NextEnergy Group
Aldo Beolchini is Managing Partner and Chief Investment Officer of NextEnergy Capital
Giulia Guidi is Head of ESG at NextEnergy Capital
Ross Grier is UK Managing Director of NextEnergy Capital
Results
NextEnergy Capital Limited, the Investment Adviser, continues to
provide dedicated support to the Company through what has been a
volatile 6-month period of high economic and political instability.
We are closely monitoring economic developments and governmental
information to assess the potential future impact on the Company's
activities.
As at 30 September 2022, the NAV per ordinary share was 122.9p
(31 March 2022: 113.5p). The substantial change in NAV over the six
month period reflects a large increase in power price forecasts
(+12.0p per ordinary share) and an upward revision in short-term
inflation forecasts (+7.5p per ordinary share). The above NAV
drivers were offset by a 0.5% discount rate increase to unlevered
operating UK solar assets in the context of increasing UK long-term
gilt yields (-3.7p per ordinary share).
UK power prices have remained at extraordinarily high levels and
there is significant uncertainty that price levels for renewable
generation will be in-line with current forecasts (which are
reflecting power prices in excess of GBP500/MWh for early parts of
2023, and prices around GBP300/MWh more than one year beyond the
valuation date). Given the recent volatility in power prices and,
at the time of calculating the NAV, the possibility of a price cap
or windfall tax on renewable generation being implemented by the UK
government, the Company discounted the forward power prices as
supplied by its market consultants which it uses in the calculation
of its NAV. The Company does not consider that the short-term power
price forecasts are a reliable reflection of the power prices which
are likely to be received for future generation. Therefore, where
prices have not been fixed/hedged, forecast power prices are
discounted to capture this underlying uncertainty and to reduce
risk associated with future cash flows. The discounts applied to
the Company's NAV analysis lead to a reduction of 7.5p / share in
the Company's NAV. Further details of the discounts applied to
forecast power prices can be found below.
Investment Highlights
In line with the investment policy, the Company continues to
advance a significant pipeline of UK solar assets, international
solar assets, UK battery storage assets as well as international
solar co-investment opportunities through NESF's commitment to
NextPower III ("NPIII"). Most notably, the Company has a $50m
commitment ($30.9m currently drawn) into NPIII, two battery storage
Joint Venture Partnerships with Eelpower Limited (c.300MW) and UK
solar investments (86MW). These, coupled with a substantial
forecasted increase in clean energy investment levels (relative to
2020), as outlined in the IEA World Energy Outlook 2022 report,
provide strong momentum into the second half of the financial year,
where significant progress is being made in executing additional
dividend-enhancing acquisitions.
These investment opportunities aim to achieve robust financial
returns, increase dividend cover and add geographical,
technological, and revenue diversification to the NESF portfolio.
The Company envisages that realisation of the future pipeline will
be funded through a mixture of drawdowns on existing Revolving
Credit Facility ("RCF") facilities and future equity issuances.
International Solar Co-investments
During the period, the Company has continued to expand into new
geographies through co-investments alongside NPIII. NPIII is a
US$806m private equity solar fund focused on utility scale solar
assets in OECD markets with a portfolio of operational and
in-construction solar assets. NESF's US$50m commitment also unlocks
attractive co-investment opportunities on a direct investment basis
alongside NPIII and other limited partners in the NPIII fund, on a
no-fee, no carry basis.
In January 2022, the Company announced its first co-investment
consisting of a 24.5% stake in a Spanish 50MW utility scale solar
project, Agenor. In May 2022, the Company announced a 13.6% stake
in Santarém, its second co-investment with NPIII, a 210MW solar
asset in Portugal. Energisation of the project is expected to take
place in 2023. Once energised, Santarém is expected to benefit from
a long-term PPA for the sale of electricity which is currently
being negotiated with a robust creditworthy counterparty.
These investments will benefit NESF in the following ways:
-- Low revenue risk through entering PPAs with high-credit counterparties; and
-- Additional geographical diversification.
UK Battery Storage Investments
NESF has continued to diversify its portfolio through expansion
into the energy storage space. NESF has developed a strong
relationship with Eelpower Limited ("Eelpower"), which has provided
the Company with access to leading UK battery storage expertise.
The company's first GBP100m Joint Venture Partnership vehicle
("JVP1") was announced last year and is owned 70% by NESF and 30%
by Eelpower.
The Company's first 50MW battery storage project through JVP1 is
currently under construction in Fife, Scotland, and is expected to
be energised and grid-connected in the first half of 2023.
In September 2022, NESF entered its second GBP200m Joint Venture
Partnership vehicle ("JVP2") with Eelpower. JVP2 benefits from
enhanced terms by increasing NESF ownership to 75%, with Eelpower
holding the remaining 25%. Following the period end, the Company
announced that it had made its first acquisition as part of JVP2
for GBP32.5m. The project includes the development rights, permits,
and initial grid milestones for a 250MW portfolio of high-quality
battery storage projects and grid connections in the East of
England. The project further demonstrates the value delivered
through the relationship with Eelpower, taking the current
announced standalone battery storage projects in the portfolio to
300MW.
Once constructed, the project will provide vital grid balancing
services whilst harnessing excess electricity generation from wind
at low import prices and then exporting electricity at times of low
generation and high prices.
The project provides a very attractive return profile for the
Company's portfolio. Battery storage is a highly complementary
technology to Solar PV, and the profiles of both are uncorrelated,
providing further diversification to the Company's portfolio from a
technology, revenue and geographic perspective.
The Directors have concluded that both Joint Venture
Partnerships meet the control requirements of the relative
accounting standards and are therefore accounted for as
subsidiaries.
In April 2022, the selection of the first site for a co-located
battery storage project occurred. The project will extend the
existing 11MW North Norfolk solar farm within the NESF portfolio to
include a 6MW/12MWh battery system. Planning permission for the
co-located battery system has been secured and discussions are
ongoing with the local distribution network operator to confirm an
energisation date. Implementing co-located batteries across the
portfolio presents an attractive growth opportunity as these assets
offer both synergies with PV assets, as well as offering
diversification to portfolio income.
UK Solar Investments
Starting in 2018, the Company sourced a pipeline of projects to
be developed into operating subsidy-free assets and set a target of
c.150MW to add into its portfolio.
During the period, the Company commenced construction of
Whitecross, a 36MW utility solar asset, located in Lincolnshire.
The asset is expected to be energised during Q1 2023 and will
generate electricity for approximately 10,000 households' annual
electricity consumption. During the period, the Company commenced
grid connection works and construction mobilisation phase of
Hatherden, a 50MW subsidy-free solar farm in Hampshire.
Alongside three other assets in the NESF portfolio, Whitecross
and Hatherden contribute towards a selection of subsidy-free
projects totaling 150MW. The other three assets being High Garret
(8.4MW), Hall Farm 2 (5.4MW) and Staughton (50MW). The successful
selection of the 150MW subsidy-free portfolio demonstrates the
Company's ability to respond efficiently and effectively to a
changing UK solar market.
Furthermore, Whitecross and Hatherden have been selected to be
part of the fourth CfD Allocation Round (AR4). The CfD programme
lasts for 15-years and is annually index linked to inflation (CPI).
It is rescheduled to commence from 31 March 2025 at the AR4 solar
PV strike price of GBP45.99/MWh (set in 2012 equivalent
prices).
During the period, NESF added a commercial rooftop solar asset
to its portfolio, secured through an existing agreement made with
the renewable energy developer, Zestec. Holiday Inn is a 0.18MW
asset is located on a Holiday Inn in Nottinghamshire and benefits
from an attractive 25-year power purchase agreement ("PPA") for
100% of its generated volume.
The NE Group's Energy Sales desk is responsible for managing the
strategy for the sale of electricity from the subsidy-free
operating assets without long-term contracts. Details on the power
price risk management strategy can be found below and in note 19b
of the Financial Statements.
Newfield, a 0.18MW commercial rooftop solar asset, was removed
from the portfolio following termination of the lease by the
landlord. The Company has received appropriate compensation in line
with the termination clause in the lease agreement.
Portfolio Performance
Energy generated during the period was 639 GWh (30 September
2021: 539GWh) and the portfolio achieved a generation
outperformance of 6.1% (30 September 2021: 1.1%), increasing
revenues by an estimated GBP4.9m against budget (30 September 2021:
GBP0.9m). During the period, solar irradiation across the portfolio
was 9.9% above budget (2021: 2.3%).
The Asset Manager monitors actual performance versus
expectations for assets operational for at least two months post
completion. Similarly, the generation performance of assets that
are yet to pass Preliminary Acceptance Certificate ("PAC") in
accordance with the engineering, procurement and construction
("EPC") contract is not reported by the Asset Manager.
Asset Management Alpha
The Asset Management Alpha is an important metric that allows
the Company to identify the "real" outperformance of the portfolio
due to effective asset management and excludes the effect of
variation in irradiation. The "nominal" outperformance is
calculated as the GWh generated by the portfolio versus the GWh
expected in the assumptions used at the time of acquisition. This
metric can be used for comparison with other peers in the solar
industry.
Irradiation (delta vs. budget) Asset Management Alpha Generation (delta vs. budget)
UK portfolio +10.2% (3.8%) + 6.4%
Italy portfolio +4.0% (2.4%) + 1.6%
Total +9.9% (3.8%) +6.1%
Portfolio Optimisation
The asset manager focusses on implementing technical
improvements across the portfolio, reducing operating costs through
the utilising of existing insurance contracts and re-negotiating
contractual terms by entering into new agreements with
suppliers.
Asset life extensions
As at 30 September 2022, 35 UK assets (337MW), comprising c.39%
of the Company's portfolio, had secured 5, 10 or 15 year lease
extensions. We continue to work on extending the life of the
remaining assets and are targeting a further two assets for the
remainder of the current financial year to 31 March 2023.
Asset optimisation
During the period, 12 sites entered into new Operating and
Maintenance 'O&M' contracts. This has resulted in an overall
reduction from GBP6,622/MW to GBP6,585/MW.
During the period, insurance claims were successfully closed out
for storm damages in relation to solar assets North Farm, High
Garrett and Balhearty. The Company received a combined total
settlement of GBP429k.
As at 30 September 2022, eight assets (62 MW) of the Company's
portfolio are equipped with inverters that were supplied by
Emerson, a solar PV manufacturer that exited the market a few years
ago. Due to their ageing, the inverters have been experiencing an
increased failure rate, the Company has therefore decided to
replace all the Emerson inverters. The works will start in January
2023 and is expected to be completed by Q4 2023.
Solar Irradiation Generation
Six months ended 30 No. of (delta vs. Asset Management (delta vs.
September assets monitored budget) Alpha budget)
--------------------- ------------------ ------------------ ----------------- ------------
2018 84 +8.4% (0.5%) +7.9%
2019 85 +4.8% +0.2% +5.0%
2020 86 +10.8% +0.3% +11.1%
2021 88 +2.4% (1.2%) +1.1%
2022 90 +9.9% (3.8%) +6.1%
--------------------- ------------------ ------------------ ----------------- ------------
Cumulative from IPO
to September 2022 90 +3.6% +1.2% +4.8%
--------------------- ------------------ ------------------ ----------------- ------------
The investment adviser is reviewing options to make strategic
re-investments across the portfolio to support and enhance
long-term asset health
Short/medium-term power purchase agreements
NESF continues to lock in power price hedges over a 48-month
period. This proactive risk mitigation helps secure and underpin
both dividend commitments and dividend cover, whilst reducing
volatility and increasing visibility of cash flows.
NextEnergy Group's energy trading desk, ensure that the
Company's electricity sales strategy increase the certainty of
revenue streams whilst mitigating the negative impact of short-term
fluctuations in the power markets. Secured pricing comprises fixed
price contracts and hedging under the trading contracts.
UK hedging summary(1) FY2022/ 23 FY2023/ 24 FY2024/ 25 FY2025/
26
Generation hedged (%) 93.3% 74.1% 44.3% 13.0%
1 Covers 83% of the total portfolio (716MW) as at 10 November 2022
For the six months ended 30 September 2022, the Italian
portfolio derived c. 82% of revenues from subsidies (principally
FiTs) and c. 12% of revenues resulted from the sale of electricity
under fixed price agreements covering 100% of Italian electricity
generation for calendar year 2022 at a weighted average fixed price
of c.EUR64/MWh (calendar year 2021:EUR45/MWh). For calendar year
2023, c.62% of the Italian portfolio has fixed price agreements in
place for H1 2023 at a weighted average fixed price of EUR91.0/MWh.
For H2 2023, 100% of the Italian portfolio has fixed price
agreements in place at a weighted average fixed price of
EUR139.5/MWh.
OFGEM audits
During the period, no material adjustments to the NAV were made
as a result of Office of Gas and Electricity Markets ("OFGEM")
audits. Since IPO, the 24 OFGEM audits have been successfully
signed-off without impacting ROC accreditations. The NextEnergy
Group has staff who are experienced in dealing with the ongoing
audits. Engagement with OFGEM is through professional advisers and
senior NextEnergy Group staff. The team has identified and mapped
contractual recourse associated with identified risk of loss for
completed and ongoing audits.
Portfolio Valuation
Introduction
The Investment Adviser carries out the fair market valuation of
the Company's underlying investment portfolio in line with its
accounting policies. This valuation is then presented to the
Company's Board for review and approval. The valuation is carried
out quarterly (ad hoc valuations may also be undertaken from time
to time, for example in conjunction with an equity fund
raising).
The valuation principles used are based on a discounted cash
flow methodology except for NPIII which is valued using the
estimated attributable NAV. Assets which are not yet operational,
or where the completion of the acquisition is not imminent at the
time of valuation, use the acquisition cost as a proxy for fair
value.
The Board reviews the operating and financial assumptions used
in the valuation of the Company's underlying portfolio.
Portfolio valuation - key assumptions As at As at
30 September 2022 31 March 2022
UK long-term inflation 2.25% 2.25%
UK short-term inflation
(1 year horizon) 12.4% 8.0%
Weighted average discount rate 6.8% 6.3%
Weighted average asset life 27.0 years 27.5 years
UK short-term power price average (2022-2026) GBP139.1/MWh (real 2022) GBP105.2/MWh (real 2022)
UK long-term power price average (2027-2041) GBP45.6/MWh (real 2022) GBP44.3/MWh (real 2022)
Italy power price average EUR79.1/MWh (real 2022) EUR60.8/MWh (real 2022)
(20 years)
UK corporation tax rate 19% until 2023, 25% thereafter 19% until 2023, 25% thereafter
Managing NESF's merchant market exposure
PPA sourcing and structuring Energy and market risk Market and pricing analysis
management
Run competitive off-taker We measure, monitor and NEC provides pricing
selection processes through manage merchant exposure for NESF projects, supported
our extensive network through selling at spot, by multiple independent
in the solar industry entering into short-term, short and long-term third-party
Quantitative evaluation medium-term and long-term power price forecasts
of the offers in terms PPAs Undertake rigorous analysis
of risk and reward and Constant dialogue with and monitoring of the
devise optimal project-specific investors, banks and main drivers for power
solutions off-takers on developing prices in target markets
Individual view of market new and innovative structures Monitor policy/regulatory
price risks and opportunities for risk diversification developments in the UK
and delivery obligations to enable us to increase and other OECD target
in order to find the portfolio returns markets to obtain an
optimal PPA structure holistic energy market
overview
------------------------------- ---------------------------------
Forecast power prices methodology
For the UK portfolio, we use multiple sources for UK power price
forecasts. At the short end (up to three years), where PPAs exist
we use the PPA prices that have been achieved. For periods where
there are no PPAs in place, we use the short-term market forward
prices. After year two we use a rolling blended average of three
leading independent energy market consultants' long-term central
case projections. This approach allows mitigation of any delay in
response from the three independent market forecasters
("Consultants") used by the Company in publishing periodic
(quarterly) or ad hoc updates following any significant market
development.
For the Italian portfolio, a leading independent energy market
consultant's long-term projections are used to derive the power
curve adopted in the valuation.
The power price forecasts used also include a 'solar capture'
discount which reflects the difference between the prices available
in the market in the daylight hours of operation of a solar asset
versus the baseload prices included in the power price estimates.
This solar capture discount is provided by the Consultants on the
basis of a typical load profile of a solar asset and is reviewed as
frequently as the baseload power price forecasts. The application
of such a discount results in a lower long-term price being assumed
for the energy generated by NESF's portfolio.
Given the recent volatility in power prices and, at the time of
calculating the NAV, the possibility of a price cap or windfall tax
on renewable generation being implemented by the UK government, the
Company discounted the forward power prices as supplied by its
market consultants which it uses in the calculation of its NAV. The
Company does not consider that the short-term power price forecasts
are a reliable reflection of the power prices which are likely to
be received for future generation. Therefore, where prices have not
been fixed/hedged, forecast power prices are discounted to capture
this underlying uncertainty and to reduce risk associated with
future cash flows. The discounts outlined below were applied to the
Company's NAV analysis, leading to a reduction of 7.5p / share in
the Company's NAV.
Time period Discount applied to unhedged portion of portfolio power prices
Q4 2022 No discount has been applied
Q1 2023 50% discount
FY 2023/24 35% discount
FY 2024/25 25% discount has been applied to Summer 2024 price and 20% discount has been applied to Winter
2024 prices
FY 2025/26 10% discount
FY 2026/27 No discount has been applied
Historic - UK power prices
UK electricity day ahead prices increased
from GBP250.4/MWh in March 2022 to
GBP262.6/MWh in September 2022. (Source:
N2EX - UK baseload - day ahead).
Forecast UK power prices (real 2022)
The Company's current UK 20 year
average power price forecast represents
an increase of 15.9% compared to
that used at the end of the previous
financial period (and 37.2% below
the average price used at IPO).
Historic - Italian power prices
Italian electricity day ahead prices
increased from EUR308.9/MWh in March
2022 to EUR429.9/MWh in September
2022. (Source: Gestore Marcati Energetici
- purchasing price).
Forecast Italian power price (real
2022)
On average, the Company's current
Italian long-term power price represents
an increase of 30.1% compared to
that used at the end of the previous
financial year.
Discount rate
During the period, the UK rate of inflation began to increase
and the market started to price in an increase in the base rate of
interest. On 3 November 2022 the Bank of England ("BoE") raised UK
interest rates by 0.75% to 3.0% in line with market expectations at
the end of the period. In the context of higher interest rates in
response to changes to the BoE base rate, the yield on UK long-term
gilts has also increased, putting upward pressure on discount
rates. Therefore, during the period, the Company has increased the
discount rate for unlevered operating UK solar assets by 0.5% to
6.25% (31 March 2022: 5.75%). This change is in line with the
increases in discount rates observed by the Investment Adviser in
the sector in which the Company operates and continues its robust
approach to valuing the portfolio. The previous adjustment to the
unlevered operating UK solar discount rate was made for the
valuation as at 31 March 2021.
Discount rate assumptions Premium As at 30 September 2022 As at 31 March 2022
UK unlevered - 6.25% 5.75%
UK levered 0.7-1.0% 6.95-7.25% 6.45-6.75%
Italy unlevered(1) 1.5% 7.75% 7.25%
Subsidy-free (uncontracted)(2) 1.0% 7.25% 6.75%
Life extensions(3) 1.0% 7.25-8.25% 6.75-7.75%
(1) Unlevered discount rate for Italian operating assets implying 1.50% country risk premium.
