Company Announcements

LEI: 213800ZPHCBDDSQH5447

11 May 2022

NextEnergy Solar Fund Limited

("NESF" or the "Company")

Unaudited Net Asset Value and Operational Update

NextEnergy Solar Fund, the specialist solar power renewable energy investment company, is pleased to announce its unaudited Net Asset Value ("NAV") as at 31 March 2022, and latest operational update. 

Financial Highlights

·    +9.1p (+8.7%) increase in unaudited NAV per ordinary share to 113.5p (31 December 2021: 104.4p).

·    Increase in unaudited Ordinary shareholders' NAV to £669m (31 December 2021: £615m).

·    Ordinary shareholders' unaudited Gross Asset Value ("GAV") of £1,150m (31 December 2021: £1,094m).

·    Ordinary shareholder cumulative total return since IPO of 53.6% (31 December 2021: 50%)

·    Gearing (including preference shares) of 42% (31 December 2021: 44%).

·    5.0% increase in target dividend to 7.52 pence per ordinary share (FY21/22 7.16 pence per ordinary share).

·    The Company is predicting a dividend cover of between 1.3x and 1.5x for the current financial year.

Portfolio Highlights

The Company continues to make strong progress with its pipeline, identifying and delivering on opportunities to drive diversification through international solar assets and energy storage, whilst enhancing revenues, and adding NAV accretive growth.

Energy storage:

·    First stand-alone 50MW battery asset is currently under construction and is expected to be energised early 2023.  The battery will initially feature a one-hour duration system but has been prepped for evolution to a two-hour duration in short order.

·    The Company has sufficient pipeline to complete initial target spend of £100m (250MW) through its joint venture with Eelpower.

·    The Company has created a co-located battery retrofit programme across its portfolio.  Starting with North Norfolk, an 11MW, 1.6ROC asset located near to Cromer, on which the team have developed a c.6MW two-hour duration battery which the business intends to construct through the second half of 2022 into early 2023.

·    An additional four co-located battery locations have been identified in the existing NESF solar portfolio and moved into development stage as the team capitalise on the opportunities of integration of short and ultimately long-duration storage into the existing portfolio.

UK solar: 

·      Construction of Whitecross, a 36MW subsidy free solar farm has begun in Lincolnshire.

·   The Company has also commenced with the grid connection works and construction mobilisation phase of    Hatherden, a 50MW subsidy free solar farm.

·   These two subsidy free solar farms will complete the Company's 150MW subsidy free solar allocation, and the Company anticipates these assets to be energised for early 2023.

International solar:

·     The Company's first co-investment into a 50MW Spanish solar plant "Agenor", made alongside the NextPower III

        ESG international solar fund ("NPIII ESG"), is currently under construction.

·    The Company has also recently announced its second international co-investment into Santarem, a 210MW solar portfolio in Portugal, alongside NPIII ESG which will be constructed across 2022 into 2023.

Net Asset Value

Summary of NAV key drivers for Q1 2022, p/share movement:

¹movements in residual value

The main contributor to the change in the Company's NAV during the quarter was an increase in power price forecast assumptions (+5.6p per ordinary share) driven by an uplift in the short to medium term power curves provided by the Company's three independent advisors.  Other changes included updating short-term inflation assumptions (+3.3p per ordinary share), reflecting the latest HM Treasury and IMF forecasts, with long-term inflation assumptions remaining unchanged at 2.25% from 2030 onwards, and an uplift from power purchase agreements (+0.8p per ordinary share).

There has been no change to the discount rate assumptions used to value the assets.

The above NAV numbers are unaudited, and the Company will publish an audited NAV as at 31 March 2022 as part of its final results for the year.

Operational Highlights

·    Total installed capacity of 865MW.

·    99 fully operating solar assets.

·    Portfolio generation outperformance of +1.9% for the financial year ending 31 March 2022, translating into additional revenues of c.£1.96m.

·    NEC's electricity sales desk continues to successfully manage risk and opportunistically lock in above forecast power prices in line with NESF's electricity sales strategy; NESF's hedging positions (covering 716MW UK portfolio) as at 31 March 2022 were:

o  2022/23: 80%, average fix price of £71MWh

o  2023/24: 74%, average fix price of £73MWh

o  2024/25: 42%, average fix price of £86MWh

·    Irradiation levels exceeded expectations by 3.4% for the year ended 31 March 2022.

