NextEnergy Solar Fund, the specialist renewable energy investment company, is pleased to announce its full year results and annual report,
for the year ended 31 March 2022.
- +14.6p (c.15%) increase in NAV per ordinary share to 113.5p (31 March 2021: 98.9p).
- Increased ordinary shareholders' NAV of £668.5m (31 March 2021: £580.8m).
- Ordinary shareholder annualised total return for the year of 11% (31 March 2021: 5.1%).
- Gearing (including preference shares) of 42% (31 March 2021: 43%).
- Dividends per ordinary share of 7.16p (31 March 2021: 7.05p).
- Increased cash dividend cover before scrip to 1.2x (31 March 2021: 1.1x).
- 5.0% increase in FY22/23 target dividend to 7.52p per ordinary share.
- Estimated dividend cover of between 1.3x and 1.5x for the FY22/23.
During the year, total group portfolio revenue increased c.19% to £114m (31 March 2021: £96m) and EBITDA of the portfolio increased c.22% to £90m (31 March 2021: £74m). The portfolio performed strongly and expanded through acquisitions in international solar assets and battery storage. These acquisitions help the Company enhance revenues and add potential future NAV accretive growth.
1 April 2021 to 31 March 2022:
- Energised South Lowfield, a 50MW solar asset located in North Yorkshire.
- Established a strong foothold in the long-term, high-credit UK corporate power purchase agreement ("PPA") market with a 15-year corporate PPA with AB InBev, the world's largest brewer, on 100MW covering c.75% of electricity generated.v
- Strategic step into the energy storage sector in the United Kingdom via a £100m Joint Venture Partnership ("JVP") with Eelpower Limited ("Eelpower"). The JVP is targeting the establishment of up to 250MW in projects. The Company has sufficient secured pipeline to complete the initial target spend of £100m.
- First stand-alone 50MW battery asset under construction as part of the JVP and is expected to be energised early 2023. The battery will initially feature a one-hour duration system but has been prepped for evolution to a two-hour duration system.
Private solar infrastructure solar fund:
- Commitment of US$50m to NextPower III LP ("NPIII"), a private ESG solar infrastructure fund established to invest in solar infrastructure projects primarily in OECD countries. Providing an opportunity for NESF's shareholders to, efficiently and cost-effectively, access an established portfolio of operational and under construction international assets and co-investment opportunities.
- First co-investment alongside NPIII, for a 50MW Spanish solar plant currently under construction.
1 April 2022 to date:
- Initiated construction of Whitecross, a 36MW subsidy free solar farm in Lincolnshire.
- Commenced with the grid connection works and construction preparation of Hatherden, a 50MW subsidy free solar farm.
- These two-subsidy free UK solar farms will complete the Company's 150MW subsidy free solar target.
- Announced NESF's 100th operating solar asset.
- Co-located battery retrofit programme introduced across the portfolio. Starting with North Norfolk, an 11MW, 1.6ROC asset located near to Cromer, where a c.6MW two-hour duration battery will be developed.
- An additional four potential co-located battery locations have been identified in the existing NESF solar portfolio and moved into development stage.
Private solar infrastructure fund:
- NPIII progress as at 27 June 2022: 92 solar projects totalling c.1GW capacity secured across the USA, Spain, Portugal, Chile, India, and Poland, with a further 300MW under exclusivity.
- Second co-investment alongside NPIII, for a 210MW solar portfolio in Portugal. The portfolio will be constructed across 2022 into 2023.
The main contributor to the change in the Company's NAV during the year was an increase in power price forecast assumptions (+9.5p 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"). Other changes included updating short-term inflation assumptions (+6.1p per ordinary share).
- Total installed capacity of 865MW(31 March 2021: 814MW).
- Reached 99 fully operating solar assets during the year, this has increased to 100 since year end (31 March 2021: 94).
- Signed a new £100m(£75m committed + £25m accordion) Revolving Credit Facility with a 3-year duration on attractive terms with lenders NatWest and AIB.
- Portfolio generation outperformance of +1.8% for the financial year ended 31 March 2022, translating into additional revenues of c.£2.0m.
- NextEnergy Capital's power sales desk continues to successfully manage risk and opportunistically secure power prices higher than forecasts in line with NESF's power sales strategy. In addition to NESF's budgeted revenues from ROCs and FITs, the Company's hedging positions (covering 716MW UK portfolio) as at 15 June 2022 were:
- 2022/23: 85% of UK budgeted generation, (average fix price of £78MWh).
- 2023/24: 74% of UK budgeted generation, (average fix price of £73MWh).
- 2024/25: 42% of UK budgeted generation, (average fix price of £86MWh).
Power Sales Strategy
Approximately 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.
To manage the sale of power into the market, NextEnergy Capital has a 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 hedged (as noted above), the Company has a high degree of comfort around forward revenue projections and strengthening dividend cover for the current financial year.
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 estimates for its UK assets. For international assets, IMF forecasts are used.