(2) Unlevered discount rate for subsidy-free uncontracted
operating assets implying 1.0% risk premium.
(3) 1.0% risk premium for cash flows after 30 years where leases have been extended .
The resulting weighted average discount rate for the Company's
portfolio was 6.8% (31 March 2022: 6.3%). The Company does not use
the weighted average cost of capital ("WACC") as the discount rate
for its investments as it believes that the reduction in WACC
deriving from the introduction of long-term debt financing does not
reflect the greater level of risk to equity investors associated
with leveraged assets or levered portfolios. However, for the
purposes of transparency, the Company's pre-tax WACC as at 30
September 2022 was 5.2% (31 March 2022: 5.3%).
The Company has not included the impact of the discount rates
used in the NPIII investment, as the Company has no control or
influence over these rates and a weighted average discount rate is
not produced by NPIII, as their underlying investments are in
multiple geographies.
Asset life
The discounted cash flow methodology implemented in the
portfolio valuation assumes a valuation time horizon capped to the
current terms of the lease and planning permission on the
properties where each individual solar asset is located. These
leases have been typically entered into for a 25-year period from
commissioning of the relevant solar plants (specific terms may
vary). However, the useful operating life of the Company's
portfolio of solar assets is expected to be longer than 25 years.
This is due to many factors, including:
-- Solar assets with technology components similar to the ones
deployed in the Company's portfolio have been demonstrated to be
capable of operating for over 45 years, with levels of the
technical degradation lower than those assumed or guaranteed by the
manufacturers; local planning authorities have already granted
initial planning consents that do not expire and/or have granted
permissions to extend initial consented periods;
-- The Company owns rights to supply electricity into the grid
through connection agreements that do not expire; and
-- Discounted cash flow valuation assumes a zero-terminal value
at the end of the lease term for each asset or the end of the
planning permission, whichever is the earlier.
Operating performance
The Company values each solar asset on the basis of the minimum
performance ratio ("PR") guaranteed by the vendor, or that
estimated by the appointed technical adviser during the acquisition
due diligence. These estimates have been generally lower than the
actual PR that the Company has been experiencing during subsequent
operations. We therefore deem it appropriate to adopt the actual PR
after two years of operating history when, typically, the plants
have satisfied tests and received Final Acceptance Certification
("FAC").
As at 30 September 2022, 72 solar assets (totalling 602MW)
achieved FAC and their actual PR was used in the discounted cash
flow valuation.
FAC timeline for remaining assets Capacity
(MW)
Financial quarter ending December 2022 55
Financial quarter ending March 2023 56
2023 onwards 152
Total 263
NAV
The Company's NAV is calculated quarterly and based on the
valuation of the investment portfolio provided by the Investment
Adviser and the other assets and liabilities of the Company
calculated by the Administrator. The NAV is reviewed and approved
by the Investment Manager and the Board. All variables relating to
the performance of the underlying assets are reviewed and
incorporated in the process of identifying relevant drivers of the
discounted cash flow valuation.
In accordance with IFRS 10, the Company reports its financial
results as an Investment entity and on a non-consolidated basis
(see note 2c to the Financial Statements). The change in fair value
of its assets during the period is taken through the Statement of
Comprehensive Income.
NAV bridge for the period ended 30 September 2022
The movement in the NAV was driven primarily by the following
factors:
-- An increase in short-term (2022-26) UK power prices forecasts
provided by Consultants, being 32.3% higher than assumptions at 31
March 2022. The Company incorporated and applied appropriate
discounts where necessary to the forecasts released by the
Consultants up to the date of preparation of this Interim
Report;
-- The increase in discount rate for unlevered operating UK solar assets;
-- The upward revision in short-term inflation forecasts;
-- The operating results achieved by the Company's solar assets; and
-- The dividends and operating costs paid during the period.
NAV sensitivity analysis as at 30 September 2022
Additional sensitivity analyses can be found in note 19b to the
Financial Statements.
Operating results
Profit before tax was GBP77.1m (30 September 2021: GBP45.5m)
with earnings per ordinary share of 13.1p (30 September 2021:
7.7p).
Operating expenses and ongoing charges
The operating expenses, excluding preference share dividends
paid by the Company, for the period amounted to GBP3.8m (30
September 2021: GBP3.3m). The Company's ongoing charges ratio
("OCR") was 1.1% (2021: 1.1%). The budgeted OCR for the financial
year ending 31 March 2023 is 1.1%. The OCR, which has been
calculated in accordance with the Association of Investment
Companies recommended methodology, is an Alternative Performance
Measure.
Cash flow analysis
As at 30 September 2022, the Company held cash of GBP11.7m at an
A/+ credit rated financial institution.
Cash received from assets in the period covered the operating
expenses, the preference share dividends, dividends declared to
ordinary shareholders in respect of the period ended 30 September
2022 and part of the investment into HoldCos.
Cash flows of the Company Period ended 30 Sep 2022 Period ended 30 Sep 2021
GBP'000 GBP'000
Company cash balance at 1 April 19,608 10,809
Investment in HoldCos (36,085) (24,057)
Received from HoldCos 57,288 45,026
Directors' fees (138) (106)
Investment Manager fees (2,992) (2,499)
Administrative costs (389) (653)
Dividends paid in cash to ordinary shareholders (20,896) (19,618)
Preference share dividends (4,710) (4,584)
Company cash balance at 30 September 11,686 4,318
NESF Group operating SPV's
The below table represents the unaudited consolidated financial
results of the Company's SPVs
Period ended September 2022 (unaudited) Period ended September 2021 (unaudited)
GBP'000 GBP'000
Total SPVs revenue 95,686 66,799
EBITDA 80,821 54,844
EBIT 52,034 27,959
Cash Dividend Cover
Six months ended GBP'000 Pre-scrip dividends GBP'000
30 September 2022
Cash income for period1 48,273
Net operating expenses for period (3,751)
Preference share dividend (4,763)
Net cash income available for distribution 39,759
Ordinary shares dividend paid during period 21,624
Cash dividend cover (2) 1.8x
(1) Cash income differs from the Income in the Statement of
Comprehensive Income as the latter is prepared on an accruals
basis.
(2) Alternative Performance Measures.
Financing
Financial debt
In June 2022, the NESF Group signed a two-year extension to its
GBP70m RCF with Santander UK, now available until July 2024. In
September 2022, the NESF Group secured GBP60m additional
commitments under an existing RCF from GBP75m to GBP135m, available
until June 2024.
At 30 September 2022, the Company's subsidiaries (including
NPIII) had financial debt outstanding of GBP335.7m (31 March 2022:
GBP283m), on a look-through basis, as shown in the table below. Due
to a combination of low debt levels and RPI linked subsidies, debt
covenants at the HoldCos level would only be breached at very low
power prices (less than c.GBP20/MWh). No covenants breaches have
occurred during the period.
Preference shares
At 30 September 2022, the Company had GBP200m of preference
shares outstanding (31 March 2022: GBP200m). The preference shares
are non-redeemable (except in limited exceptional circumstances),
non-voting and convertible into ordinary shares from 1 April 2036
at their issue price (GBP200m in aggregate) plus any unpaid
preference share dividends at the date of conversion. For financial
accounting purposes, and in line with IFRS the preference shares
are classified as long-term liabilities.
The preference shares are equivalent to non-amortising debt with
repayment in shares, and the Company is not required to use
cashflow, or raise funds, to repay them at the end of their life.
The absence of amortisation enhances the ability to pay the
ordinary share dividend, and repayment in shares removes
refinancing risk.
From 1 April 2030, the Company may elect to redeem all or some
of the preference shares. Redemption of the preference shares by
the Company would provide an attractive uplift if the share price
is trading at a healthy premium. Benefits of the preference shares
for NESF include:
-- A reduction in the exposure to secured debt financing;
-- The fixed preferred dividend of 4.75p per preference share
being a significantly lower all-in annual cash cost to the Company
compared to issuing ordinary shares; and
-- The further optimisation of the Company's capital structure
and, over the long term, increase in cash flows available to fund
ordinary share dividends or for reinvestment compared to
refinancing with conventional long-term amortising financial debt,
thereby increasing the cash dividend cover
The investment management fee is calculated based on the
ordinary share NAV and, accordingly, no management fee is payable
in respect of the preference shares. The terms of the preference
shares can be found in note 23 to the Financial Statements.
Total gearing
The financial debt, together with the preference shares,
represented a total gearing level of 42% (31 March 2022: 42%),
which is below the maximum limit of 50% in the Company's Investment
Policy.
Provider/arranger Type Borrower No. of Loan Tranches Facility Amount Termination Applicable
power to Amount Out-standing (inc. rate
plants Value(2) (GBPm) (GBPm) options
secured(1) (%) to extend)
Fully-amortising
long-term
MIDIS/CBA/NAB debt3 NESH 21 (241MW) 48.2% Medium-term 48.3 41.8 Dec-26 2.91%4
Floating
long-term 24.2 24.2 Jun-35 3.68%(4)
Index-linked RPI +
long-term 38.7 33.85 Jun-35 0.36%
Fixed
long-term 38.7 38.7 Jun-35 3.82%
Debt
service
reserve
facility 7.5 - Jun-26 1.50%
Fully-amortising
long-term NESH RPI +
MIDIS debt3 IV 5 (84MW) 45.0% Inflation-linked 27.5 18.95 Sep-34 1.44%
Fixed
long-term 27.5 22.2 Sep-34 4.11%
Total long-term
debt 212.4 179.6
Revolving
credit NESH SONIA
Banco Santander facility VI 13 (100MW) N/a N/a 70.0 40.5 Jun-24 + 1.60%
Revolving
credit NESH SONIA
Natwest/AIB facility III 19 (226MW) N/a N/a 135.0 109.7 Jun-24 + 1.20%
Total short-term
debt 205.0 150.2
NPIII look
through
debt N/a N/a N/a N/a N/a 5.9(6)
Total debt 335.7
1 NESF has 326MW under long-term debt financing, 326MW under
short-term debt financing and 214MW without debt financing
(excludes NPIII look through debt).
2 Loan to Value defined as 'Debt outstanding / GAV'.
3 Long-term debt is fully amortised over the period secured
assets receive subsidies (ROCs and others).
4 Applicable rate represents the swap rate.
5 Represents the "real" outstanding debt balance. The "nominal"
outstanding debt balances are included in the debt balances
provided in Note 23b to the financial statements.
6 The total combined short and long-term debt in relation to
NESF's commitment into NPIII (on a look through equivalent
basis).
Alignment of interest
As at 16 November 2022, NextEnergy Group employees held 475,194
shares in NESF.
Events After the Balance Sheet Date
Following the period end, NESF signed a GBP32.5m agreement to
acquire the development rights for a high-quality 250MW lithium-
ion battery storage project in the East of England, called Lapwing.
The project was secured through JVP2, the Company's second Joint
Venture Partnership vehicle with Eelpower Limited.
NextEnergy Capital Limited
18 November 2022
Operating Portfolio
Power plant Location Acquisition Subsidy/PPA1 Installed Cost Remaining life
date capacity (GBPm) of plant
(MW) (Years)
Higher
1 Hatherleigh Somerset Apr-14 1.6 6.1 7.3(3) 15.5
2 Shacks Barn Northamptonshire May-14 2.0 6.3 8.2(3) 14.8
3 Gover Farm Cornwall Jan-15 1.4 9.4 11.1(3) 17.2
4 Bilsham West Sussex Jan-15 1.4 15.2 18.9(3) 21.7
5 Brickyard Warwickshire Jan-15 1.4 3.8 4.1(3) 17.1
6 Ellough Suffolk Jul-14 1.6 14.9 20.0(3) 26.4
7 Poulshot Wiltshire Apr-15 1.4 14.5 15.7(3) 16.4
8 Condover Shropshire May-15 1.4 10.2 11.7(3) 17.1
9 Llywndu Ceredigion Jul-15 1.4 8.0 9.4 27.2
10 Cock Hill Farm Wiltshire Jul-15 1.4 20.0 23.6(3) 16.9
Boxted
11 Airfield Essex Apr-15 1.4 18.8 20.6(3) 17.5
12 Langenhoe Essex Apr-15 1.4 21.2 22.9(3) 32.5
13 Park View Devon Jul-15 1.4 6.5 7.7(3) 32.3
14 Croydon Cambridgeshire Apr-15 1.4 16.5 17.8(3) 17.2
15 Hawkers Farm Somerset Jun-15 1.4 11.9 14.5(3) 17.5
16 Glebe Farm Bedfordshire Apr-15 1.4 33.7 40.5(3) 27.2
17 Bowerhouse Somerset May-15 1.4 9.3 11.1(3) 32.5
18 Wellingborough Northamptonshire Jun-15 1.4 8.5 10.8(3) 16.7
19 Birch Farm Essex Sep-15 FiTs UK 5.0 5.3(3) 17.7
Thurlestone
20 Leicester Leicestershire Oct-15 FiTs UK 1.8 2.3 10.6
21 North Farm Dorset Oct-15 1.4 11.5 14.5(3) 32.2
Ellough Phase
22 2 Suffolk Aug-16 1.3 8.0 8.0(3) 33.1
23 Hall Farm Leicestershire Nov-15 FiTs UK 5.0 5.0(3) 37.9
24 Decoy Farm Lincolnshire Mar-16 FiTs UK 5.0 5.2(3) 33.5
25 Green Farm Essex Dec-16 FiTs UK 5.0 5.8 18.5
26 Fenland Cambridgeshire Jan-16 1.4 20.4 23.9(2,4) 17.8
27 Green End Cambridgeshire Jan-16 1.4 24.8 29.0(2,4) 17.9
28 Tower Hill Gloucestershire Jan-16 1.4 8.1 8.8(2,4) 17.5
29 Branston Lincolnshire Mar-16 1.4 18.9 32.4
Great
30 Wilbraham Cambridgeshire Mar-16 1.4 38.1 32.4
31 Berwick East Sussex Mar-16 1.4 8.2 97.9(2,5) 19.0
32 Bottom Plain Dorset Mar-16 1.4 10.1 32.7
33 Emberton Buckinghamshire Mar-16 1.4 9.0 37.6
34 Kentishes Essex Jul-17 1.2 5.0 4.5 37.5
35 Mill Farm Hertfordshire Jul-17 1.2 5.0 4.2 34.3
36 Bowden Somerset Sep-17 1.2 5.0 5.6 34.4
37 Stalbridge Dorset Jan-17 1.2 5.0 5.4 34.3
38 Aller Court Somerset Sep-17 1.2 5.0 5.5 19.5
39 Rampisham Dorset Sep-17 1.2 5.0 5.8 20.0
40 Wasing Berkshire Aug-17 1.2 5.0 5.3 24.2
41 Flixborough South Humberside Aug-17 1.2 5.0 5.1 25.3
42 Hill Farm Oxfordshire Mar-17 1.2 5.0 5.5 29.4
43 Forest Farm Hampshire Mar-17 FiTs UK 3.0 3.3 29.5
44 Birch CIC Essex May-17 FiTs UK 1.7 1.7 17.7
45 Barnby Nottinghamshire Aug-17 1.2 5.0 5.4 19.8
46 Bilsthorpe Nottinghamshire Aug-17 1.2 5.0 5.4 20.2
47 Wickfield Wiltshire Mar-17 1.2 4.9 5.6 20.6
48 Bay Farm Suffolk Sep-17 1.6 8.1 10.5 32.4
49 Honnington Suffolk Sep-17 1.6 13.6 16.0 32.3
Macchia
50 Rotonda Apulia Dec-17 FiTs Italy 6.6 13.3
51 Lacovangelo Apulia Dec-17 FiTs Italy 3.5 13.6
52 Armiento Apulia Dec-17 FiTs Italy 1.9 13.6
53 Inicorbaf Apulia Dec-17 FiTs Italy 3.0 116.22,6 13.4
Gioia del
54 Colle Campania Dec-17 FiTs Italy 6.5 14.1
55 Carinola Apulia Dec-17 FiTs Italy 3.0 14.1
56 Marcianise Campania Dec-17 FiTs Italy 5.0 14.0
57 Riardo Campania Dec-17 FiTs Italy 5.0 116.2(2,6) 14.0
58 Gilley's Dam Cornwall Nov-17 1.3 5.0 6.4 32.2
Pickhill
59 Bridge Clwyd Dec-17 1.2 3.6 3.7 35.0
60 North Norfolk Norfolk Dec-17 1.6 11.0 14.6 22.1
61 Axe View Devon Dec-17 1.2 5.0 5.6 24.9
62 Low Bentham Lancashire Dec-17 1.2 5.0 5.4 23.4
63 Henley Shropshire Jan-18 1.2 5.0 5.2 23.7
64 Pierces Farm Berkshire May-18 FiTs UK 1.7 1.2 16.6
65 Salcey Farm Buckinghamshire May-18 1.4 5.5 6.5 16.6
66 Thornborough Buckinghamshire Jul-18 1.2 5.0 5.7 19.2
Temple
67 Normaton Derbyshire Jul-18 1.2 4.9 5.6 18.8
Fiskerton
68 Phase 1 Lincolnshire Jul-18 1.3 13.0 16.6 27.5
69 Huddlesford HF Staffordshire Jul-18 1.2 0.9 0.9 18.3
Little
70 Irchester Northamptonshire Jul-18 1.2 4.7 5.9 19.3
71 Balhearty Clackmannanshire Jul-18 FiTs UK 4.8 2.6 28.3
72 Brafield Northamptonshire Jul-18 1.2 4.9 5.8 33.7
73 Huddlesford PL Staffordshire Jul-18 1.2 0.9 0.9 18.5
74 Sywell Northamptonshire Jul-18 1.2 5.0 5.9 18.6
75 Coton Park Derbyshire Jul-18 FiTs UK 2.5 1.1 18.6
76 Hook Somerset Aug-18 1.6 15.3 21.8(2) 31.5
77 Blenches Wiltshire Aug-18 1.6 6.1 7.8(2) 16.2
78 Whitley Somerset Aug-18 1.6 7.6 10.4(2) 31.3
79 Burrowton Devon Aug-18 1.6 5.4 7.3(2) 31.0
80 Saundercroft Devon Aug-18 1.6 7.2 9.6(2) 31.4
81 Raglington Hampshire Aug-18 1.6 5.7 8.1(2) 31.3
82 Knockworthy Cornwall Aug-18 FiTs UK 4.6 6.6(2) 15.5
Chilton
83 Canetello Somerset Aug-18 FiTs UK 5.0 9.0(2) 29.8
84 Crossways Dorset Aug-18 FiTs UK 5.0 10.0(2) 29.8
85 Wyld Meadow Dorset Aug-18 FiTs UK 4.8 7.1(2) 30.3
Rooftop
86 Ermis Portfolio Jul-18 FiTs UK 1.0 3.0 14.1
Rooftop
87 Angelia Portfolio Jul-18 FiTs UK 0.2 0.6 14.0
88 Ballygarvey County Antrim Jul-19 1.4 NIROCs 8.2 8.5 25.3
89 Hall Farm 2 Leicestershire Aug-19 Subsidy-free 5.4 2.5 36.8
90 Staughton Bedfordshire Dec-19 Subsidy-free 50.0 27.4 36.4
91 High Garret Essex Oct-20 Subsidy-free 8.4 4.1 37.6
92 Marham Norfolk Jan 21 Long-term PPA 1.0 0.7 38.7
93 Sutterton Lincolnshire Mar 21 Long-term PPA 0.4 0.3 38.3
94 The Grange Nottinghamshire Feb 21 Long-term PPA 50.0 32.1 16.9
95 South Lowfield Yorkshire Jun-21 Long-term PPA 50.0 29.6 22.5
96 JSC (NZ)1 Worcestershire Mar-19 FiTs UK 0.04 0.04 24.6
97 Karcher (NZ)1 Oxfordshire Nov-19 Subsidy-free 0.3 0.2 23.3
98 Dolphin (NZ)1 East Sussex Jul-21 Subsidy-free 0.2 0.2 23.4
Holiday Inn
99 (NZ)1 Northamptonshire Apr-22 Long-term PPA 0.18 0.2 24.6
Subtotal 865.0 999.5 27.0(7)
Multiple
100 NextPower III8 OECD Markets Jun-21 long-term PPAs 21.78 28.3 n/a
Total 886.7 1027.8
(1) 1ROCs, unless otherwise stated. An explanation of the ROC subsidy is available at www.ofgem.gov.uk/environmental-programmes/renewables-obligation-ro .