Power Sales Strategy

40% of the Company's revenue is generated from selling power into the short-term power market. NextEnergy Capital's specialist energy sales desk actively manage short and long duration power price contracts.  In the current environment, the energy sales desk has enabled the Company to mitigate market price volatility whilst allowing optimum weighted average price by forward hedging above forecast prices.  The Company also benefits from 60% of its revenue coming from long term government subsidies that are RPI inflation linked.  Taken in aggregate with the amount of power hedged (as noted above) this gives exceptional comfort around forward revenue projections and strengthening dividend cover out over the coming years.

Inflation

The Company continues to be consistent in its inflation assumptions, using third party, independent inflation data from the HM Treasury Forecasts and long-term implied rates from the Bank of England estimates for its UK assets.  For international assets, IMF forecasts are used.

Future Pipeline:

·    The Company has exclusivity over an attractive pipeline of £350m of domestic and international assets across the solar and battery space.

·    The Company also continues to explore further co-investment opportunities with NextPower III ESG, providing an additional pool of international solar opportunities alongside some of the largest blue-chip investors in the world.

Available Capital

The Company has capital to pursue its short-term immediate pipeline, including bringing online it's identified battery storage projects and completing the construction of its post-subsidy solar.  Out of the total £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.

Establishment of ESG Board Committee

The board is pleased to announce the establishment of the NESF ESG Committee, which will be chaired by Josephine Bush, who has extensive ESG experience.  The committee will provide enhanced governance to NESF ESG activities.

ESG and Energy Security

NESF qualifies under Article 9 of the Sustainable Finance Disclosures Regulation ("SFDR"), and continues to provide its annualised lifecycle emissions, estimated scope 1, 2 and 3 GHG emissions. The GHG emissions data is provided by the Green Investment Group (GIG) and is calculated using their Green Impact methodology based on information provided by NextEnergy Capital.

Around 5% of the UK's energy generation comes from solar power and NESF has played a key part in this growth story providing enough clean energy for over 300,000 UK homes on an annual basis.  NESF supports the UK in delivering energy security and independence through its 91 individual operating solar assets in UK and the Company is also in a strong position to continue to increase this into the future with both new solar and battery assets.

NextEnergy Capital New Hire

NextEnergy Capital, NESF's investment manager, is pleased to announce that it has further strengthened its team through the hiring of Stephen Rosser as Investment Director and In-House Legal Counsel.  Stephen will play a key role in helping drive NESF's continued growth strategy alongside the existing team, harnessing his deep experience and understanding of the regulatory environment in UK energy, adding further weight to the skillset of the team as the fund brings new assets online.  Stephen has previously led legal teams for both Good Energy Group PLC and Centrica.

Market Outlook

The UK power market continues to experience sustained high prices, driven predominantly by existing prevailing market conditions around the supply of gas, which continue to look challenging given recent macroeconomic and geo-political events.  This has brought into key focus the nation's energy security in conjunction with accelerated Net Zero ambitions following COP26.  

Dividend Target

The board of NESF recently approved a target dividend of 7.52 pence per ordinary share, representing a 5.0% increase from the previous year's dividend of 7.16 pence per ordinary share.  This increase is above the 4.1% calculated Retail Price Index ("RPI") rise for the 2021 calendar year.

The target dividend increase is supported by the high degree of visibility of the Company's 2023 revenues, primarily driven by its active power price hedging strategy locking in c.83% of budgeted generation at a fixed price for the 2023 financial year.  When this is added to the aforementioned proportion of revenues from subsidy this gives more than 90% certainty to the revenue that the portfolio is forecasted to generate from its operations.  NESF's high quality asset base has outperformed its generation targets in every year since the fund's inception, this gives the management team outstanding visibility over the strengthening dividend cover out into the future. 

Full Year Results

The Company intends to announce its full year audited results for the financial year ended 31^st March 2022 at the end of June.  Further information on the full year results presentation will be announced shortly.

Kevin Lyon, Chairman of NextEnergy Solar Fund commented:

"This has been an excellent start to the calendar year for NESF and we are pleased to provide an update that covers the current position and exciting outlook for the Fund.  NESF's unaudited NAV per ordinary share for the quarter increased from 104.4p to 113.5p, unaudited Ordinary shareholders' NAV increased by 8.7% to £669m.  The announced 5% dividend target increase is a combination of the Fund's strong progress and a market characterised by sustained higher power prices.  We were also pleased to reveal the selection of the site of our first co-located battery storage site in Norfolk, UK, and to announce our co-investments in Spain and Portugal.

ESG remains at the forefront of investors' minds and our newly established and dedicated ESG committee, chaired by Josephine Bush, who joined the NESF Board as a Non-Executive Director at the start of the year, will continue to enhance our capabilities in this field."

