US Solar Fund PLC is pleased to announce its interim results for the period ending 30 June 2022 along with a dividend of 1.27 cents per share for the quarter ended 30 June 2022.
Highlights to 30 June 2022
• The Company has continued to meet its dividend target on a cash covered basis with an increase of 1.5% in 2022 to a target full year dividend of 5.58 cents per share. The first payment was made in early July 2022 (for the quarter ending 31 March 2022) and the second quarterly dividend announced with these results will be paid on or around 21 October 2022.
• Period end Net Asset Value (NAV) of $321.2 million or $0.967 per Ordinary Share, is marginally higher than the 31 March NAV of $321.1 million or $0.967 per Ordinary Share. A small uplift in electricity price forecasts, improved operating cost assumptions, and valuation date roll forward drove the increase in fair value of the portfolio's underlying solar investments.
• The 25% second tranche of Mount Signal 2 (MS2) closed in late May, bringing the Company's ownership in the asset to 50% or 100MWDC and the total USF portfolio to 543 MWDC of operating capacity across 42 projects in four US states. Operating stability from a variety of investment grade offtakers S&P rated A to BBB+, ensured portfolio revenues are 100% contracted at fixed or escalating prices for a weighted average of 14.3 years at period end.
• Whilst extreme energy price volatility has been experienced globally, USF's near-term cash flows are insulated from changes to inflation and volatility in wholesale power prices because of its contracted cash flows. USF's revenues from electricity sales are 100% contracted through the PPA period with its counterparties. The longest PPA has approximately 23 years remaining, the shortest has five years remaining; with a capacity weighted average PPA term remaining across the portfolio of 14.3 years at 30 June 2022.
• During the period, the operating portfolio produced 452GWh of electricity. This was within the expected range of annual generation variance and ensured the continued strong cash cover of the dividend.
Dividend
• The Board is pleased to declare a dividend of 1.27 cents per share on 26 September 2022 for the quarter ending 30 June 2022, totaling 2.54 cents per share for the six-month period.
• Dividend cash cover remains strong at 1.19x for the six months ending 30 June reflecting seasonality of cash flows, noting the forecast coverage for the full year is 1.24x.
• The Company confirms its target 5.58 cents per Ordinary Share annual cash-covered dividend target for FY2022.
Highlights after Period-End
• In August, USF announced it had sold an option over its 50% interest MS2 to MN8 Energy (MN8), a renewable energy business formerly known as Goldman Sachs Renewable Power LLC. Under the terms of the option, MN8 paid USF a non-refundable option fee of $1 million and will have the option, for an initial term of six months extendable for a further three months by mutual agreement, to acquire USF's 50% interest in MS2 for an additional $52.2 million excluding working capital. The total proceeds of $53.2 million that USF will receive if MN8 exercises the option imply a gross return of 11% per annum since USF announced the agreement to acquire up to 50% of MS2 from NEW in December 2020.
• MS2 is the only jointly-owned asset in the USF portfolio and the Board and Investment Manager believe this is an attractive opportunity for USF to realise the value in the MS2 investment. The Option structure allows MN8 to complete the acquisition of USF's 50% interest after its acquisition of the other owner's 50% share, while providing price certainty to USF.
Commenting on the Company's results, Gill Nott, Chair of the Company said:
"We are proud of the Company's progress and dividend performance since its IPO in 2019. Our portfolio of assets with long term PPAs, insulated from power price volatility, has been designed to deliver consistent long-term income prized by investors. We believe that, as a consequence, the company's recent share price has lagged its peers which have more exposure to sharply rising power prices prevailing in Europe, while US power price rises have been more modest.
The wider consequences for renewables of current UK and European policy action, and any future changes, to reduce power prices for consumers, are difficult to predict. While we expect to remain more insulated from any future power price falls, the Board and Investment Manager are disappointed with the Company's share price performance and are exploring all options to continue to deliver value for our shareholders.