2 With project level debt.
3 Part of the Apollo portfolio.
4 Part of the Thirteen Kings portfolio.
5 Part of the Radius portfolio.
6 Part of the Solis portfolio.
7 Average years remaining.
8 21.7MW represents the proportion of NPIII operational assets
owned by NESF on a look through equivalent basis as at 30 September
2022. NPIII is a portfolio of assets at different stages of their
project life cycle.
Portfolio Generation Performance
Power plant Operational Period ended 30 September 2022 Since acquisition
date
Generation Solar Generation Solar Generation
(GWh) irradiation delta irradiation delta
delta (%) delta (%)
(%) (%)
Higher
1 Hatherleigh Apr-13 4.1 4.2 (1.7) 1.7 4.0
2 Shacks Barn Mar-13 4.5 5.6 9.0 2.9 8.0
3 Gover Farm Oct-14 6.0 10.8 (7.3) 3.9 0.4
4 Bilsham Nov-14 12.2 9.6 10.7 5.5 6.4
5 Brickyard Nov-14 2.6 6.0 2.4 3.5 5.7
6 Ellough Mar-14 10.9 8.9 4.6 1.5 5.1
7 Poulshot Mar-15 10.2 5.2 5.8 1.3 5.2
8 Condover Mar-15 6.7 1.2 (0.6) 0.4 0.9
9 Llywndu Feb-15 6.0 2.3 10.8 (2.5) 4.5
10 Cock Hill Farm Mar-15 14.7 6.7 7.9 3.4 5.3
Boxted
11 Airfield Mar-15 14.7 9.7 12.4 3.9 6.1
12 Langenhoe Mar-15 17.2 13.6 15.9 6.7 9.7
13 Park View Mar-15 4.9 3.3 3.9 (1.0) 1.5
14 Croydon Mar-15 12.8 15.2 20.4 6.9 8.0
15 Hawkers Farm Mar-15 9.0 4.4 6.9 1.0 4.0
16 Glebe Farm Mar-15 25.9 14.5 18.3 7.2 12.6
17 Bowerhouse Mar-15 6.1 8.3 (5.7) 3.6 (0.7)
18 Wellingborough Mar-14 6.3 9.2 13.1 3.1 5.9
19 Birch Farm Jun-15 3.9 12.2 11.9 5.0 6.9
Thurlestone
20 Leicester1 Apr-13 1.1 0.0 4.0 0.0 0.2
21 North Farm Mar-15 8.4 4.3 (3.5) (2.0) (4.2)
Ellough Phase
22 2 Jan-16 6.4 14.3 15.8 8.9 12.9
23 Hall Farm Aug-16 3.5 8.7 8.0 4.4 1.4
24 Decoy Farm Nov-15 3.9 12.5 15.6 5.6 10.1
25 Green Farm Mar-16 3.7 9.5 4.7 4.2 4.1
26 Fenland Feb-15 15.2 12.6 9.3 5.8 9.2
27 Green End Mar-15 17.4 11.0 3.3 5.2 3.1
28 Tower Hill Mar-15 6.1 4.6 9.9 3.5 7.2
29 Branston Mar-15 14.5 13.8 16.1 6.8 7.8
Great
30 Wilbraham Mar-15 28.3 12.2 9.7 5.9 5.8
31 Berwick Mar-15 6.7 9.8 10.3 5.1 9.4
32 Bottom Plain Dec-14 7.5 9.0 3.1 4.0 3.7
33 Emberton Mar-15 6.4 11.4 5.3 4.9 2.6
34 Kentishes Dec-16 3.9 12.3 8.2 6.2 6.4
35 Mill Farm Dec-16 4.0 16.2 16.8 9.1 11.2
36 Bowden Mar-17 3.8 3.4 (0.4) 0.7 1.0
37 Stalbridge Mar-17 3.9 3.8 5.0 1.1 6.0
38 Aller Court Mar-17 3.9 5.5 5.0 3.7 5.0
39 Rampisham Mar-17 4.0 2.7 3.0 (1.3) (0.6)
40 Wasing Mar-17 3.9 11.2 11.8 6.2 9.3
41 Flixborough Mar-17 3.7 10.9 11.1 6.1 8.3
42 Hill Farm Mar-17 3.8 10.3 14.2 6.6 9.2
43 Forest Farm Mar-17 2.4 11.7 14.7 5.4 9.3
44 Birch CIC Jun-15 1.3 12.9 7.8 6.0 5.0
45 Barnby Mar-17 3.6 10.7 11.2 5.2 5.6
46 Bilsthorpe Mar-17 3.6 10.1 10.1 4.9 6.6
47 Wickfield Mar-17 3.4 8.1 2.2 5.5 4.3
48 Bay Farm Mar-14 6.0 10.0 13.6 7.0 8.9
49 Honnington Mar-14 10.3 11.0 11.8 4.4 5.0
Macchia
50 Rotonda Feb-11 5.7 6.9 (4.6) 6.2 1.7
51 Iacovangelo Apr-11 3.2 6.9 2.5 4.7 5.5
52 Armiento Apr-11 1.8 6.6 5.7 5.4 7.2
53 Inicorbaf Mar-11 2.8 6.7 5.4 5.7 6.3
Gioia del
54 Colle Oct-11 6.0 1.4 3.0 1.0 3.7
55 Carinola Oct-11 2.7 1.5 4.1 2.3 3.9
56 Marcianise Sep-11 4.5 3.8 4.7 2.6 3.8
57 Riardo Sep-11 4.4 1.3 (1.0) 2.0 0.2
58 Gilley's Dam Mar-16 3.5 (0.3) (5.7) (3.8) (2.8)
Pickhill
59 Bridge Mar-17 2.6 5.8 8.8 4.9 8.2
60 North Norfolk Jan-14 7.0 12.4 (7.8) 7.1 4.5
61 Axe View Mar-17 3.8 9.7 8.9 6.2 7.5
62 Low Bentham Mar-17 3.3 0.3 (2.6) 2.2 2.5
63 Henley Mar-17 3.5 5.3 7.0 3.5 6.2
64 Pierces Farm Mar-15 1.3 10.6 12.0 4.2 7.7
65 Salcey Farm Sep-14 3.9 11.6 4.0 8.4 5.2
66 Thornborough Mar-16 3.2 1.3 (9.0) 4.0 (7.8)
Temple
67 Normaton Mar-16 3.0 7.0 (9.7) 4.7 (5.6)
Fiskerton
68 Phase 1 Mar-15 8.7 10.8 (3.4) 8.1 0.0
69 Huddlesford HF Mar-16 0.7 7.5 10.3 5.9 5.8
Little
70 Irchester Mar-16 2.7 5.5 (20.0) 4.4 (7.7)
71 Balhearty(4) Mar-16 - - - (0.8) (27.9)
72 Brafield Mar-16 3.6 11.3 1.9 7.5 1.3
73 Huddlesford PL Mar-16 0.6 6.5 4.3 5.4 2.6
74 Sywell Dec-15 3.8 8.4 8.5 6.3 3.3
75 Coton Park Dec-15 1.7 2.9 7.2 2.8 5.0
76 Hook Mar-14 10.3 6.1 (5.4) 3.8 (0.2)
77 Blenches Mar-14 4.1 5.2 0.5 4.6 4.8
78 Whitley Mar-14 5.0 13.4 (7.4) 7.0 (1.4)
79 Burrowton Mar-14 8.6 6.2 -6.0 4.6 0.0
80 Saundercroft
81 Raglington Mar-13 3.3 9.9 (21.8) 4.2 (12.6)
82 Knockworthy Mar-13 2.8 4.8 (18.2) 2.3 (11.3)
Chilton
83 Canetello Jul-12 3.5 13.0 (4.9) 6.1 3.6
84 Crossways Jul-12 3.6 8.9 (5.0) 4.4 1.9
85 Wyld Meadow Jul-12 3.0 4.0 (17.5) (0.2) (5.6)
86 Ermis(1) Oct-11 0.6 0.0 3.0 0.0 0.6
87 Angelia1 Oct-11 0.1 0.0 6.7 0.0 3.1
88 Ballygarvey Mar-18 4.6 1.0 (4.2) 1.8 (2.1)
89 Hall Farm 2 Aug-19 3.7 13.0 8.6 11.3 1.5
90 Staughton Dec-19 39.9 19.8 21.1 12.7 11.2
91 High Garrett Oct-20 6.6 15.0 12.7 9.9 4.9
92 Marham Jan-21 0.7 6.7 3.1 (0.03) (4.7)
93 Sutterton Mar-21 0.3 7.3 6.6 3.1 6.2
94 The Grange Jan-21 38.1 14.7 6.4 10.4 (1.4)
95 South Lowfield Jun-21 37.7 11.0 10.8 4.3 4.5
96 JSC (NZ)1 Mar-19 0.0 0.0 0.2 0.0 2.5
97 Karcher (NZ)1 Nov-19 0.2 0.0 (1.1) 0.0 (4.0)
98 Dolphin (NZ)1 Jul-21 0.2 0.0 12.4 0.0 11.2
Holiday Inn
99 (NZ)1 Apr-22 0.1 0.0 4.8 0.0 4.8
Subtotal 639 9.9 6.1 3.6 4.8
100 NextPower III3 Multiple n/a n/a n/a n/a n/a
Total 639 9.9 6.1 3.6 4.8
(1) Rooftop asset which is not monitored for irradiation.
2 An asset which is yet to pass provisional acceptance clearance
(PAC) are not reported by the Asset Manager.
3 NextPower III performance not included.
4 Due to damage caused by Storm Arwen in November 2021 and Storm
Eunice in February 2022, Balhearty was taken offline and is in the
process of being repaired by a chosen EPC contractor.
Sustainability and ESG
Introduction from Kevin Lyon, Chair of NESF
Sustainability and ESG factors are at the forefront of
everything that we set out to achieve: they provide a solid
foundation to drive growth, whilst providing enhanced due diligence
on all potential opportunities and risks. NESF is proud to qualify
as an Article 9 fund under the EU SFDR classifications, with a
sustainable investment objective at its core.
Governments and major economies around the world continue to
step up their support for renewable energy, with the UK becoming
the first major economy to pass net zero emission laws, requiring
all greenhouse gas emissions to be net zero by 2050. In addition to
this, the war in Ukraine has shown that the world remains fragile,
and that securing energy independence, security and affordability
are vital.
As one of the most affordable forms of renewable energy, solar
photovoltaic (PV) assets and energy storage play a huge part in the
transition to clean energy and we are in an excellent position to
increase NESF's positive impact. The nature and location of our
assets offer us a unique opportunity to help rebalance nature's
assets, by developing our solar farms as biodiversity 'hubs'. As at
30 September 2022, we own 99 operating solar assets, of which 91
are in the UK and eight are in Italy, and indirectly own equity
stakes in another 21.7MW of solar projects via our stake in
NextPower III. Our expansion into UK battery energy storage will
also contribute to the independence of the UK's energy supply and
aid the penetration of renewables in the UK.
We remain determined to reduce the risk of human rights abuses,
including modern slavery, within our supply chains through the way
we do business and contract with suppliers and partners. Tracking
progress and reporting impact change throughout our value chain is
a crucial step in tackling climate change, driving accountability,
and ultimately delivering a sustainable future for generations to
come.
It is of critical importance for the global energy sector to
accelerate renewable energy generation, improving the amount of
clean energy consumed globally, whilst reducing the world's
reliance on carbon-emitting energy sources. We look forward to
continuing our leading and transparent approach in this space,
helping to provide a cleaner future for tomorrow's generation.
Tonnes of CO2e emissions
avoided p.a. [1]
266,500
(30 September 2021: 229,000)
Equivalent UK homes powered
for one year1
354,274
(30 September 2021: 299,000)
Total clean electricity generated for the period ended 30
September 2022
639 GWh
(30 September 2021: 539 GWh)
[1]
Greeninvestmentgroup.com/green-impact/green-investment-handbook
NESF's Sustainability Framework
NESF's Framework is built on three pillars: climate change,
biodiversity and human rights. The investment process is aligned
with this Framework, and is supported by our Sustainable Investment
Policy, the Position Statements on each of the three pillars and
the Code of Conduct for Suppliers.
The United Nations Sustainable Development Goals ("SDGs") are
core to the Framework; they provide reference points against which
we can measure performance against the Company's high-level goals.
This Framework defines the sustainability approach and informs
investment decisions and operational practices.
NESF takes a 360deg approach to sustainability, starting with
the three pillars as the core. The Company implements a bottom-up
approach to its Framework by measuring the impact on the three
pillars by cross-referring the 17 UN SDGs and their respective
targets, particularly those that are material to its business. The
diagram below represents this approach and the layers of which the
approach is built on.
The pillars drive the Company's attention and actions on
fundamental areas where it has identified the existence of the most
significant ESG risks and opportunities for the fund. As a result,
they allow the Company to ensure the most effective management of
the application of the Policies and UN SDGs to our funds.
To find out more about how NESF integrates ESG into its
investment process, please go to the Company's standalone
sustainability report:
nextenergysolarfund.com/esg/transparency-and-reporting.
The ESG team currently consists of three members (with plans to
expand significantly in the near future), Giulia Guidi, with more
than 20 years of combined experience in ESG risk management in the
financial sector, David Hawkins, with over 10 years of
sustainability and environmental experience in the energy sector,
and Phoebe Wright, the ESG Analyst for the NextEnergy Group. The
expansion plans consist of three new associate positions and one
additional analyst position to contribute to the delivery of the
Company's evolving sustainability standards and growing investor
expectations.
Sustainability Pillars
Climate Change:
Climate change mitigation is clearly an opportunity for NESF
given its core activities. This is also a risk with potential
negative impacts on operations that the Company is determined to
address and disclose on.
The Company supported the UK Government's ambitious objective of
bringing all greenhouse gas emissions to net zero by 2050 and
limiting global average temperature rises to 1.5 C compared to
pre-industrial levels.
Biodiversity:
Biodiversity is an issue the Company and its investment adviser
are collectively passionate about.
NESF wants to enhance biodiversity at all its asset sites and
are committed to lead best practice in the solar industry. From
initial site selection through to decommissioning, the aim is to
align practices with policies such as the UK Government's 'A Green
Future: our 25-year plan to improve the environment', the
objectives of the Taskforce on Nature-related Financial Disclosures
(TNFD), and the relevant UN SDGs.
Human Rights and Modern Slavery:
Action on human rights links directly to local communities. The
people who work on NESF's assets are generally neighbours, so the
Company also focuses on engagement with local communities,
contractors and suppliers.
NESF respects fundamental human rights principles, and operate
in line with the UN Universal Declaration of Human Rights, the OECD
Guidelines for Multinational Enterprises and the UN Guiding
Principles on Business and Human Rights. The Company opposes any
form of slavery or forced labour and publish an annual Modern
Slavery Statement.
NESF & SFDR - Article 9 Fund
The SFDR came into force on 10 March 2021, requiring financial
market participants to disclose their ESG policies and practices.
NESF has published an ESG Disclosure document on its website, which
describes our approach and how passionate we are in this area, and
the Company has also made the relevant disclosure in the annual
report as well as pre-contractual disclosure. This document
outlines how the Company aligns with the EU Taxonomy, in particular
how it substantially contributes to climate mitigation, how it does
no significant harm (DNSH) to the other environmental objectives
applicable to the solar PV sector (climate adaptation, water
management, circular economy and biodiversity), and how it complies
with the minimum safeguarding standards, including, but not limited
to, implementation of the OECD Guidelines for Multinational
Enterprises, and the UN Guiding Principles on Business and Human
Rights.
NESF classify under Art. 9 of the SDFR and starting from this
year, it has disclosed according to Annex V of the SFDR and
Taxonomy Regulatory Technical Standard (RTS). Please refer to the
NESF website for the relevant disclosure. To continue to increase
transparency, an FAQ document has been published on the Investment
Adviser website to clarify how NESF (and other funds) are planning
to comply with future EU SFDR requirements.
Task Force on Climate-Related Financial Disclosures ('TCFD')
In June 2022, the Company's published its first TCFD report,
which outlines the risks and opportunities as a result of the
physical and economic consequences of climate change. The full
report can be found on the Company's website:
nextenergysolarfund.com/esg/transparency-and-reporting/.
Supply Chain Management
Ensuring that our high standards for ESG are mirrored in our
supply chain is a key priority for NESF. NESF's investment adviser
not only enforces a robust internal risk management approach but is
also leading the industry through collective engagement, including
the launch of the Solar Stewardship Initiative. This initiative has
marked a milestone for the sector in addressing transparency and
traceability throughout the value chain.
Natural Capital Commitments
NESF's growing network of UK solar farms provides the
opportunity to use land in a unique way over an extended time
period. The Company is seizing this opportunity by creating
biodiversity 'hubs' that benefit many different stakeholders and
the planet as a whole.
The Company is leading the industry and supporting the Global
Goal for Nature's targets of "nature-positive by 2030", and "nature
-- recovery by 2050", by creating stepping stones for biodiversity,
establishing best practice, and introducing innovations that
enhance, rather than deplete, agricultural land.