- Establishment of the NESF ESG Board Committee, chaired by Josephine Bush.
- Qualifies under Article 9 of the Sustainable Finance Disclosures Regulation ("SFDR").
- NESF continues to provide the fund's substantial contribution to climate change mitigation by disclosing the carbon emission reduction associated with the fund's clean energy generation.
- In compliance with the requirement of Article 9 of the SFDR, the fund is disclosing its periodic reporting in accordance with Annex V on its website: [ https://www.nextenergysolarfund.com/esg/transparency-and-reporting/ ]
- 773GWh clean electricity generated (31 March 2021: 738GWh).
- 328,700 tonnes of CO2e emissions avoided (31 March 2021: 317,600 t CO2e avoided).
- Equivalent to 216,300 UK homes powered for one year (31 March 2021: 195,000 UK homes).
- GHG emissions data is provided by the Green Investment Group (GIG) and is calculated using their Green Impact methodology based on information provided by NextEnergy Capital and on the UNFCCC - IFI Approach to GHG accounting for renewable energy project:
- A new standalone NESF ESG/Sustainability Report will be released in August 2022.
- 15 Universal Biodiversity Management Plans (UBMPs) were launched in the NESF portfolio, going above and beyond local planning to enhance and promote biodiversity net gain. These measures consist of the introduction of wildflowers, hibernacula, bird, bat and owl boxes and bug hotels.
- A further 15 UBMP sites have been identified and are in the process of being implemented in the NESF portfolio over the current financial year.
- Wildflowers, crucial for pollinators, continue to be planted across the portfolio, covering a total area of 34 acres to date.
- 45% of portfolio has enhanced biodiversity measures in place to date.
- 47% of portfolio grazed by sheep currently.
- 37 average plant species across the portfolio.
The Company has exclusivity over an immediate attractive pipeline of £350m of domestic and international assets across the solar and battery space.
The Company has capital to pursue its short-term immediate pipeline, including bringing online a secured battery storage project and completing the construction of its post-subsidy solar. Out of the total £145m Revolving Credit Facilities ("RCF") available to the Company, £49m remains undrawn and available for deployment. The Company may look to raise capital in the near future to fund attractive growth opportunities it has identified and is pursuing.
The UK power market continues to experience sustained high prices. Prevailing market conditions around the supply of gas continue to look challenging given recent macroeconomic and geo-political events, highlighting the importance of energy security. Against this backdrop, NESF offers strong diversification and protection for investors in their portfolios, in conjunction with helping accelerate Net Zero ambitions following COP26. For the current financial year, NESF is targeting an attractive dividend of 7.52p per ordinary share, supported by a strong expected dividend cover.
There will be a webcast and conference call this morning at 9.00am hosted by:
- Michael Bonte-Friedheim (CEO and Founder of NextEnergy Group)
- Ross Grier (UK Managing Director of NextEnergy Capital)
To register for the webcast please use this link: https://webcast.openbriefing.com/nesf-june22
The presentation will be followed by a Q&A session for analysts. Investor questions can be submitted prior to the presentation via email to email@example.com. NextEnergy Capital will endeavour to answer submitted questions during the Q&A section, if this is not possible due to time constraints, the investment advisor will follow up separately after the presentation.
A recording of the analyst presentation will also be made available on the Company's website shortly after the event.
Kevin Lyon, Chairman of NextEnergy Solar Fund commented:
"The twelve months to 31 March 2022 marked the second year of living with COVID-19, alongside macroeconomic and geopolitical uncertainty, and rising inflation. Despite these challenges, NESF has generated a steady revenue stream and provided investors with a reliable attractive dividend, with the Company's portfolio performing strongly throughout the year.
Having underwritten a commitment to NextPower III ("NPIII"), a private solar infrastructure fund, NESF made its first international solar co-investments in Spain and Portugal alongside NPIII and finalised its first stand-alone investment into the battery storage sector.
NESF weathered the turbulence that the past year has thrown at it and capitalised on rising power prices, with ordinary shareholders' NAV at £668.5m compared to 2021's figure of £580.8m, a significant uplift.
I would like to take a moment to thank everyone who has continued to support NESF over the last year. The Board and I firmly believe that NESF is both well positioned and low risk due to our significant and expanding footprint in the solar sector, combined with our proactive hedging strategy."
Michael Bonte-Friedheim, CEO and Founder of NextEnergy Group commented:
"Over the course of twelve months there has been a dynamic shift in the UK and other power markets. We saw exceptional support from COP26 promoting the continued roll out of renewable technology, alongside increased market volatility, and record power prices in the UK and abroad.
NESF's portfolio continues to outperform technically, financially and operationally, providing vital low-cost of production power generation to the UK, in an environment of rising inflationary pressure, with increased focus on energy security. NESF remains well placed to deliver shareholders an attractive, inflation-protected income, while pursuing more of the exciting growth prospects the sector offers. NESF continues to build new solar projects in the UK, which will contribute to the decarbonisation of the power generation sector and the reduction of imported hydrocarbons."