Net Asset Value and Operational Update

LEI: 213800ZPHCBDDSQH5447

22 February 2021

NextEnergy Solar Fund Limited

("NESF" or the "Company")

Net Asset Value and Operational Update

NextEnergy Solar Fund, the FTSE 250 solar power renewable energy investment company, is pleased to announce the following operational update and its unaudited Net Asset Value ("NAV") as at 31 December 2020.

NESF's operating activities continue to be resilient during the COVID-19 pandemic and the Company remains well-placed to meet its investment objective of providing shareholders with an attractive risk-adjusted return from a diversified portfolio of primarily UK-based solar infrastructure assets.

Financial highlights

·    Increase in NAV per ordinary share to 100.7p (30 September 2020: 99.6p)

·    Increase in ordinary shareholders' NAV to £591m (30 September 2020: £583.5m)

·    Second interim dividend of 1.7625p per ordinary share for the year ending 31 March 2021 (31 March 2020: 1.7175p)

Operational highlights

·    763 MWp total capacity installed to date (30 September 2020: 755 MWp), across 91 operating solar assets with 8.5 MWp added to the subsidy-free portfolio

·    Strong operational resilience through COVID-19 pandemic with year-to-date portfolio outperformance

·    Electricity generation was 8.1% above budget year-to-date ("YTD"), generating c.£5.1m in additional revenue

·    Irradiation levels exceeded expectations by 7.3% YTD

·    Asset management alpha of 0.8% YTD, attributable to the added value of active management and operation of the portfolio by the investment manager and asset manager

·    Generated additional revenue of c.£7m from NESFs power price strategy

·    Conservative risk approach, actively hedging future power prices securing future cash flows

·    100% of budgeted generation for the 2020/21 financial year hedged at fixed prices*

·    83% of budgeted generation for the 2021/22 financial year hedged at an average price of over £48/MWh* (compared with £43.5/MWh power price forecasts)

·    32% of budgeted generation for the 2022/23 financial year hedged at an average price of over £50/MWh* (compared with £46/MWh power price forecasts)

*Covers the sale of electricity at market prices on 725MW of UK assets, as at 19 February 2021.

Subsidy-free asset portfolio

NESF remains on track to reach its subsidy-free target of 150 MWp through its project pipeline during the 2021/22 financial year.  With three operational subsidy-free solar projects among its portfolio, NESF continues to lead the UK solar industry's transition from a subsidy-based regime to one that provides clean electricity at market competitive terms without the need for support from consumers or regulators.

Increase in NAV

The increase in NAV was primarily driven by a 0.25% reduction in the unlevered discount rate to 6.0% for UK operating assets.  The Board considered it appropriate to reduce the discount rate as a result of the observed increased market valuations of operating solar plants in the UK as well as the impact of the reduction in UK interest rates.

Changes in the Company's power price forecasts had a minimal effect on the NAV this quarter due to the power price hedges implemented and the short-term rise in power prices being offset by both lower medium to long-term price forecasts as provided by the Company's independent consultants.

Inflation expectations have remained in-line with NESF forecasts.

Attractive dividend

NESF is targeting a dividend of 7.05p per ordinary share in respect of the financial year ending 31 March 2021 (2020: 6.87p).  The forecast full-year dividend represents a yield of c.7% based on Friday's closing share price of 100.4p.

Future pipeline

NESF continues to advance a pipeline of UK and international solar assets to achieve its growth and expansion objectives.  The Company has sufficient financial flexibility through its two revolving credit facilities to pursue selected growth opportunities. 

Factsheet

The Company's December 2020 factsheet is available now on the Company's website nextenergysolarfund.com  

Kevin Lyon, NextEnergy Solar Fund Chairman, commented:

"I am pleased that, following what has been an extremely challenging period for all, NESF can present an increase in NAV.  NESF entered the final quarter of this financial year in a very strong position, having secured attractive prices for the totality of expected generation this current financial year, plus a significant portion of expected generation for 2021/22. We look forward to updating the market further regarding our growing pipeline of attractive UK and international opportunities."  

Michael Bonte-Friedheim, CEO and Founding Partner of NextEnergy Capital, commented:

"The successful active management of NESF's assets in the year was clear as the Group enjoyed above-budget electricity generation, good asset management alpha from our portfolio management, and a significant cash benefit from our power price contract fixes. Progress towards our subsidy-free goal of 150 MWp is on track as NESF continues to lead the market in a transition to a subsidy-free model in the UK and beyond."

For further information:

Notes to Editors¹:

About NextEnergy Solar Fund 

A constituent of the FTSE 250 Index, NextEnergy Solar Fund is a renewable energy infrastructure investment company that currently invests in operating solar power plants in the UK and Italy.  The Company may invest up to 30% of its gross asset value in non-UK OECD countries, 15% in private equity structures, and 10% in standalone energy storage.

NESF currently has a diversified portfolio comprising 91 operating solar assets, primarily on agricultural, industrial, and commercial sites, with a combined installed power capacity of c.763MW.

As at 31 December 2020, the Company had gross assets of £1,001 million, of which 88% was invested in the UK, and net assets of £591 million.  The majority of long-term cash flows from its investments are inflation-linked.

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 primarily UK-based solar energy infrastructure assets.  The dividend is payable quarterly, and the Company has announced a dividend target for the year ending 31 March 2021 of 7.05p per ordinary share. 

Committed 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.

For further information on NESF please visit nextenergysolarfund.com

About NextEnergy Capital Group ("NEC Group")

NESF is managed by the NextEnergy Capital Group, a specialist solar investment manager, which has a strong track record in sourcing, acquiring, and managing operating solar assets.  NEC Group is a leading player in the global solar investment sector and has over 190 team members with offices in UK, Italy, India, and the USA and assets under management of over $2.3bn across three institutional funds.

NextEnergy Capital Group donates 5% of its net annual profits to NextEnergy Foundation.  NextEnergy Foundation is an international charity that was founded in 2016. Its mission is to participate proactively in the global effort to reduce carbon emissions, provide clean power sources in regions where they are not yet available, and contribute to poverty alleviation.

For further information on NEC Group please visit nextenergycapital.com  

For further information on NextEnergy Foundation visit nextenergyfoundation.org

About WiseEnergy

WiseEnergy is NEC Group's specialist operating asset management division.  NESF is differentiated by its access to WiseEnergy, which has provided operating asset management, monitoring, technical due diligence, and other services to over 1,500 utility-scale solar power plants with an installed capacity in excess of 2.3GW.

For further information on Wise Energy please visit wise-energy.com  

^[1] Note: All financial data is as at 31 December 2020, being the latest date in respect of which NESF has published financial information