NESF's Sustainability Report
To find out more about NESF's commitment to ESG and its case
studies, see NESF's standalone sustainability report for more
information:Transparency
nextenergysolarfund.com/esg/transparency-and-reporting.
ktCO2e avoided since IPO Units
---------
1,985 ktCO(2) e
Metric Units FY2018 FY2019 FY2020 FY2021 FY2022 HY2023
ktCO(2)
GHG avoided e 211.2 299.4 307.7 317.6 328.7 266.5
Nox avoided tonnes 193.1 276.5 274.4 283.4 296.3 241.5
Sox avoided tonnes 365.9 499.2 511.9 527.5 549.7 444.5
PM2,5 tonnes 15.9 22.6 23.2 24.0 25.2 20.8
PM10 tonnes 4.0 5.6 5.8 5.9 6.2 5.1
tonnes
Fossil oil
Fuels avoided equivalent 90.0 127.7 131.2 135.9 142.8 117.8
million
barrels 0.66 0.94 0.96 1.00 1.05 0.9
Principal Risks and Uncertainties
For the remaining six months of the year ending 31 March
2023
Emerging and Principal Risks
The Company's approach to risk governance, the risk review
process and risk appetite are set out in the Annual Report for the
year ended 31 March 2022 within the following sections; Risk and
Risk Management section in the Strategic Report (pages 55 to 57)
and the Risk, Internal Controls and Internal Audit section in the
Corporate Governance Statement (pages 65 and 72), this can be found
on our website (nextenergysolarfund.com).
The Principal risks and uncertainties to the achievement of the
Company's objectives are described on pages 55 to 57 of the Annual
Report and are categorised as follows:
-- Portfolio management and performance risks:
- electricity generation falling below expectations;
- asset outages due to long periods of preventative maintenance
and upgrade by Distribution Network Operators ("DNOs"); and
- portfolio valuations.
-- External and market risks:
- adverse changes in government policy and political uncertainty;
- adverse changes to the regulatory framework for solar plants; and
- changes to tax legislation and tax rates, health and safety.
-- Operational and strategic risks:
- a decline in the price of electricity;
- disruptions to supply chains;
- counterparty risk; and
- plant operational risks.
The Board believes that the aforementioned risks are unchanged
with respect to the remaining six months of the year to 31 March
2023. The Board has identified the following emerging risks which
are being monitored on an ongoing basis:
-- The risk to the Company of a pandemic reoccurring; and
-- The risk associated with the ongoing OFGEM reviews of subsidy accreditations.
During the period, the Board has identified the following new
emerging risks which are being monitored on an ongoing basis:
-- The risk of plans announced in November 2022 by UK government
to introduce a windfall tax for renewables;
-- The risk of goals by ministers to redefine "best and most
versatile" land (BMV) to include grade 3b land, which would
restrict the development of solar assets on such land; and
-- The risk of disruption to the global supply chain for
components required in the construction of solar and battery
storage assets.
The inherent risks associated with investment in the solar
energy sector could result in a material adverse effect on the
Company's performance and the value of the ordinary shares. Risks,
including emerging risks, are mitigated and managed by the Board
through continual review, policy setting and regular reviews of the
Company's risk matrix by the Audit Committee to ensure that
procedures are in place with the intention of minimising the impact
of the principal risks to the achievement of the Company's
objectives. The Audit Committee undertook a formal review of the
Company's risk matrix at its meeting held on 23 June 2022. The
Board and the Audit Committee rely on periodic reports provided by
the Investment Manager and the Administrator regarding risks that
the Company faces. When required, experts, including tax advisers,
legal advisers and environmental advisers, are employed to gather
information.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Interim Report
in accordance with applicable law and regulations.
In accordance with the FCA's Disclosure Guidance and
Transparency Rule 4.2.10R, the Directors confirm that, to the best
of their knowledge:
-- The Unaudited Condensed Interim Financial Statements have
been prepared in accordance with IAS 34 Interim Financial
Reporting;
-- The Interim Report, comprising the Chairman's Statement and
the Investment Adviser's Report, meet the requirements of an
interim management report and include a fair review of the
information required by:
- DTR4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
Unaudited Condensed Interim Financial Statements and a description
of the principal risks and uncertainties for the remaining six
months of the financial year; and
- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place during the
first six months of the current financial year and that have
materially affected the financial position or performance of the
Company during that period and any changes in the related party
transactions described in the last Annual Report that could do
so.
The Board is responsible for the maintenance and integrity of
the corporate and financial information included on the Company's
website (nextenergysolarfund.com), and for the preparation and
dissemination of financial statements. Legislation in Guernsey
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
On behalf of the Board of Directors of NESF
Kevin Lyon
Chairman
18 November 2022
Independent Review Report to NextEnergy Solar Fund Limited
Conclusion
We have been engaged by NextEnergy Solar Fund Limited (the
"Company") to review the condensed set of financial statements in
the half-yearly financial report for the six months ended 30
September 2022 of the Company, which comprises the Statements of
Comprehensive Income, Financial Position, Changes in Equity, Cash
Flows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2022 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued by the Financial Reporting Council
for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Scope of review
section of this report, nothing has come to our attention to
suggest that the directors have inappropriately adopted the going
concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However future events or conditions
may cause the Company to cease to continue as a going concern, and
the above conclusions are not a guarantee that the Company will
continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the interim financial report in accordance with the
DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards. The directors are responsible for preparing
the condensed set of financial statements included in the
half-yearly financial report in accordance with IAS 34 Interim
Financial Reporting.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless they
either intend to liquidate the Company or to cease operations, or
have no realistic alternative but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the scope
of review paragraph of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement letter to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Dermot Dempsey
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants, Guernsey
18 November 2022
Statement of Comprehensive Income (Unaudited Condensed)
For the six months ended 30 September 2022
Notes Six months Six months Year ended
ended ended
30 September 30 September 31 March
2022 2021 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Income
Income comprises:
Interest income 6,191 6,016 12,799
Investment income 36,878 18,887 42,009
Administrative services
income 5,203 5,051 10,226
Net changes in fair value
of investments 17 37,125 23,489 78,665
Unrealised foreign exchange 204 - -
gain
----------------------------- ------ --------------- --------------- ------------
Total net income 85,601 53,443 143,699
----------------------------- ------ --------------- --------------- ------------
Expenditure
Preference share dividends 4,763 4,718 9,454
Management fees 5 2,875 2,499 5,041
Legal and professional
fees 336 316 744
Directors' fees 7 128 106 222
Administration fees 6 142 112 227
Other expenses 9 158 78 122
Audit fees 8 90 90 138
Charitable donation 10 - - 100
Regulatory fees 11 45 79
Insurance 11 12 22
----------------------------- ------ --------------- --------------- ------------
Total expenses 8,514 7,976 16,149
----------------------------- ------ --------------- --------------- ------------
Profit and comprehensive
income for the period/year 77,087 45,467 127,550
Earnings per ordinary share
- basic 14 13.08p 7.74p 21.69p
Earnings per ordinary share
- diluted 14 10.69p 6.36p 17.34p
----------------------------- ------ --------------- --------------- ------------
All activities are derived from ongoing operations.
There is no other comprehensive income or expense apart from
those disclosed above and consequently a Statement of Other
Comprehensive Income has not been prepared.
The accompanying notes are an integral part of these condensed
interim financial statements.
Statement of Financial Position (Unaudited Condensed)
As at 30 September 2022
Notes 30 September 30 September 31 March
2022 2021
(unaudited) (unaudited) 2022
GBP'000 GBP'000 (audited)
GBP'000
Non-current assets
Investments 17 889,078 788,288 842,346
--------------------------------- ------ -------------- -------------- ------------
Total non-current assets 889,078 788,288 842,346
--------------------------------- ------ -------------- -------------- ------------
Current assets
Cash and cash equivalents 11,686 4,318 19,608
Trade and other receivables 11 24,654 34,870 16,389
--------------------------------- ------ -------------- -------------- ------------
Total current assets 36,340 39,188 35,997
--------------------------------- ------ -------------- -------------- ------------
Total assets 925,418 827,476 878,343
--------------------------------- ------ -------------- -------------- ------------
Current liabilities
Trade and other payables 12 (2,600) (22,849) (11,785)
--------------------------------- ------ -------------- -------------- ------------
Total current liabilities (2,600) (22,849) (11,785)
--------------------------------- ------ -------------- -------------- ------------
Non-current liabilities
Preference shares 23 (198,127) (197,989) (198,058)
--------------------------------- ------ -------------- -------------- ------------
Total non-current liabilities (198,127) (197,989) (198,058)
--------------------------------- ------ -------------- -------------- ------------
Net assets 724,691 606,638 668,500
--------------------------------- ------ -------------- -------------- ------------
Equity
Share capital and premium 13 608,771 607,193 608,037
Retained earnings 115,920 (555) 60,463
--------------------------------- ------ -------------- -------------- ------------
Equity attributable to ordinary
shareholders 724,691 606,638 668,500
--------------------------------- ------ -------------- -------------- ------------
Total equity 724,691 606,638 668,500
--------------------------------- ------ -------------- -------------- ------------
Net assets per ordinary share 16 122.9p 103.1p 113.5p
--------------------------------- ------ -------------- -------------- ------------
The accompanying notes are an integral part of these condensed
interim financial statements.
The unaudited condensed financial statements were approved and
authorised for issue by the Board of Directors on 18 November 2022
and signed on its behalf by:
Kevin Lyon Patrick Firth
Chairman Director
Statement of Changes in Equity (Unaudited Condensed)
For the six months ended 30 September 2022
Share capital Retained Total equity
and premium earnings GBP'000
GBP'000 GBP'000
Ordinary shareholders' equity at
1 April 2022 608,037 60,463 668,500
Profit and comprehensive income
for the period - 77,087 77,087
Scrip shares issued in lieu of dividends 734 - 734
Ordinary dividends declared - (21,624) (21,630)
------------------------------------------ -------------- ---------- -------------
Ordinary shareholders' equity at
30 September 2022 608,771 115,920 724,691
------------------------------------------ -------------- ---------- -------------
Ordinary shareholders' equity at
1 April 2021 605,938 (25,147) 580,791
Profit and comprehensive income
for the period - 45,467 45,467
Scrip shares issued in lieu of dividends 1,255 - 1,255
Ordinary dividends declared - (20,873) (20,875)
------------------------------------------ -------------- ---------- -------------
Ordinary shareholders' equity at
30 September 2021 607,193 (555) 606,638
------------------------------------------ -------------- ---------- -------------
Ordinary shareholders' equity at
1 April 2021 605,938 (25,147) 580,791
Profit and comprehensive income
for the year - 127,550 127,550
Scrip shares issued in lieu of dividends 2,099 - 2,099
Ordinary dividends declared - (41,940) (41,940)
------------------------------------------ -------------- ---------- -------------
Ordinary shareholders' equity at
31 March 2022 608,037 60,463 668,500
------------------------------------------ -------------- ---------- -------------
Statement of Cash Flows (Unaudited Condensed)
For the six months ended 30 September 2022
Notes Six months ended Six months ended Year ended
30 September 2022 30 September 2021 31 March
(unaudited) (unaudited) 2022
GBP'000 GBP'000 (audited)
GBP'000
Cash flows from operating activities
Profit and comprehensive income for the period/year 77,087 45,467 127,550
Adjustments for:
Interest income receivable (6,191) (6,016) (12,799)
Interest income received 6,191 6,016 12,799
Investment income receivable (36,878) (18,887) (42,009)
Investment income received 20,290 20,083 34,019
Change in fair value of investments 17 (37,125) (23,489) (78,665)
Proceeds from HoldCos 17 22,785 64,900 82,443
Payments to HoldCos 17 (26,726) (38,549) (58,370)
Payments to NPIII (6,562) (21,506) (27,716)
Proceeds from NPIII - - 10,502
Financing proceeds from HoldCos 5,000 - 42,100
Financing proceeds returned to HoldCos (5,000) - (42,100)
Net changes in unrealised foreign exchange (204) - (32)
Financial debt amortisation 69 69 139
Dividends paid on preference shares as finance
costs 4,763 4,718 9,454
---------------------------------------------------- ------ -------------------- -------------------- ------------
Operating cash flows before movements in working
capital 17,499 32,806 57,315
---------------------------------------------------- ------ -------------------- -------------------- ------------
Changes in working capital
Movement in trade and other receivables 49 (13,856) 694
Movement in trade and other payables (68) (1,112) 131
---------------------------------------------------- ------ -------------------- -------------------- ------------
Net cash generated from operating activities 17,480 17,838 58,140
---------------------------------------------------- ------ -------------------- -------------------- ------------
Cash flows from financing activities
Dividends paid on preference shares (4,710) (4,711) (9,500)
Dividends paid on ordinary shares (20,896) (19,618) (39,841)
---------------------------------------------------- ------ -------------------- -------------------- ------------
Net cash used in from financing activities (25,606) (24,329) (49,341)
---------------------------------------------------- ------ -------------------- -------------------- ------------
Net movement in cash and cash equivalents during
period/year (8,126) (6,491) 8,799
---------------------------------------------------- ------ -------------------- -------------------- ------------
Cash and cash equivalents at the beginning of the
period/year 19,608 10,809 10,809
Effect of foreign exchange rate changes 204 - -
---------------------------------------------------- ------ -------------------- -------------------- ------------
Cash and cash equivalents at the end of the
period/year 11,686 4,318 19,608
---------------------------------------------------- ------ -------------------- -------------------- ------------
The accompanying notes are an integral part of these condensed
interim financial statements.
Notes to the Financial Statements (Unaudited Condensed) For the
six months ended 30 September 2022
1. General Information
The Company was incorporated with limited liability in Guernsey
under the Companies (Guernsey) Law, 2008 on 20 December 2013 with
registered number 57739, and is regulated by the Guernsey Financial
Services Commission as a registered closed-ended investment
company. The registered office of the Company is Floor 2 Trafalgar
Court, Les Banques, St Peter Port, Guernsey, Channel Islands GY1
4LY.
The Company's ordinary shares are publicly traded on the London
Stock Exchange under a premium listing. The Company seeks to
provide ordinary shareholders with attractive risk-adjusted
returns, principally in the form of regular dividends, by investing
in a diversified portfolio of primarily UK and OECD based solar
energy infrastructure assets. The Company currently makes its
investments through HoldCos and SPVs which are directly or
indirectly wholly owned by the Company.
The Company has appointed NextEnergy Capital IM Limited as its
Investment Manager pursuant to the Management Agreement dated 18
March 2014. The Investment Manager is a Guernsey registered
company, incorporated under the Companies (Guernsey) Law, 2008 with
registered number 57740 and is licensed and regulated by the
Guernsey Financial Services Commission and is a member of the NEC
Group. The Investment Manager acts as the Alternative Investment
Fund Manager of the Company.
The Investment Manager has appointed NextEnergy Capital Limited
as its Investment Adviser pursuant to the Investment Advisory
Agreement dated 18 March 2014. The Investment Adviser is a company
incorporated in England with registered number 05975223 and is
authorised and regulated by the FCA.
2. Summary of Significant Accounting Policies
a) Basis of Preparation
The unaudited condensed interim financial statements for the six
months ended 30 September 2022 have been prepared in accordance
with IAS 34 Interim Financial Reporting and the FCA's Disclosure
Guidance and Transparency Rules. They have been prepared under the
historical cost convention with the exception of financial assets
held at fair value through profit and loss. The principal
accounting policies adopted are set out below. These accounting
policies and critical accounting estimates and judgments used in
preparing the unaudited condensed interim financial statements are
consistent with those used in the Company's latest audited
financial statements for the year ended 31 March 2022.
The condensed interim financial statements are unaudited but
have been reviewed by the Company's Auditor, KPMG Channel Islands
Limited, in accordance with International Standard on Review
Engagements (UK) 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity and were
approved for issue on 18 November 2022.
The unaudited condensed interim financial statements do not
include all information and disclosures required in the annual
financial statements and should be read in conjunction with the
Company's audited financial statements for the year ended 31 March
2022, which were prepared in accordance with IFRS and the FCA's
Disclosure Guidance and Transparency Rules.
b) Going Concern
The Company owns a portfolio of solar energy infrastructure
assets in the UK, Italy, Spain and Portugal that are predominantly
fully constructed, operational and generating renewable
electricity. A significant proportion of the income from the
Company's investments is fixed for a long period of time in
accordance with the terms of the relevant ROC or FiT subsidy. The
balance of the income has exposure to wholesale electricity prices,
although the Investment Manager seeks to reduce this exposure
through entering into short- or long-term power purchase agreements
with fixed price mechanisms.
The Directors have reviewed the current and projected financial
position of the Company making reasonable assumptions about future
performance. The key areas reviewed were:
-- Maturity of debt facilities;
-- Future investment transactions;
-- Expenditure commitment; and
-- Forecast income and cash flows.
The Company's cash balance as at 30 September 2022 was GBP11.7m,
all of which was readily available. It also had immediately
available but undrawn amounts under its debt facilities of a
further GBP54.8m. The NESF Group had capital commitments totalling
GBP54.3m at the period end. The majority of the NESF Group's
revenues are derived from government subsidies. A signi cant part
of the NESF Group's borrowings are on a non-recourse basis. The
Company's portfolio is diversi ed by geography, components, plant
size, subsidy schemes and revenue streams.
The Board is satis ed that the Company has suf cient financial
resources available to be able to manage the Company's business
effectively and pursue the Company's principal activities and
investment objective. In particular, the Board is not currently
aware of any material uncertainties in relation to the Company's
ability to continue for a period of at least 12 months from the
date of approval of this Interim Report. The Board is of the
opinion, therefore, that the going concern basis adopted in the
preparation of the Financial Statements is appropriate.
c) Basis of Non-Consolidation
The Company has set up/acquired SPVs through its investment in
the holding companies. The Company meets the definition of an
investment entity as described by IFRS 10. Under IFRS 10 investment
entities are required to hold subsidiaries at fair value through
profit or loss rather than consolidate them. There are four holding
companies (NextEnergy Solar Holdings Limited, NextEnergy Solar
Holdings III Limited, NextEnergy Solar Holdings IV Limited and
NextEnergy Solar Holdings V Limited, collectively the "HoldCos").
The HoldCos are also investment entities and, as required under
IFRS 10, value their investments at fair value.
Under the definition of an investment entity, the entity should
satisfy all three of the following tests:
-- Obtains funds from one or more investors for the purpose of
providing these investors with investment management services;
-- Commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both (including having an exit strategy for
investments); and
-- Measures and evaluates the performance of substantially all
of its investments on a fair value basis.
In assessing whether the Company meets the definition of an
investment entity set out in IFRS 10, the Directors note that:
-- The Company is an investment company that invests funds
obtained from multiple investors in a diversified portfolio of
solar energy infrastructure assets and related infrastructure
assets and has appointed the Investment Manager to manage the
Company's investments;
-- The Company's purpose is to invest funds for investment
income and potential capital appreciation and will exit its
investments at the end of their economic lives or when their
planning permissions or leasehold land interests expire (unless it
has repowered their sites) and may also exit investments earlier
for reasons of portfolio balance or profit; and
-- The Board evaluates the performance of the Company's
investments on a fair value basis as part of the quarterly
management accounts review and the Company values its investments
on a fair value basis twice a year for inclusion in its annual and
interim financial statements with the movement in the valuations
taken to the Income Statement.
Taking these factors into account, the Directors are of the
opinion that the Company has all the typical characteristics of an
investment entity and meets the definition set out in IFRS 10.
The Directors believe the treatment outlined above provides the
most relevant information to investors.
d) Segmental Reporting
IFRS 8 Operating Segments requires a "management approach" under
which segment information is presented on the same basis as that
used for internal reporting purposes.
The Chief Operating Decision Maker, which is the Board, is of
the opinion that the Company is engaged in a single segment of
business, being investment in solar energy infrastructure assets
via its HoldCos and SPVs. Therefore, the financial information used
by the Chief Operating Decision Maker to allocate resources and
manage the Company presents the business as a single segment.
e) Seasonal Reporting
The Company's results may vary during reporting periods as a
result of a fluctuation in the levels of sunlight during the period
and, together with other factors, will impact the NAV. Other
factors including changes in inflation and power prices.
f) Functional and Presentational Currency
The financial information is presented in pounds sterling
("GBP") because that is the currency of the primary economic
environment in which the Company operates.
3. New and Revised Standards
a) New and Revised IFRSs Adopted by the Company
The Directors have assessed all new standards and amendments to
standards and interpretations which are effective for annual
periods commencing on or after 1 April 2022 and noted no material
impact on the Company.
b) New and Revised IFRSs in Issue but not yet Effective
The Directors have considered new standards and amendments to
standards and interpretations in issue and effective for annual
periods commencing after 1 April 2022 and do not expect that their
adoption will result in a material impact on the financial
statements of the Company in future periods.
4. Critical Accounting Estimates and Judgements
The Company makes estimates and assumptions that affect the
reported amounts of assets and liabilities. Estimates and
judgements are continually evaluated and based on historic
experience and other factors believed to be reasonable under the
circumstances.
a) Critical Accounting Estimate: Investments at Fair Value
Through Profit or Loss
The Company's investments are measured at fair value for
financial reporting purposes. The Board has appointed the
Investment Manager to produce investment valuations based on
projected future cash flows. These valuations are reviewed and
approved by the Board. The investments are held through SPVs.
IFRS 13 establishes a single source of guidance for fair value
measurements and disclosures about fair value measurements. Fair
value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Board
bases the fair value of the investments on the information received
from the Investment Manager.
The Company classified its investments at fair value through
profit or loss as level 3 within the fair value hierarchy. As at 30
September 2022 level 3 investments amount to GBP889.1m (30
September 2021: GBP788.3m; 31 March 2022: GBP842.4m) and consist of
1 Private Equity Solar fund investment (NPIII) which has been
valued using estimated attributable NAV and 99 investments in solar
PV plants (30 September 2021: 99, 31 March 2022: 99) all of which
have been valued on a look through basis based on the discounted
cash flows of the solar assets (except for those solar assets not
yet operational) and the residual value of net assets at the
HoldCos level.
The discount rate is a significant Level 3 input and a change in
the discount applied could have a material effect on the value of
the investments. The conflict in Ukraine has had an unprecedented
and sustained positive impact on the long-term power price
projections, which is also a significant Level 3 input. Investments
in solar assets that are not yet operational are held at fair
value, where the cost of the investment is used as an appropriate
approximation of fair value. Level 3 valuations are reviewed
regularly by the Investment Manager who reports to the Board on a
periodic basis. The Board considers the appropriateness of the
valuation model and inputs, as well as the valuation result.
Information about the unobservable inputs used at 30 September
2022 in measuring financial instruments categorised as Level 3 in
the fair value hierarchy and their sensitivities are disclosed in
note 19. Unlisted investments reconcile to the "Total investments
at fair value" in the table in note 17.
b) Significant Judgement: Consolidation of Entities
The Company, under the investment entity exemption rule, holds
its investments at fair value. The Company meets the definition of
an investment entity per IFRS 10 as detailed in note 2c).
The Company does not have any other subsidiaries other than
those determined to be controlled subsidiary investments.
Controlled subsidiary investments are measured at fair value
through profit or loss and are not consolidated in accordance with
IFRS 10. The fair value of controlled subsidiary investments is
determined as described in note 17.
The Company and the HoldCos operate as an integrated structure
whereby the Company invests both in the HoldCos and a singular
direct investment. Under IFRS 10, there is a requirement for the
Board to assess whether the HoldCos are themselves investment
entities. The Board has performed this assessment and concluded
that each of the HoldCos is an investment entity for the following
reasons:
-- The HoldCos have obtained funds for the purpose of investing
in equity or other similar interests in multiple investments and
providing the Company (and its investors) with investment income;
and
-- The performance of investments made through the HoldCos are
measured and evaluated on a fair value basis.
Furthermore, the HoldCos themselves are not deemed to be
operating entities providing services to the Company and,
therefore, are able to apply the exemption from consolidation.
5. Management Fees
The Investment Manager is entitled to receive an annual fee,
accruing daily and calculated on a sliding scale, as follows
below:
-- 1% of NAV up to GBP200m;
-- 0.9% of NAV above GBP200m and up to and including GBP300m; and
-- 0.8% of NAV above GBP300m.
The NAV for the purpose of calculation, is reduced by an amount
equivalent to US$50m for NESF's investment in NPIII. For the six
months ended 30 September 2022 the Company incurred GBP2.9m in
management fees (six months ended 30 September 2021: GBP2.5m; year
ended 31 March 2022: GBP5.0m), of which GBP15k was outstanding at
30 September 2022 (30 September 2021: GBPnil; 31 March 2022:
GBP62k).
6. Administration Fees
Under an amended Administration Agreement with the previous
administrator the administration fee was a fixed fee of GBP220k per
annum with effect from 1 October 2020. With effect from 1 January
2022, the fixed fee was to increase annually in line with the
annual increase in Guernsey RPI. For the period up to 30 March
2022, the previous administrator was also entitled to additional
fees for attendance at ad hoc Board and Board Committee
meetings.
With effect from 30 March 2022 Ocorian Administration (Guernsey)
Limited was appointed Administrator to the Company. The
administration fee changed to a fixed fee of GBP275k per annum with
effect from 30 March 2022. With effect from 1 January 2023, the
fixed fee will increase annually in line with the annual increase
in Guernsey RPI.
For the six months ended 30 September 2022 the Administrator was
entitled to administration fees of GBP142k (six months ended 30
September 2021: GBPnil; year ended 31 March 2022: GBPnil), of which
GBP69k was outstanding at 31 March 2022 (30 September 2021: GBPnil;
31 March 2022: GBPnil).
For the six months ended 30 September 2022 the previous
Administrator was entitled to administration fees of GBPnil (six
months ended 30 September 2021: GBP112k; year ended 31 March 2022:
GBP227k), of which GBPnil was outstanding at 31 March 2022 (30
September 2021: GBP56k; 31 March 2022: GBP115k).
The fee payable to the previous administrator was payable
quarterly in arrears. The fee payable to the new Administrator is
payable quarterly in advance.
7. Directors' Fees
The Directors are all non-executive and their remuneration is
solely in the form of fees. The Directors' total fees for the
period were GBP128k (six months ended 30 September 2021: GBP106k;
year ended 31 March 2022: GBP222k), of which GBPnil was outstanding
at 30 September 2022 (30 September 2021: GBPnil; 31 March 2022:
GBP11k).
8. Audit Fees
The analysis of the auditor's remuneration is as follows:
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2022 2021 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Fees payable to the auditor for
the audit of the Company 45 45 84
Fees payable to the auditor for
the interim review of the Company 45 45 45
Additional audit fee and disbursements
for the prior period/year - - 9
Total 90 90 138
9. Other Expenses
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2022 2021 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Amortisation expense 69 69 139
Sundry expenses 87 9 (18)
Director's expenses 2 - 1
Total 158 78 122
10. Charitable Donation
During the period ended 30 September 2022, the Company made a
charitable donation of GBPnil (six months ended 30 September 2021:
GBPnil; year ended 31 March 2022: GBP100k). Information on the
NextEnergy Foundation and how it used the donation can be found on
our website (nextenergysolarfund.com).
11. Trade and Other Receivables
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Administrative service fee income - 2,041 -
receivable
Prepayments 45 46 74
Accrued income - - 20
Due from HoldCos 24,609 32,783 16,295
Total trade and other receivables 24,654 34,870 16,389
Amounts due from HoldCos are interest free and payable on
demand.
12. Trade and Other Payables
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Other payables 171 228 273
Due to NPIII - - 896
Preference dividends payable 2,395 2,395 2,342
Due to HoldCos - 20,226 8,274
Trade creditors 34 - -
Total trade and other payables 2,600 22,849 11,785
Amounts due to HoldCos were interest free and payable on
demand.
During the period, an amount of GBP8.3m representing a non-cash
dividend was set-off against amounts due to Holdcos as these
transactions are with the same Holdco.
13. Share Capital and Reserves
a) Ordinary Shares
The share capital of the Company comprises solely of ordinary
shares of no par value and preference shares of no par value.
Ordinary shares issuance Six months Six months Year ended
ended ended
30 September 30 September 31 March
2022 2021 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Opening balance 589,077,244 586,987,678 586,987,678
Scrip shares issued during the period/year 621,399 1,246,447 2,089,566
Total issued 589,698,643 588,234,125 589,077,244
Issued ordinary shares - share capital Six months Six months Year ended
and premium ended ended
30 September 30 September 31 March
2022 2021 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Opening balance 608,037 605,938 605,938
Value of scrip shares issued during
the period/year 734 1,255 2,099
Total issued 608,771 607,193 608,037
All the holders of the ordinary shares are entitled to receive
dividends as declared from time to time. At any general meeting of
the Company, each ordinary shareholder will have, on a show of
hands, one vote and, on a poll, one vote in respect of each
ordinary share held.
b) Preference Shares
In accordance with International Accounting Standard 32, the
preference shares are classified as liabilities. Details of the
preference shares can be found in note 23.
c) Retained Reserves
Retained reserves comprise the retained earnings as detailed in
the Statement of Changes in Equity.
Under Guernsey law, the Company can pay dividends in excess of
its retained earnings provided it satisfies the solvency test
prescribed by the Companies (Guernsey) Law, 2008. The solvency test
considers whether the Company is able to pay its debts when they
fall due, and whether the value of the Company's assets is greater
than its liabilities. The Company satisfied the solvency test in
respect of all dividends declared or paid in the year.
14. Earnings per Ordinary Share
a) Basic
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2022 2021 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Pro t and comprehensive income for
the period/year (GBP'000) 77,087 45,467 127,550
Basic weighted average number of
issued ordinary shares 589,212,809 587,566,139 588,014,946
Earnings per share basic 13.08p 7.74p 21.69p
b) Diluted
From 1 April 2036 the preference shares have the right to
convert, based on 100p per preference share and the NAV per
ordinary share at the time of conversion, into new ordinary shares
or a new class of unlisted B shares with dividend and capital
rights ranking pari passu with the ordinary shares.
30 September 30 September 31 March
2022 2021 2022
Pro t and comprehensive income for
the period/year (GBP'000) 77,087 45,467 127,550
Plus: preference share dividends
paid during the period/year (GBP'000) 4,763 4,718 9,454
Pro t for the period/year attributable
to ordinary shareholders (GBP'000) 81,850 50,185 137,004
Basic weighted average number of
issued ordinary shares 589,212,809 587,566,139 588,014,946
Plus: weighted number of ordinary
shares issuable on any conversion
of preference shares, based on the
NAV per ordinary share as at the
start of period/year 176,211,454 202,020,202 202,224,469
Adjusted weighted average number
of ordinary shares 765,424,263 789,586,341 790,239,415
Earnings per share diluted 10.69p 6.36p 17.34p
15. Ordinary Share Dividends
a) Paid During the period/year
Six months Six months Six months Six months Year ended Year ended
ended ended ended ended 31 March 31 March
30 September 30 September 30 September 30 September 2022 2022
2022 2022 Pence 2021 2021 Pence GBP'000 Pence per
GBP'000 per share GBP'000 per share share
Quarter 1 10,544 1.7900 10,346 1.7625 10,346 1.7625
Quarter 2 11,080 1.8800 10,527 1.7900 10,527 1.7900
Quarter 3 N/a N/a N/a N/a 10,529 1.7900
Quarter 4 N/a N/a N/a N/a 10,538 1.7900
Total 21,624 3.6700 20,873 3.5525 41,940 7.1325
b) Declared in Respect of the period/year
Six months Six months Six months Six months Year ended Year ended
ended ended ended ended 31 March 31 March
30 September 30 September 30 September 30 September 2022 2022
2022 2022 Pence 2021 2021 Pence GBP'000 Pence per
GBP'000 per share GBP'000 per share share
Quarter 1 11,080 1.8800 10,527 1.7900 10,527 1,7900
Quarter 2 11,086 1.8800 10,529 1.7900 10,529 1,7900
Quarter 3 N/A N/A N/A N/A 10,538 1,7900
Quarter 4 N/A N/A N/A N/A 10,544 1,7900
Total 22,166 3.7600 21,056 3.5800 42,138 7.1600
16. Net Assets per Ordinary Share
30 September 30 September 31 March
2022 2021 2022
Ordinary shareholders' equity (GBP'000) 724,691 606,638 668,500
Number of issued ordinary shares 589,698,643 588,234,125 589,077,244
Net assets per ordinary share 122.9p 103.1p 113.5p
17. Investments at Fair Value Through Profit or Loss
The Company owns its portfolio of solar assets through its
investments in HoldCos and a direct investment in NPIII. The
Company's investments comprise its portfolio of solar assets and
the residual net assets of the HoldCos. As explained in note 4a),
all of the Company's investments are held at fair value through pro
t or loss and classi ed as Level 3 in the fair value hierarchy.
There were no movements between the hierarchy Levels during the
period ended 30 September 2022 (six months ended 30 September 2021:
none; year ended 31 March 2022: none).
The Company's total investments at fair value are recorded under
"Non-current assets" in the Statement of Financial Position.
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2022 2021 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Brought forward cost of investments 809,531 815,494 815,494
Investment proceeds from HoldCos (22,785) (64,900) (82,443)
Investment payments to HoldCos 26,726 38,549 58,370
Investment payments from NPIII - - (10,502)
Investment payments to NPIII 5,666 21,506 28,612
Carried forward cost of investments 819,138 810,649 809,531
Brought forward unrealised gains/(losses)
on valuation 32,815 (45,850) (45,850)
Movement in unrealised gains on
valuation 37,125 23,489 78,665
Carried forward unrealised gains/(losses)
on valuation 69,940 (22,361) 32,815
Total investments at fair value 889,078 788,288 842,346
Non-cash transactions: On 23 February 2022, NESH V issued
Eurobonds listed on The International Stock Exchange totalling
GBP6.6m. During the period ended 30 September 2022, no Eurobonds
were listed on The International Stock Exchange.
To facilitate the acquisition of various investments at 30
September 2022 GBP5.0m, (30 September 2021; GBPnil; 31 March 2022;
GBP42.1m) was drawn down at subsidiary level, remitted to the
Company before GBP5.0m was returned to a subsidiary (30 September
2021; GBPnil; 31 March 2022; GBP42.1m).
The total change in the value of the investments in the HoldCos
is recorded through pro t and loss in the Statement of
Comprehensive Income. Information about the principal unobservable
inputs used in valuing the Company's investments and their
sensitivities is included in note 19.
18. Subsidiaries and Other Investments
The Company holds investments through subsidiary companies (the
HoldCos) which have not been consolidated as a result of the
adoption of IFRS 10: Investment entities exemption to
consolidation. The Company holds its investment of NPIII directly.
As stated in note 4b), the HoldCos are incorporated in the UK and
100% directly owned. There are no cross guarantees amongst Group
entities. During the period to 30 September 2022, NextEnergy Solar
Holdings II Limited and its subsidiaries were transferred to RRAM
Energy Limited (a subsidiary of NextEnergy Solar Holdings III
Limited). Below is the legal entity name for the SPVs, all owned
100% at 30 September 2022 directly or indirectly through the
HoldCos listed below (besides Agenor (24.5%) and NextPower III
Co-Invest LP (18%) which are owned by Next Energy Solar Holdings V
Limited).
Name Country Name Country
of of
incorporation incorporation
NextEnergy Solar Holdings UK
Limited
BL Solar 2 Limited UK North Farm Solar Park UK
Limited
Bowerhouse Solar Limited UK Push Energy (Birch) Limited UK
Ellough Solar 2 Limited UK Push Energy (Boxted Airfield) UK
Limited
Glebe Farm SPV Limited UK Push Energy (Croydon) UK
Limited
Glorious Energy Limited UK Push Energy (Decoy) Limited UK
Greenfields (A) Limited UK Push Energy (Hall Farm) UK
Limited
NESF-Ellough Ltd UK Push Energy (Langenhoe) UK
Limited
Nextpower Ellough LLP UK SSB Condover Limited (Condover) UK
Nextpower Gover Farm Limited UK ST Solarinvest Devon 1 UK
Limited
Nextpower Higher Hatherleigh UK Sunglow Power Limited UK
Nextpower Shacks Barn Ltd UK Wellingborough Solar Limited UK
NextEnergy Solar Holdings UK
III Limited
Balhearty Solar Limited UK Burcroft Solar Parks Ltd UK
Ballygarvey Solar Ltd UK Burrowton Farm Solar Park UK
Ltd
Birch Solar Farm CIC UK Camilla Battery Storage UK
Limited
Blenches Mill Farm Solar UK Chilton Cantello Solar UK
Park Ltd Park Ltd
Brafield Solar Limited UK Crossways Solar Park Ltd UK
Greenfields (T) Limited UK Empyreal Energy Limited UK
Helios Solar 1 Limited UK Fiskerton Limited UK
Helios Solar 2 Limited UK NextZest Ltd UK
Hook Valley Farm Solar UK PF Solar Limited UK
Park Ltd
Knockworthy Solar Park UK Pierces Solar Limited UK
Ltd
Lark Energy Bilsthorpe UK Raglington Farm Solar UK
Ltd Park Ltd
Le Solar 51 Limited UK RRAM Energy Limited UK
Little Irchester Solar UK Saundercroft Farm Solar UK
Limited Park Ltd
Little Staughton Airfield UK SL Solar Services Ltd UK
Solar Limited
Micro Renewables Domestic UK Sywell Solar Limited UK
Ltd
Micro Renewables Ltd UK Tau Solar Limited UK
NESH 3 Portfolio A Limited UK Temple Normanton Solar UK
Limited
Nextpower Bosworth Ltd UK NextPower Grange Limited UK
Nextpower Eelpower Ltd UK Thornborough Solar Limited UK
NextPower High Garrett UK NextPower South Lowfield UK
Ltd Limited
Nextpower Hops Energy UK Thurlestone-Leicester UK
Solar Limited
Nextpower SPV 4 Ltd UK UK Solar (Fiskerton) LLP UK
Nextpower SPV 6 Ltd UK Wheb European Solar (UK) UK
2 Ltd
Nextpower SPV 10 Ltd UK Wheb European Solar (UK) UK
3 Ltd
Nextpower Water Projects UK Whitley Solar Park (Ashcott UK
Ltd Farm) Ltd
Nextpower Eelpower (2) UK Wickfield Solar Ltd UK
Ltd
Wyld Meadow Farm UK Wyld Meadow Farm UK
NextEnergy Solar Holdings UK Trowbridge PV Limited UK
II Limited
ESF Llwyndu Limited UK NextEnergy Solar Holdings UK
VI Limited
Bowden Lane Solar Park UK Green End Renewables Limited UK
Ltd
Fenland Renewables Limited UK Tower Hill Farm Renewables UK
Limited
NextEnergy Solar Holdings UK
IV Limited
Berwick Solar Park Limited UK Emberton Solar Park Limited UK
Bottom Plain Solar Park UK Great Wilbraham Solar UK
Limited Park Limited
Branston Solar Park Limited UK Nextpower Radius Limited UK
NextEnergy Solar Holdings UK
V Limited
Agrosei S.r.l Italy Starquattro S.r.l Italy
Fotostar 6 S.r.l Italy SunEdison Med. 6 S.r.l Italy
Macchia Rotonda Solar S.r.l Italy Agenor* Spain
NextPower III Co-Invest Portugal
LP**
* Agenor is an associate of the Company, not a subsidiary.
**NextPower III Co-Invest LP is an investment of the Company,
not a subsidiary or an associate.
19. Fair Value of Investment in Unconsolidated Subsidiaries
a) Valuation process
The valuation process is described in note 4a.
The Directors and the Investment Manager consider that the
discounted cash ow methodology used in deriving the fair value of
investments in operating solar plants is in accordance with the
fair value requirements of IFRS 13 and that the valuation
methodology used, including the key estimates and assumptions
applied, is appropriate. As at 30 September 2022, investments held
at fair value totalled GBP889.1m (30 September 2021: GBP788.3m; 31
March 2022: GBP842.3m).
During the prior year the Company invested directly in a private
equity fund NPIII. The fair value of the Company's investment in
private equity funds is generally considered to be the Company's
attributable portion of the NAV of the private equity fund, as
determined by the general partner/manager of such funds, adjusted
if considered necessary by the Board of Directors, including any
adjustment necessary for carried interest. The Board of Directors
and the Investment Manager consider the IPEV guidelines when
valuing private equity fund investments. As at 30 September 2022,
investments held at fair value using NAV totalled GBP28.3m (30
September 2021: GBP18.8m; 31 March 2022: GBP17.3m).
Investments in assets that are not yet operational (this
included the co-investment into Project Agenor and NextPower III
Co-Invest LP) are also held at fair value, where the cost of the
investment is used as an appropriate approximation of fair value.
These investments are not included in the sensitivity analyses. As
at 30 September 2022, investments held at fair value using the cost
methodology totalled GBP46.0m (30 September 2021: GBP9.6m; 31 March
2022: GBP21.9m).
Another GBP54.6m of investments held at fair value relates to
the residual net assets of the HoldCos. Therefore, the total
operational fair value to which the sensitivity analysis has been
applied in the below tables is GBP760.2m.
b) Sensitivity Analyses of Changes in Signi cant Unobservable
Inputs to the Discounted Cash Flow Calculation
Most of the Company's investments are valued using the
discounted cash ow methodology. Information on this methodology is
included in note 4a). The Directors consider the following to be
signi cant unobservable inputs to the discounted cash ows
calculation on a look through basis.
Discount Rates
Discount rates used in the valuation of the Company's
investments represent the Investment Adviser's and Board's
assessment of the rate of return in the market for assets with
similar characteristics and risk profile.
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Weighted average discount rate 6.8% 6.3% 6.3%
Range of discount rates (unlevered 6.25% to 5.75% to 5.75% to
to levered) 7.75% 7.25% 7.25%
Premium applied to cash flows earned
30 years after grid connection date 1.0% 1.0% 1.0%
The table below shows the sensitivity of the portfolio valuation
to a change to the weighted average discount rate by plus or minus
0.5%, with all other variables held constant.
Discount rate sensitivity +0.5% change Investments -0.5% change
30 September 2022
Directors' valuation (GBP20.0m) GBP760.2m GBP21.4m
Directors' valuation - percentage
movement (2.4%) 2.6%
Change in NAV per ordinary share (3.4p) 3.6p
30 September 2021
Directors' valuation (GBP20.5m) GBP788.3m GBP22.1m
Directors' valuation - percentage
movement (3.0%) 3.3%
Change in NAV per ordinary share (3.1p) 3.4p
31 March 2022
Directors' valuation (GBP20.1m) GBP842.4m GBP21.6m
Directors' valuation - percentage
movement (2.7%) 2.9%
Change in NAV per ordinary share (3.4p) 3.7p
Power Price
As at 30 September 2022, estimates implied an average rate of
growth of UK electricity prices (2022-2041) of approximately -7.7%
(30 September 2021: -5.2%; 31 March 2022: -7.7%) in 2022 real terms
and an average rate of growth of Italian electricity prices
(2022-2042) of approximately -7.3% (30 September 2021: -1.6%; 31
March 2022: -4.7%) in 2022 real terms. As at 30 September 2022,
estimates implied a long-term inflation rate of 2.3% (30 September
2021: 2.5%; 31 March 2022: 2.3%).
The impact of the current higher power price environment,
heightened by the conflict in Ukraine, on 2022 power prices has
been unprecedented. The blended average of the 'central case'
scenario has been applied to the valuation which includes the
impact of the current high power price environment. Given the
recent volatility in power prices and, at the time of calculating
the NAV, the possibility of a price cap or windfall tax on
renewable generation being implemented by the UK government, the
Company discounted the forward power prices as supplied by its
market consultants which it uses in the calculation of its NAV. The
Company does not consider that the short-term power price forecasts
are a reliable reflection of the power prices which are likely to
be received for future generation. Therefore, where prices have not
been fixed/hedged, forecast power prices are discounted to capture
this underlying uncertainty and to reduce risk associated with
future cash flows. The discounts outlined below were applied to the
Company's NAV analysis, leading to a reduction of 7.5p / share in
the Company's NAV.
Time period Discount applied to unhedged portion of portfolio power prices
Q4 2022 No discount has been applied
Q1 2023 50% discount
FY 2023/24 35% discount
FY 2024/25 25% discount has been applied to Summer 2024 price and 20% discount has been applied to Winter
2024 prices
FY 2025/26 10% discount
FY 2026/27 No discount has been applied
The table below shows the sensitivity of the portfolio valuation
to a sustained decrease or increase in the power price by minus or
plus 10% on the valuation, with all other variables held
constant.
Power price sensitivity -10% change Investments +10% change
30 September 2022
Directors' valuation (GBP55.5m) GBP760.2m GBP53.4m
Directors' valuation - percentage
movement (6.6%) 6.4%
Change in NAV per ordinary share (9.4p) 9.1p
30 September 2021
Directors' valuation (GBP45.2m) GBP788.3m GBP43.0m
Directors' valuation - percentage
movement (6.7%) 6.4%
Change in NAV per ordinary share (6.9p) 6.6p
31 March 2022
Directors' valuation (GBP48.9m) GBP842.4 GBP46.5m
m
Directors' valuation - percentage
movement (6.6%) 6.3%
Change in NAV per ordinary share (8.3p) 7.9p
Energy Generation
The portfolios aggregate energy generation yield depends on the
combination of solar irradiation and technical performance of the
solar assets. The table below shows the sensitivity of the
portfolio valuation to a sustained decrease or increase of energy
generation by minus or plus 5% on the valuation, with all other
variables held constant.
Energy generation sensitivity -0.5% underperformance Investments +0.5% outperformance
30 September 2022
Directors' valuation (GBP47.1m) GBP760.2m GBP45.3m
Directors' valuation - percentage
movement (5.6%) 5.4%
Change in NAV per ordinary share (8.0p) 7.7p
30 September 2021
Directors' valuation (GBP42.8m) GBP788.3m GBP42.2m
Directors' valuation - percentage
movement (6.4%) 6.3%
Change in NAV per ordinary share (6.6p) 6.5p
31 March 2022
Directors' valuation (GBP46.2m) GBP842.4m GBP43.9m
Directors' valuation - percentage
movement (6.3%) 6.0%
Change in NAV per ordinary share (7.8p) 7.5p
Inflation Rates
The portfolio valuation assumes long-term inflation of 2.3% (30
September 2021: 2.5%; 31 March 2022: 2.3%) p.a. for investments
(based on UK RPI ).
The table below shows the sensitivity of the portfolio valuation
to a change to the inflation rate by minus or plus 3% for 30
September 2022 and 31 March 2022 and minus or plus 0.5% for 30
September 2021, with all other variables held constant.
Inflation rate sensitivity -3.0% change Investments +3.0% change
30 September 2022
Directors' valuation (GBP140.9m) GBP760.2m GBP198.4m
Directors' valuation - percentage
movement (16.9%) 23.8%
Change in NAV per ordinary share (23.9p) 33.6p
30 September 2021 -0.5% change +0.5% change
Directors' valuation (GBP27.4m) GBP788.3m GBP29.5m
Directors' valuation - percentage
movement (4.1%) 4.4%
Change in NAV per ordinary share (4.2p) 4.5p
31 March 2022 -3.0% change +3.0% change
Directors' valuation (GBP132.9m) GBP842.4m GBP191.1m
Directors' valuation - percentage
movement (18.0%) 25.9%
Change in NAV per ordinary share (22.6p) 32.4p
Operating Costs
The table below shows the sensitivity of the portfolio to
changes in operating costs by plus or minus 5% for 30 September
2022 and 31 March 2022 and plus or minus 10% for 30 September 2021
at the SPVs level, with all other variables held constant.
Operating costs sensitivity +5.0% change Investments -5.0% change
30 September 2022
Directors' valuation (GBP7.0m) GBP760.2m GBP6.9m
Directors' valuation - percentage
movement (0.8%) 0.8%
Change in NAV per ordinary share (1.2p) 1.2p
30 September 2021 +10% change -10% change
Directors' valuation (GBP13.1m) GBP788.3m GBP13.1m
Directors' valuation - percentage
movement (2.0%) 2.0%
Change in NAV per ordinary share (2.0p) 2.0p
31 March 2022 +5.0% change -5.0% change
Directors' valuation (GBP6.5m) GBP842.4m GBP6.5m
Directors' valuation - percentage
movement (0.9%) 0.9%
Change in NAV per ordinary share (1.1p) 1.1p
Tax Rates
The UK corporation tax rate used in the portfolio valuation is
19% until 2023 and 25% thereafter (30 September 2021: 19% until
2023 and 25% thereafter; 31 March 2022: 19% until 2023 and 25%
thereafter), in accordance with the latest UK Budget
announcements.
(ii) Sensitivity analysis of changes in significant unobservable
inputs of Private Equity Investments
The NAV of NPIII, the direct private equity investment as at 30
September 2022 was GBP28.3m (30 September 2021: GBP18.8m; 31 March
2022: GBP17.3m). The valuation of private equity investments is
subject to changes in the valuations of the underlying portfolio
companies. These can be exposed to a number of risks, including
liquidity risk, price risk, credit risk, currency risk and interest
rate risk.
A movement of 10% in the value of the private equity investment
would move the Company NAV at the period end by 0.4%.
20. Non-investment Financial Assets and Liabilities
Cash and cash equivalents are Level 1 items in the fair value
hierarchy.
Current assets and current liabilities are Level 2 items in the
fair value hierarchy, with their carrying value being approximates
for their fair values as these are short-term items.
The preference shares are held at amortised cost using the
effective interest method and are measured at gross proceeds net of
transaction costs incurred, as at September 2022 they are held at
GBP198.1 m (30 September 2021: GBP197.9m; 31 March 2022:
GBP198.1m). The transaction costs are amortised over the expected
life of the preference shares to 2036. Management has assessed that
the carrying amount of the preference shares is not significantly
different to their fair value as at 30 September 2022.
21. Capital Management
a) Capital Structure
The NESF Group, which comprises the Company and its
unconsolidated subsidiaries (being the direct investment in NPIII,
HoldCos and SPVs), manages its capital to ensure that it will be
able to continue as a going concern whilst maximising the return to
ordinary shareholders through the optimisation of the debt and
equity balances. The NESF Group's principal use of cash has been to
fund investments in accordance with the Company's Investment Policy
as well as ongoing operational expenses.
The capital structure of the Company consists entirely of equity
(comprising issued ordinary share capital and retained earnings)
and preference share capital (which, for accounting purposes is
treated as a liability). The capital structure of each of the
Company's subsidiaries consists entirely of equity or a combination
of equity and debt, which may be short- or long-term. The Board,
with the assistance of the Investment Adviser, monitors and reviews
the NESF Group's capital structure on an ongoing basis.
b) Debt
The Company's Investment Adviser reviews the debt structure of
the Company and its subsidiaries on an ongoing basis. The Company
and its subsidiaries use leverage for financing the acquisition of
solar investments and working capital purposes. In accordance with
the Company's Investment Policy, the NESF Group may employ
leverage, provided that it does not exceed (at the time the
relevant arrangement is entered into) 50% of GAV. For this purpose,
leverage includes all short- and long-term debt raised by the
Company or any of its subsidiaries, as well as the aggregate
subscription monies paid in respect of all preference shares in
issue and any unpaid dividends due in respect of the preference
shares.
As at 30 September 2022, the Company had GBP200m of preference
shares in issue (30 September 2021: GBP200m; 31 March 2022:
GBP200m) and no financial debt outstanding. The subsidiaries had
GBP335.7m in long-term debt, look through debt and revolving credit
facilities outstanding (30 September 2021: GBP282.8m; 31 March
2022: GBP283.3m) (see note 22.b), representing a total gearing
level of 42% (30 September 2021: 44%; 31 March 2022: 42%).
22. Financial Risk Management Objectives
The Board, with the assistance of the Investment Manager and
Investment Adviser, monitors and manages the financial risks
relating to the operations of the NESF Group through an internal
risk map and the Investment Manager's reports. These risks include
capital risk, market risk (including price risk, power price risk,
currency risk and interest rate risk), credit risk and liquidity
risk. The objective of the risk management programme is to minimise
the potential adverse effects on the financial performance of the
NESF Group.
For the Company and its subsidiaries, financial risks are
managed by the Investment Manager and Investment Adviser, which
operate within Board-approved policies. The various types of
financial risk which affect the Company, its subsidiaries or both
are managed as described below. Risks that affect the Company's
unconsolidated subsidiaries may affect in turn the fair value of
investments held by the Company.
a) Capital Risk (Company Only)
The Company has put in place a financing structure that enables
it to manage its capital effectively. The Company's capital
structure comprises equity (issued ordinary share capital and
retained earnings) and preference share capital. As at 30 September
2022 the Company had no recourse financial debt, although the
Company is a guarantor for two financing and hedging facilities of
its subsidiaries (see note 25).
b) Market Price Risk (Company and Subsidiaries)
Market price risk is the risk that the fair value of future cash
flows of a financial instrument held by the Company, through its
subsidiaries, will fluctuate because of changes in market prices.
Changes in market prices will affect the discount rate applied to
the expected future cash flows from the Company's investments and,
therefore, the fair value of those investments. The impact of
changes in the discount rate is considered in note 19.
Power Price Risk (Company and Subsidiaries)
The wholesale market price of electricity is volatile and is
affected by multiple factors, including demand for electricity, the
generation across the entire grid and government subsidies, as well
as fluctuations in the market prices of fuel commodities and
foreign exchange. Whilst some of the Company's investments benefit
from subsidies and short-term PPA hedges that fix prices, other
revenue streams are not hedged and subject to wholesale electricity
prices.
The Investment Adviser monitors these factors and hedges the
price at which the subsidiaries sell electricity as necessary.
Currency Risk (Company, NESH V and NESH VI)
Foreign currency risk, as de ned in IFRS 7, arises as the values
of recognised monetary assets and monetary liabilities denominated
in other currencies uctuate due to changes in foreign exchange
rates. The Company has no direct exposure to currency risk as all
its assets and liabilities are in pounds sterling, the Company's
functional and presentational currency. A substantial majority of
the cash ows from the Company's solar assets in Italy to NESH V are
hedged and so the cash ows to the Company from that HoldCo are
exposed to limited currency risk and therefore the currency risk on
the value of the assets is not considered to be signi cant.
Interest Rate Risk (Company and Subsidiaries)
The Company is indirectly exposed to interest rate risk from the
credit facilities of the HoldCos, as at 30 September 2022. Of the
GBP335.7m (30 September 2021; GBP268.6m; 31 March 2022: GBP278.5m)
credit facilities outstanding (excluding NPIII look through debt of
GBP5.9m (30 September 2021; GBP14.2m; 31 March 2022: GBP4.8m),
GBP113.6m (30 September 2021; GBP117.5m; 31 March 2022: GBP115.8m)
had fixed interest rates and the remaining GBP216.1m (30 September
2021; GBP151.1m; 31 March 2022: GBP162.7m) had floating interest
rates. For the floating amount, interest rate swaps were
implemented over the term of the loans to mitigate interest rate
risks for GBP66.0m (30 September 2021; GBP72.0m; 31 March 2022:
GBP66.5m). The counterparties to these swaps are all Investment
grade financial institutions. The remaining GBP150.2m (30 September
2021: GBP79.1m; 31 March 2022: GBP96.2m) had floating rates which
are not hedged and are not considered by the Directors to be
significant.
c) Credit Risk (Company and Subsidiaries)
Credit risk is the risk that a counterparty will default on its
contractual obligations resulting in a financial loss to the
Company or the subsidiary that is a party to the contract. Credit
risk arises from cash and cash equivalents and derivative financial
instruments, as well as credit exposures to customers.
The Company and its subsidiaries mitigate their risk of cash and
derivative transactions by only transacting with major
international financial institutions with high credit ratings
assigned by international credit rating agencies. At the investment
level, the credit risk relating to significant counterparties is
reviewed on a regular basis, in conjunction with monitoring the
credit ratings issued by recognised credit rating agencies, and
potential adjustments to the discount rate are considered to
recognise changes to credit risk where applicable. The Directors
believe that the NESF Group is not significantly exposed to the
risk that the customers of its investments do not fulfil their
payment obligations because of the NESF Group's policy to invest in
jurisdictions and with customers with satisfactory credit
ratings.
The Company's maximum exposure to credit risk is the carrying
amounts of the respective financial assets set out below:
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 11,686 4,318 19,608
Trade and other receivables 24,654 34,870 16,389
Debt investments 306,554 300,000 306,554
Total 342,894 339,188 342,551
Debt investments relate to Eurobonds which have been valued at
fair value as part of the Company's investments as disclosed in
note 17. No collateral is received from NESH III or NESH V in
relation to the Eurobonds. The credit quality of these investments
is based on the nancial performance of NESH III and NESH V as well
as the underlying investments they own. The risk of default is
deemed low and the principal repayments and interest payments are
expected to be made in accordance with the agreed terms and
conditions.
The Company does not have any signi cant credit risk exposure to
any single counterparty in relation to trade and other receivables.
In respect of the Company's subsidiaries, ongoing credit evaluation
is performed on the nancial condition of accounts receivable. As 30
September 2022, the probability of default of the Company's
subsidiaries was considered low and so no allowance has been
recognised based on 12-month expected credit loss as any impairment
would be insigni cant to the subsidiary (30 September 2021: none;
31 March 2022: none). The Investment Adviser has suf cient
oversight of the subsidiary's receivables to assess the probability
of default.
Details of the Company's cash and cash equivalent balances at
the period end are set out in the table below.
Credit rating Cash
Standard GBP'000
& Poor's
30 September 2022
Long - A/+
Short -
Barclays Bank PLC A-1 11,686
30 September 2021
Long - A/+
Short -
Barclays Bank PLC A-1 4,318
31 March 2022
Long - A
Short -
Barclays Bank PLC A/A-1 19,608
d) Liquidity Risk (Company and Subsidiaries)
Liquidity risk is the risk that the NESF Group will not be able
to meet its nancial obligations as they fall due as a result of the
maturity of assets and liabilities not matching. The Board has
established an appropriate liquidity risk management framework for
the management of the NESF Group's short-, medium- and long-term
funding and liquidity management requirements. The Company and its
subsidiaries manage liquidity risk by monitoring forecast and
actual cash ows and matching the maturity pro les of assets and
liabilities and maintaining suf cient cash balances to meet their
operating needs.
The following table shows the maturity of the Company's
non-derivative nancial assets and liabilities. The amounts
disclosed are contractual, undiscounted cash ows and may differ
from the actual cash ows received or paid in the future as a result
of early repayments.
Carrying Up to 3 months 3 to 12 months Greater than
amount GBP'000 GBP'000 12 months
GBP'000 GBP'000
30 September 2022
Assets
Cash and cash equivalents 11,686 11,686 - -
Trade and other receivables 24,654 24,654 - -
Liabilities
Contractual preference
shares repayment and
dividends payable1 (198,127) (2,395) (7,105) (328,341)
Trade and other payables (2,600) (2,600) - -
30 September 2021
Assets
Cash and cash equivalents 4,318 4,318 - -
Trade and other receivables 34,870 34,870 - -
Liabilities
Contractual preference
shares repayment and
dividends payable1 (200,384) (2,359) - (335,431)
Trade and other payables (22,849) (22,849) - -
31 March 2022
Assets
Cash and cash equivalents 19,608 19,608 - -
Trade and other receivables 16,389 16,389 - -
Liabilities
Contractual preference
shares repayment and
dividends payable1 (200,400) (2,342) (7,132) (333,000)
Trade and other payables (9,443) (9,443) - -
1 Assumes no conversion of preference shares in 2036.
23. Preference Shares and Revolving Credit and Debt
Facilities
a) Preference Shares
On each of 12 November 2018 and 12 August 2019, the Company
issued 100,000,000 preference shares at a price of 100p per
preference share. The preference shares pay a preferred dividend of
4.75% p.a. until March 2036, after which they have the right to
convert, based on 100p per preference share and the NAV per
ordinary share at the time of conversion, into new ordinary shares
or a new class of unlisted B shares with dividend and capital
rights ranking pari passu with the ordinary shares. The preference
shares do not confer any voting rights, except in limited
circumstances.
The preference shares are redeemable at the option of the
Company at any time after 1 April 2030, in full or in part. The
redemption price will be the subscription price plus any unpaid
dividends. In addition, the preference shares may be redeemed in
full at the option of the holders in the event of a delisting or
change of control of the Company.
Opening Amortisation Carry Amount
GBP'000 GBP'000 GBP'000
30 September 2022
Preference shares 198,058 69 198,127
30 September 2021
Preference shares 197,920 69 197,989
31 March 2022
Preference shares 197,920 139 198,058
b) Revolving credit and debt facilities
The Company's HoldCos have revolving credit and debt facilities
which are factored into the calculation of the fair value of the
underlying investments.
In January 2017, NESH closed a syndicated loan with MIDIS, NAB
and CBA for GBP157.5m ("Project Apollo") to refinance its revolving
credit facility. As part of the facility agreement, the lenders
provide an additional Debt Service Reserve Facility of GBP7.5m and
hold a charge over the assets of NESH. As at 30 September 2022, the
nominal outstanding amount was GBP146.0m (30 September 2021:
GBP149.6m; 31 March 2022: GBP145.1m).
In June 2021, NESH III closed a RCF with National Westminster
Bank plc and AIB Group (UK) p.l.c. for GBP75.0m of which GBP75.0m
was subsequently drawn down. In September 2022 the facility was
increased to a total commitment of GBP135.0m. As at 30 September
2022, the outstanding amount was GBP109.7m (30 September 2021:
GBP50.0m; 31 March 2022: GBP75.0m).
In March 2016, NESH IV agreed the purchase of Project Radius.
The acquisition was part funded by a debt facility entered between
NESH IV and Macquarie Bank Limited for GBP55.0m, which was fully
drawn down in April 2016. As part of the debt facility agreement
Macquarie Bank Limited holds a charge over the assets of NESH IV.
As at 30 September 2022, the nominal outstanding amount was
GBP46.9m (30 September 2021: GBP47.5m; 31 March 2022:
GBP47.3m).
In July 2018, NESH IV closed a RCF with Santander for GBP40.0m
which was subsequently fully drawn down. In January 2019, the
facility was increased to a total commitment of GBP70.0m with a
subsequent GBP30.0m drawdown. In August 2019, GBP56.0m was repaid.
In February 2021 GBP35.2m was drawn down. As at 30 September 2022,
the outstanding amount was GBP40.5m (30 September 2021: GBP29.1m;
31 March 2022: GBP21.1m).
24. Reconciliation of Financing Activities
Opening Cash Flows Net Income Non-cash Carry Amount
GBP'000 GBP'000 Allocation Flows GBP'000
GBP'000 GBP'000
Six months ended 30 September
2022
Share capital and premium 608,037 - - 734 608,771
Preference shares 198,058 - - 69 198,127
Retained earnings 60,463 (20,896) 77,087 (734) 115,920
Six months ended 30 September
2021
Share capital and premium 605,938 - - 1,255 607,193
Preference shares 197,920 - - 69 197,989
Retained earnings (25,147) (19,620) 45,467 (1,255) (555)
31 March 2022
Share capital and premium 605,938 - - 2,099 608,037
Preference shares 197,920 - - 138 198,058
Retained earnings (25,147) (39,841) 127,550 (2,099) 60,463
25. Commitments and Guarantees
The Company had parental guarantees in place with two financial
institutions for its subsidiaries, debt obligations and a currency
hedge transaction executed through subsidiaries.
The Company, through its Holdco, had forward and development
funding facilities in relation to the construction of subsidy-free
development projects. As at 30 September 2022, the facilities
amounted to GBPnil and GBPnil respectively (30 September 2021:
GBPnil and GBPnil; 31 March 2022: GBP3m and GBP1.4m).
On 19 November 2018, the Company entered into a
counter-indemnity deed with Banco Santander ("Santander") regarding
borrowings by NextPower Radius Limited. Under the terms of the deed
the Company may request Santander to issue a letter of credit for
no more than EUR2,500,000. As at 30 September 2022, a letter of
credit of GBP2,374,426 was in issue (30 September 2021: GBPnil; 31
March 2022: GBP2,374,426).
On 1 December 2017, the Company provided a guarantee to Intesa
Sanpaolo S.p.A. ("ISP") relating to derivative transactions made
available to NESH V. The guarantee covers all present and future
obligations of NESH V to ISP relating to the derivative
transactions. As at 30 September 2022 the Company has no
outstanding commitments related to this guarantee (30 September
2021: none; 31 March 2022: none).
The Company has a remaining commitment to NPIII of $19.1m as at
30 September 2022 (30 September 2021: $23.3m; 31 March 2022:
$25.9m). The Company, through its subsidiary, has a remaining
commitment of EUR0.2m in relation to the co-investment in Project
Agenor as at 30 September 2022 (30 September 2021: none; 31 March
2022: EUR1.0m). The Company, through its subsidiary, has a
remaining commitment of EUR4.1m in relation to the co-investment in
Project Santarem as at 30 September 2022 (30 September 2021: none;
31 March 2022: none).
The Company, through its HoldCo's, had other project spending
commitments totaling GBP33m as at 30 September 2022.
26. Related Parties
The Investment Manager, the Investment Adviser and the Asset
Manager are considered to be related parties in light of their
responsibilities in implementing the investment strategy set by the
Board of Directors and directing the activities of Group entities.
All management fee transactions with the Investment Manager are
disclosed in note 5.
There are no fee transactions between the Company and the
Investment Adviser.
Under existing arrangements with the Asset Manager, each of the
operating subsidiaries of the Company entered into an asset
management agreement with the Asset Manager and each of the HoldCos
entered into on accounting services agreement with the Asset
Manager. The total value of recurring and one-off services paid to
the Asset Manager by the subsidiaries during the period amounted to
GBPnil (30 September 2021: GBPnil; 31 March 2022: GBP6.6m).
At 30 September 2022 GBP24.6m (30 September 2021: GBP32.8m; 31
March 2022: GBP8.3m) was owed from the subsidiaries in relation to
their restructuring, GBP24.6m being cash trapped within the
structure at period end (30 September 2021: GBP12.6m; 31 March
2022: GBP8.0m). GBP5.2m of administrative service fees were
received from the subsidiaries during the period (30 September
2021: GBP5.1m; 31 March 2022: GBP10.2m), none of which was
outstanding at 30 September 2022 (30 September 2021: GBPnil; 31
March 2022: GBPnil). During the period, dividends of GBP36.9m (30
September 2021: GBP18.9m; 31 March 2022: GBP42.0m) were received
from the subsidiaries. Refer to note 11 and 12 for terms and
conditions on amounts due from and to subsidiaries.
During the prior year the Company committed US$50m to NPIII, as
a Limited Partner governed by a Limited Partnership Agreement, with
US$30.9m drawn as at 30 September 2022 (30 September 2021:
US$26.7m; 31 March 2022: US$24.1m). The Investment Manager, the
Investment Adviser and the Asset Manager are all professionally
engaged to provide services to this fund. Equalisation interest of
GBP0.8m was received in the prior year due to subsequent closes of
NPIII. The principal activity of NPIII is to invest in solar
photovoltaic plants globally (primarily in OECD countries). The
Company has committed a fixed amount of capital which may be drawn
(and returned) over the life of NPIII. The Company pays capital
calls when due and receives distributions from NPIII over the life
of the fund. The outstanding commitment to NPIII is disclosed in
note 25.
During the period to 30 September 2022, NextEnergy Solar
Holdings II Limited and its subsidiaries were sold to RRAM Energy
Limited (a subsidiary of NextEnergy Solar Holdings III Limited) for
consideration of GBP33.4m.
The Directors' fees for the six months ended 30 September 2022
amounted to GBP128k (30 September 2021: GBP106k; 31 March 2022:
GBP222k).
As at 16 November 2022, NextEnergy Capital Group employees held
475,194 shares in NESF.
27. Controlling Parties
In the opinion of the Directors, on the basis of shareholdings
disclosed to them, the Company has no immediate nor ultimate
controlling party.
28. Events After the Balance Sheet Date
On 9 November 2022, NESF signed a GBP32.5m agreement to acquire
the development rights for a high-quality 250MW lithium-ion battery
storage project in the East of England. The project was secured
through JVP2, the Company's second Joint Venture Partnership
vehicle with Eelpower Limited.
On 9 November 2022, the Directors approved a dividend of 1.88
pence per ordinary share for the quarter ended 30 September 2022 to
be paid on 30 December 2022 to ordinary shareholders on the
register as at the close of business on 17 November 2022.
Following the period end, the UK Government announced initial
details of a windfall tax on low-carbon electricity generators in
the UK, as part of its Autumn Statement on the 17 November 2022.
Full details are expected to be clarified through the legislative
process during December 2022. Under the temporary tax, which takes
effect from 1 January 2023 and runs to 31 March 2028, low carbon
generators will pay a surcharge of 45% on in-scope revenues
exceeding GBP75/MWh. The tax will be calculated at group level for
each accounting year, based on aggregated generation and revenues
for that year, less an allowance of GBP10m.
Based on information available at the date of publication, the
Company considers that the methodology used to derive the Company's
NAV as at 30 September 2022, and based on the assumptions outlined
in note 19b, takes account of the potential impact of the windfall
tax levy.
The windfall tax will not be applied to the Company's government
subsidised revenues which makes up c.50% of the Company's total
revenue profile, it will also not be applicable to revenues
generated from energy storage assets, an area where the Company is
strategically positioned with a secured pipeline to rapidly expand
and diversify its future revenue sources.
Historical Financial and Portfolio Information
Year ended 31 March Six months
ended 30
September
2022
2018 2019 2020 2021 2022
Financial
Ordinary shares in issue 575.7m 581.7m 584.2m 586.9m 589.1m 589.7m
Ordinary share price 111.0p 117.5p 101.5p 99.6p 103.4p 111.0p
Market capitalisation of GBP639m GBP683m GBP593m GBP585m GBP609m GBP655m
ordinary shares
NAV per ordinary share(1) 105.1p 110.9p 99.0p 98.9p 113.5p 122.9p
Total ordinary NAV(1) GBP605m GBP645m GBP579m GBP580m GBP669m GBP725m
Premium/(discount) to NAV(1) 5.6% 6.0% 2.5% 0.7% (8.9%) (9.7%)
Earnings per ordinary share 5.88p 12.37p (5.09p) 6.87p 21.69p 13.08p
Dividends per ordinary share 6.42p 6.65p 6.87p 7.05p 7.16p 3.76p
Dividend yield(1) 5.8% 5.7% 6.8% 7.1% 6.9% 6.8%
Cash dividend cover - pre-scrip
dividends1 1.1x 1.3x 1.2x 1.1x 1.2x 1.8x
Preference shares in issue - 100m 200m 200m 200m 200m
Financial debt outstanding GBP270m GBP269m GBP214m GBP246m GBP283m GBP336m
at subsidiaries level
GAV GBP875m GBP1,014m GBP991m GBP802m GBP1,150m GBP1,258m
Financial debt (financial
debt/GAV)(1) 31% 27% 22% 24% 25% 27%
Gearing (financial debt +
preference shares/GAV)(1) 31% 36% 42% 43% 42% 42%
Ordinary shareholder total
return - cumulative since
IPO 33.6% 46.7% 37.5% 42.6% 53.6% 64.8%
Ordinary shareholder total
return - annualised since
IPO 8.5% 9.5% 6.3% 6.1% 6.7% 7.7%
Ordinary shareholder total
return 6.2% 11.8% (7.8%) 5.1% 11.0% 11.0%
Ordinary NAV total return(1) 6.3% 11.8% (4.6%) 7.0% 22.0% 11.6%
Ordinary NAV total return
- annualised since IPO(1) 7.0% 8.1% 5.9% 6.0% 8.0% 9.1%
Ongoing charges ratio(1) 1.1% 1.1% 1.1% 1.1% 1.1% 1.1%
Weighted average discount
rate 7.3% 7.0% 6.8% 6.3% 6.3% 6.8%
---------------------------------
Operational
Invested capital(1) GBP734m GBP896m GBP950m GBP998m GBP1,039m GBP1,074m
Number of assets 63 87 90 94 99 99
Total installed capacity 569MW 691MW 755MW 814MW 865MW 865MW
Annual generation 451 GWh 693 GWh 712 GWh 738 GWh 773GWh 639GWh
Generation since IPO 1.1 TWh 1.8 TWh 2.5 TWh 3.2 TWh 4.0TWh 4.7TWh
Irradiation (delta vs. budget) (0.9%) +9.0% +4.0% +6.2% +1.8% +9.9%
Generation (delta vs. budget) +0.9% +9.1% +4.7% +5.5% +3.4% +6.1%
Asset Management Alpha(1) +1.8% +0.1% +0.7% +0.7% (1.6%) (3.8%)
Weighted average lease life 23.3 25.2 26.9 27.5 27.3 27.0 years
years years years years years
---------------------------------
1 Alternative performance measure.
2 Excludes share in private equity vehicle (NextPower III).
Inclusion of NESF's share of NextPower III would increase capacity
by 21.7MW to 886.7MW
Alternative Performance Measures ("APMS")
We assess our performance using a variety of measures that are
not specifically defined under IFRS and are therefore termed APMs.
The APMs that we use may not be directly comparable with those used
by other companies. Our APMs, which are shown below, are used to
present a clearer picture of how the Company has performed over the
period/year and are all financial measures of historical
performance.
Asset Management Alpha
Asset Management Alpha measures the operating performance of the
portfolio. It is the performance of the portfolio relative to
budget due to active management and excludes the effect of
variation in solar irradiation.
Six months Six months Year ended
ended ended
30 Sep 2022 30 Sep 2021 31 Mar 2022
% % %
Delta of generation vs. budget (A) 6.1 1.1* 1.8
Delta of irradiation vs. budget
(B) 9.9 2.4 3.4
------------------------------------
Asset Management Alpha (A - B) (3.8) (1.2)* (1.6)
------------------------------------
*the values do not cast due to rounding differences.
Invested Capital
Invested capital measures the capital deployed into solar assets
through the HoldCos and SPVs to generate investment returns for
shareholders.
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Invested capital 1,073,733 1,029,098 1,038,648
------------------
Total Gearing
Total gearing measures the aggregate of the NESF Group's
financial debt and fair value of the preference shares relative to
GAV.
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
NESF Group's outstanding financial
debt (A) 335,651 282,832 283,304
Preference shares as per Statement
of Financial Position (B) 198,128 197,989 198,058
Net assets as per Statement of Financial
Position (C) 724,691 606,638 668,500
------------------------------------------
Total gearing ((A + B) / (A + B
+ C)), expressed as a percentage) 42.4% 44.2% 41.9%
------------------------------------------
Financial Debt Gearing
Financial debt gearing measures the aggregate of the NESF
Group's financial debt relative to GAV.
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
NESF Group's outstanding financial
debt (A) 335,651 282,832 283,304
Preference shares as per Statement
of Financial Position (B) 198,128 197,989 198,058
Net assets as per Statement of Financial
Position (C) 724,691 606,638 668,500
------------------------------------------
Financial debt gearing ((A) / (A
+ B + C)), expressed as a percentage) 26.7% 26.0% 24.6%
------------------------------------------
Cash Income
Cash income measures of the cash generated from the Company's
operations.
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Income as per Statement of Comprehensive
Income (A) 48,273 29,954 65,034
Trade and other receivables - administrative
service fee income accrual at beginning
of period/year (B) - 759 758
Trade and other receivables - administrative - 2,041 -
service fee income accrual at end
of period/year (C)
----------------------------------------------
Cash income (A + B - C) 48,273 28,672 65,792
----------------------------------------------
Cash Dividend Cover (Pre-scrip Dividends)
Cash dividend cover (pre-scrip dividends ) measures the cash
available to pay ordinary share dividends, treating all scrip
dividends as if they had been paid as cash dividends.
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Cash Income as per the table above
(A) 48,273 28,672 65,792
Total expenses as per Statement
of Comprehensive Income (B) 8,514 7,976 16,190
Pre-scrip ordinary dividends paid
as per Statement of Changes in Equity
(C) 21,624 20,875 41,940
-------------------------------------------
Cash dividend cover (pre-scrip dividends)
((A - B) / C) 1.8x 1.0x 1.2x
-------------------------------------------
Dividend Yield
Dividend yield is a measure of the return to the ordinary
shareholders.
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Dividend per ordinary share (A) 7.52 7.16 7.16
Ordinary share price at end of period/year
(B) 111.0 99.8 103.4
--------------------------------------------
Dividend yield (A / B, expressed
as a percentage) 6.77% 7.2% 6.92%
--------------------------------------------
NAV per Ordinary Share
NAV per ordinary share is a measure of the value of one ordinary
share.
30 September 30 September 31 March
2022 2021 2022
pence pence pence
Net assets as per Statement of Financial
Position (GBP,000) (A) 724,691 606,638 668,500
Number of ordinary shares in issue
at period/year end (B) 589,698,643 588,234,125 589,077,244
------------------------------------------
NAV per ordinary share ((A / B)
x 1,000) 122.9p 103.1p 113.5p
------------------------------------------
NAV Total Return per Ordinary Share
NAV total return per ordinary share is a measure of the overall
financial performance of the Company and measures the combined
effect of dividends paid together with the rise or fall in the
NAV.
Six months Six months Year ended
ended ended 31 Mar
30 Sep 30 Sep 2022
2022 2021 pence
pence pence
Basic NAV per ordinary share at
period/year end as per Statement
of Financial Position (A) 122.9 103.1 113.5
Annual dividend per ordinary share
declared in respect of period/year
(B) 3.76 3.58 7.16
Basic NAV per ordinary share at
beginning of period/year as per
Statement of Financial Position
(C) 113.5 98.9 98.9
-------------------------------------
NAV total return per ordinary share
((A + B - C) / C,
expressed as a percentage) 11.59% 7.9% 21.98%
-------------------------------------
Ordinary Shareholder Total Return
Ordinary shareholder total return is a measure of the overall
performance of the ordinary shares and measures the combined effect
of dividends paid together with the rise or fall in the share
price.
30 September 30 September 31 March
2022 2021 2022
pence pence Pence
Ordinary share price at period/year
end (A) 111.0 99.8 103.4
Annual dividend per ordinary share
declared/paid in respect of period/year
(B) 3.76 3.58 7.16
Ordinary share price at beginning
of period/year (C) 103.4 99.6 99.6
------------------------------------------
Ordinary shareholder total return
per share ((A + B - C) / C, expressed
as a percentage) 10.99% 3.8% 11.0%
------------------------------------------
Discount to NAV per Ordinary Share
Discount to NAV per ordinary share is a measure of the
performance of the ordinary share price relative to the NAV per
ordinary share.
30 September 30 September 31 March
2022 2021 2022
pence pence Pence
Ordinary share price at period/year
end (A) 111.0 99.8 103.4
NAV per ordinary share at year end
as per Statement of
Financial Position (B) 122.9 103.1 113.5
-------------------------------------
Discount to NAV per Ordinary Share
((A - B) / B,
expressed as a percentage) (9.7%) (3.3%) (8.9%)
-------------------------------------
Ongoing Charges Ratio
Ongoing charges ratio measures the Company's recurring operating
costs (excluding the costs of acquisition or disposal of
investments , financing charges and gains or losses arising on
investments) as a percentage of the average of the net assets at
the end of each of the last four consecutive quarters ending at the
period end.
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Total expenses as per Statement
of Comprehensive Income (A) 8,514 7,976 16,181
Preference share dividends as per
Statement of Comprehensive Income
(B) 4,763 4,718 9,454
Non-recurring expenses (C) 69 158 248
Average of quarterly net assets
(D) 346,425 296,734 595,637
-------------------------------------
Ongoing charges ratio ((A - B -
C) / D, expressed as a percentage) 1.1% 1.1% 1.09%
-------------------------------------
General Shareholder Information
Alternative Investment Fund Management Directive ("AIFMD")
The AIFMD aims to harmonise the regulation of Alternative
Investment Fund Managers ("AIFMs") and imposes obligations on
managers who manage or market Alternative Investment Funds ("AIFs")
in the EU or who market shares in such funds to EU investors.
The Company is a non-EU AIF and has appointed NextEnergy Capital
IM Limited as its non-EU AIFM. The Company's marketing activities
in the UK and the EU are subject to regulation under the AIFMD and
any applicable national private placement regimes ("NPPRs"). NPPRs
provide a mechanism to market non- EU AIFs that are not allowed to
be marketed under the AIFMD domestic marketing regimes. The Board
uses NPPRs to market the Company, specifically in the UK, the
Republic of Ireland, the Netherlands and Sweden.
In accordance with the AIFMD, information in relation to the
Company's leverage and remuneration of the Investment Manager, as
the Company's AIFM, are required to be made available to investors.
These disclosures, including those on the AIFM's remuneration
policy, are available on request from the Investment Manager.
Packaged Retail and Insurance-Based Investment Products
("PRIIPs") Regulation/Key Information Document ("KID")
The PRIIPs Regulation aims to ensure retail investors are
provided with transparent and consistent information across
different types of financial products.
The Company is a PRIIP. The PRIIPs Regulation requires the
Investment Manager to publish a KID in respect of the Company that
includes standardised illustrations of theoretical risk and
returns. The KID is available on the Company's website under
Investor Relations (nextenergysolarfund.com).
The Company is not responsible for the information contained in
the KID and investors should note that the procedures for
calculating the risks, costs and potential returns are prescribed
by law. The figures in the KID may not reflect the expected returns
for the Company and anticipated performance returns cannot be
guaranteed.
Foreign Account Tax Compliance Act ("FATCA")/ OECD Common
Reporting Standard ("CRS")
FATCA is a United States federal law enacted in 2010, the intent
of which is to enforce the requirement for United States persons
(including those living outside the US) to file yearly reports on
their non-US financial accounts. Developed and approved by the OECD
in 2014, the CRS is a global standard for the automatic exchange of
financial account information between governments around the world
to help fight against tax evasion and protect the integrity of
systems.
The Board, in conjunction with the Company's service providers
and advisers, will ensure the Company's compliance with the FATCA
and CRS requirements to the extent relevant to the Company.
Markets in Financial Instruments Directive II ("MiFID II")
Status
MiFID II requires retail investors in complex products to be
assessed for "knowledge and understanding" by distributing firms if
they are buying them without advice.
The Company's ordinary shares are considered as "non-complex" in
accordance with MiFID II.
Retail Distribution of the Company's Shares Via Financial
Advisers and Other Third-Party Promoters
The FCA's rules restrict the promotion of investment products
classified as "non-mainstream pooled investment products" to retail
investors. The restrictions do not apply to ordinary shares in a UK
investment trust or non-UK investment company which would qualify
for approval as an investment trust under section 1158 of the
Corporation Tax Act 2010 if resident and listed in the UK.
The Board has been advised that the Company would qualify as an
investment trust if it was resident in the UK. Accordingly, the
promotion and distribution of the Company's ordinary shares are not
subject to the FCA's restrictions referred to above.
The Company currently conducts its affairs so that its ordinary
shares can be recommended by financial advisers to retail investors
and intends to continue to do so for the foreseeable future.
ISA Status
NESF's ordinary shares are eligible for stocks and shares
ISAs.
The Company intends to continue to manage its affairs so that
its ordinary shares qualify as an eligible investment for a stocks
and shares ISA.
Net Asset Value per Ordinary Share
The NAV per ordinary share is calculated on a quarterly basis
and published through a stock exchange announcement.
Scrip Dividends
The Company offers a scrip dividend alternative to shareholders.
For further information, please see the scrip dividend alternative
circular for the year ending 31 March 2023, which is available
under "Publications" in the Investor Relations section of the
Company's website (nextenergysolarfund.com).
Additional Information
Copies of the Company's Annual and Interim Reports, quarterly
fact sheets and stock exchange announcements, together with
information on the Company's ordinary share price, NAV per ordinary
share, historic ordinary share and NAV performance, together with
further information, is available on the Company's website
(nextenergysolarfund.com).
Financial Calendar for Year Ending
31 March 2023
Annual Results announced June 2023
Annual General Meeting August 2023
Interim dividends
In the absence of unforeseen circumstances, the Directors expect
to declare and pay the following interim dividends per ordinary
share in respect of the financial year ending 31 March 2023.
Dividend Announcement Ex-dividend Payment date Amount
date Date
10 November 17 November 30 December
2nd 22 22 22 1.88p
16 February
3rd 9 February 23 23 31 March 23 1.88p
4th 11 May 23 18 May 23 30 June 23 1.88p
----------
Cautionary Statement
This Interim Report and the Company's website may contain
certain "forward-looking statements" with respect to the Company's
financial condition, results of its operations and business, and
certain plans, strategies, objectives, goals and expectations with
respect to these items and the markets in which the Company
invests. Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
"aims", "anticipates", "believes", "estimates", "expects",
"intends", "targets", "objective", "could", "may", "should", "will"
or "would" or, in each case, their negative or other variations or
comparable terminology.
Forward-looking statements are not guarantees of future
performance. By their very nature forward-looking statements are
inherently unpredictable, speculative and involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. Many of these
assumptions, risks and uncertainties relate to factors that are
beyond the Company's ability to control or estimate precisely.
There are a number of such factors that could cause the Company's
actual investment performance, results of operations, financial
condition, liquidity, dividend policy and financing strategy to
differ materially from those expressed or implied by these
forward-looking statements. These factors include, but are not
limited to: changes in the economies and markets in which the
Company operates; changes in the legal, regulatory and competition
frameworks in which the Company operates; changes in the markets
from which the Company raises finance; the impact of legal or other
proceedings against or which affect the Company; changes in
accounting practices and interpretation of accounting standards
under IFRS; and changes in power prices and interest and exchange
rates.
Any forward-looking statements made in this Interim Report or
the Company's website, or made subsequently, which are attributable
to the Company, or persons acting on its behalf (including the
Investment Manager and Investment Adviser), are expressly qualified
in their entirety by the factors referred to above. Each
forward-looking statement speaks only as of the date it is made.
Except as required by its legal or statutory obligations, the
Company does not intend to update any forward-looking
statements.
Nothing in this Interim Report or the Company's website should
be construed as a profit forecast or an invitation to deal in the
securities of the Company.
Glossary and Definitions
Administrator Ocorian Administration (Guernsey) Limited
AGM Annual General Meeting
AIC The Association of Investment Companies
AIC Code The AIC Code of Corporate Governance (February
2019)
AIFM Alternative Investment Fund Manager for the
purpose of the EU's Alternative Investment
Fund Management Directive
Asset Management Alpha The difference between (i) the delta of generation
vs. budget and (ii) the delta of irradiation
vs. budget
Apollo portfolio 21 UK solar plants held within NESH (see the
Operating Portfolio - Overview for further
details)
Asset Manager or WiseEnergy (Great Britain) Limited and WiseEnergy
WiseEnergy Italia Srl
Brexit The withdrawal of the United Kingdom from the
European Union
Cash dividend cover The ratio of the Company's cash income to dividends
paid or payable in respect of the financial
period/year
CBA Commonwealth Bank of Australia
Company or NESF NextEnergy Solar Fund Limited
Consultants The three independent market forecasters used
by the Company
CO2e or A term for describing different greenhouse
carbon dioxide gases in a common unit. For any quantity and
equivalent type of greenhouse gas, CO2e signifies the
amount of CO2 which would have the equivalent
global warming impact
DNO Distribution Network Operator
DNOO Distribution Network Operator Outages
EBITDA Earnings before interest, tax, depreciation
and amortisation
Embedded benefits Supplier costs that are reduced or avoided
via contracting with small-scale generation
connected at the distribution network level
instead of the national transmission system
EPC Engineering, Procurement and Construction
ESG Environmental, Social and Governance
FCA Financial Conduct Authority
FiT Feed-in-Tariff schemes are financial mechanisms
by which the UK Government incentivised the
deployment of small-scale renewable energy
generation and the Italian Government incentivised
the deployment of large-scale renewable energy
generation by requiring participating licensed
electricity suppliers to make payments on both
generation and export from eligible installations
GAV Gross asset value, being the aggregate of the
net asset value of the ordinary shares, the
fair value of the preference shares and the
amount of NESF Group debt outstanding
GW Gigawatt; A unit of power equal to 1,000 MW
GWh GW hour, being a measure of electricity generated
per hour
HoldCos Intermediate holding companies used by the
Company as pass-through vehicles to invest
in underlying solar energy infrastructure assets,
currently being NESH, NESH II, NESH III, NESH
IV, NESH V and NESH VI
IFRS International Financial Reporting Standards
Investment Adviser or NextEnergy Capital Limited
NEC
Investment Manager NextEnergy Capital IM Limited
IPO Initial Public Offering
IRR Internal Rate of Return
KPMG KPMG Channel Islands Limited, independent auditor
to the Company
KWh Kilowatt hour, being a measure of electricity
generated per hour
LIBOR London Interbank Offered Rate
MIDIS Macquarie Infrastructure Debt Investment Solutions
MW A Megawatt is unit of power equal to one million
watts and is used as a measure of the output
of a power plant
MWh MW hour, being a measure of electricity generated
per hour
NAB National Australia Bank
Net assets or NAV Net asset value
NAV total return The actual rate of return from dividends paid
and any increase or reduction in the NAV per
ordinary share over a given period of time
NEC or NEC Group The NextEnergy Capital group of companies,
including the Investment Manager, Investment
Adviser and Asset Manager
NESF Group The Company, HoldCos and SPVs
NESH NextEnergy Solar Holding Limited
NESH II NextEnergy Solar Holding II Limited
NESH III NextEnergy Solar Holding III Limited
NESH IV NextEnergy Solar Holding IV Limited
NESH V NextEnergy Solar Holding V Limited
NESH VI NextEnergy Solar Holding VI Limited
NIROC Like the ROCs in Great Britain, the Northern
Ireland Renewable Obligation Certificate scheme
obliges electricity suppliers to produce a
certain number of NIROCs for each MWh of electricity
which they supply to their customers in Northern
Ireland or to pay a buy-out fee that is proportionate
to any shortfall in the number of NIROCs being
so presented
NPIII NextPower III L.P.
NZ NextZest
O&M Operations and Maintenance
OECD Organisation for Economic Co-operation and
Development
OFGEM Office of Gas and Electricity Markets
Ongoing charges ratio The regular, recurring annual costs of running
the Company (excluding the costs of acquisition
or disposal of investments, financing charges
and gains or losses arising on investments),
expressed as a percentage of average net assets,
calculated in accordance with the AIC's methodology
Ordinary shareholder The actual rate of return from dividends paid
total return and any increase or reduction in the ordinary
share price over a given period of time
Ordinary shares The issued ordinary share capital of the Company
Performance ratio Describes the relationship between the actual
and theoretical energy outputs of a solar plant
(expressed as a percentage)
PPA Power purchase agreement
Premium/discount to NAV The amount, expressed as a percentage, by which
the Company's ordinary shares trade above or
below the NAV per ordinary share
Preference shares The issued preference share capital of the
Company
PV Photovoltaic
Radius portfolio Five UK solar plants held within NESH IV (see
the Operating Portfolio - Overview for further
details)
RCF Revolving Credit Facility
ROC Renewable Obligation Certificates (the Renewable
Obligation scheme is the financial mechanism
by which the UK Government incentivised the
deployment of large-scale renewable electricity
generation by placing a mandatory requirement
on licensed UK electricity suppliers to source
a specified and annually increasing proportion
of the electricity they supply to customers
from eligible renewable sources or pay a penalty)
ROC recycle The payment received by generators from the
redistribution of the buy-out fund (payments
are made into the buy-out fund when suppliers
do not have sufficient ROCs or NIROCs to cover
their obligation)
RPI Retail Price Index
RRAM portfolio 10 UK solar plants held in NESH III (see the
Operating Portfolio - Overview for further
details)
Scrip shares Ordinary shares issued pursuant to the Company's
scrip dividend alternative
SDG The Sustainable Development Goals are a set
of ambitious global developmental targets adopted
by the United Nations Member States in 2015
to be achieved by 2030 and seek to address
the global challenges we face through the promotion
of development as a balance of social, economic,
and environmental sustainability
Solis portfolio Eight Italian solar plants held within NESH
V (see the Operating Portfolio - Overview for
further details)
SPVs Special purpose vehicles that hold the Company's
investment portfolio of underlying solar energy
infrastructure assets
Thirteen Kings portfolio 13 plants held in NESH III (see the Operating
Portfolio - Overview for further details)
Treasury shares Ordinary shares which are bought back by the
Company, reducing the number of outstanding
shares on the open market, and held by the
Company for resale at a future date
Wholesale revenue Revenue from energy sold in the wholesale power
market which is not connected with subsidy
schemes or PPAs
This document is printed on FSC(R) certified paper and to the
EMAS standard and its Environmental Management System is certified
to ISO 14001.
This publication has been manufactured using 100% offshore wind
electricity sourced from UK wind.
100% of the inks used are HP Indigo ElectroInk which complies
with RoHS legislation and meets the chemical requirements of the
Nordic Ecolabel (Nordic Swan) for printing companies, 95% of press
chemicals are recycled for further use and, on average 99% of any
waste associated with this production will be recycled and the
remaining 1% used to generate energy.
This document is printed on Revive 100 Silk and Revive 100
uncoated paper containing 100% recycled fibre. The FSC(R) label on
this product ensures responsible use of the world's forest
resources.
This is a certified climate neutral print product for which
carbon emissions have been calculated and offset by supporting
recognised carbon offset projects. The carbon offset projects are
audited and certified according to international standards and
demonstrably reduce emissions. The climate neutral label includes a
unique ID number specific to this product which can be tracked at
www.climatepartner.com, giving details of the carbon offsetting
process including information on the emissions volume and the
carbon offset project being supported.
The Company
NextEnergy Solar Fund Limited
Registered Office:
Floor 2
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 4LY
Registered no.: 57739
LEI: 213800ZPHCBDDSQH5447
Ordinary Share ISIN: GG00BJ0JVY01
Ordinary Share SEDOL: BJ0JVY0
London Stock Exchange Ticker: NESF
Website: nextenergysolarfund.com
Directors
Kevin Lyon, Chairman
Vic Holmes, Senior Independent Director
Patrick Firth
Josephine Bush
Joanne Peacegood
(All non-executive and independent)
Investment Manager
NextEnergy Capital IM Limited
East Wing, Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3PP
Investment Adviser
NextEnergy Capital Limited
20 Savile Row
London W1S 3PR
Asset Manager
WiseEnergy
20 Savile Row
London W1S 3PR
Company Secretary and Administrator
Ocorian Administration (Guernsey) Limited
Floor 2
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 4LY
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey GY1 1WR
Registrar
Link Market Services (Guernsey) Ltd
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH
Legal Advisers
As to UK Law
Stephenson Harwood LLP
1 Finsbury Square
London EC2M 7SH
As to Guernsey Law
Carey Olsen (Guernsey) LLP
PO Box 98
Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ
Sponsor and Joint Broker
Cenkos Securities plc
6, 7, 8 Tokenhouse Yard
London EC2R 7AS
Joint Broker
RBC Capital Markets Ltd
100 Bishopsgate
London EC2N 4AA
Media and Public Relations Adviser
Camarco
107 Cheapside
London EC2V 6DN
Principal Bankers
Barclays Bank plc
6/8 High Street
St Peter Port
Guernsey GY1 3BE
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END
IR BMBMTMTTTBJT
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November 21, 2022 02:00 ET (07:00 GMT)
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