Michael Bonte-Friedheim, Group CEO of NextEnergy Group said:

"Over the course of 12 months there has been a dynamic shift in the UK power market.  We saw exceptional support from COP26 promoting the continued roll out of renewable technology, alongside increased market volatility, and record UK power prices.  NESF's portfolio continues to outperform operationally, providing vital low-cost power generation to the UK in an environment of both rising inflationary pressure, and increased focus on energy security.  NESF remains well placed to continue to deliver ordinary shareholders with an attractive, inflation protected income and to harness more of the exciting growth prospects the market offers."

For further information:

Notes to Editors¹:

About NextEnergy Solar Fund

NESF is a specialist solar power renewable energy investment company listed on the premium segment of the London Stock Exchange that invests in utility-scale solar power plants and energy storage.  The Company may invest up to 30% of its gross asset value in non-UK OECD countries, 15% in solar-focused private equity structures, and 10% in energy storage.

NESF currently has a diversified portfolio comprising of the following:

Solar PV:

·    99 operating solar assets across the UK and Italy (primarily on agricultural, industrial, and commercial sites)

·    A 50MW co-investment into a Spanish solar project alongside NextPower III ESG, currently under construction

·    A 210MW co-investment into a Portuguese solar project alongside NextPower III ESG, currently under construction

·    A subsidy-free UK solar project under construction (Whitecross 36MW)

·    A ready-to-build subsidy-free UK solar project (Hatherden 50MW)

·   A $50m commitment into NextPower III ESG (a private solar infrastructure fund providing exposure to operating andin-development international solar assets)

Energy Storage:

·    A 50MW standalone battery storage project in Fife, Scotland, currently under construction (part of a 250MW joint venture with Eelpower)

·     A 6MW co-located battery storage project at North Norfolk Solar Farm

The NESF portfolio has a combined installed power capacity of 865MW (excluding NextPower III MW on an equivalent look-through basis).

As at 31 March 2022, the Company had an unaudited gross asset value of £1,150million, being the aggregate of the net asset value of the ordinary shares, the fair value of the preference shares and the amount of NESF Group debt outstanding, and a net asset value of £669million.

NESF's investment objective is to provide ordinary shareholders with attractive risk-adjusted returns, principally in the form of regular dividends, by investing in a diversified portfolio of solar energy and energy storage infrastructure assets.  The majority of NESF's long-term cash flows are inflation-linked via UK government subsidies.

For further information on NESF please visit www.nextenergysolarfund.com

Commitment to ESG

NESF is committed to ESG principles and responsible investment which make a meaningful contribution to reducing CO2 emissions through the generation of clean solar power.  NESF will only select investments that meet the requirements of NEC Group's Sustainable Investment Policy.  Based on this policy, NESF benefits from NEC's rigorous ESG due diligence on each investment.  NESF is committed to reporting on its ESG performance in accordance with the UN Sustainable Development Goals framework and the EU Sustainable Finance Disclosure Regulation.

NESF has been awarded the London Stock Exchange's Green Economy Mark and has been designated a Guernsey Green Fund by the Guernsey Financial Services Commission.

NESF's sustainability-related disclosures in the financial services sector in accordance with Regulation (EU) 2019/2088 can be accessed on the ESG section of both the NESF website (nextenergysolarfund.com/esg/) & NEC Group website (nextenergycapital.com/sustainability/transparency-and-reporting/).

About NextEnergy Group

NESF is managed by NextEnergy Capital, part of the NextEnergy Group.  NextEnergy Group was founded in 2007 to become a leading market participant in the international solar sector.  Since its inception, it has been active in the development, construction, and ownership of solar assets across multiple jurisdictions.  NextEnergy Group operates via its three business units: NextEnergy Capital (Investment Management), WiseEnergy (Operating Asset Management) and Starlight (Asset Development).

NextEnergy Capital

NextEnergy Capital comprises the Group's investment management activities.  To date, NEC has invested in over 325 individual solar plants for a capacity in excess of 2.3GW across it institutional funds. 
www.nextenergycapital.com

·   NextEnergy Solar Fund ("NESF") is a solar infrastructure investment company focused on the UK and other OECD countries, which is listed on the premium segment of the London Stock Exchange.  It currently owns 865MW spread among 99 individual assets in the UK and Italy, comprising an unaudited gross asset value of £1,150m.  NESF is one of the largest listed solar energy investment companies in the world.

·     NextPower II ("NPII") a private fund made up of 105 individual operating solar power plants and an installed capacity of 149MW, focused on consolidating the substantial, highly fragmented Italian solar market.  NPII was successfully divested in January 2022, a 2016 vintage vehicle that generated net IRRs to its investors in excess of 25%, versus a gross target of 10-12%.

·    NextPower III ESG ("NPIII ESG") is a private fund exclusively focused on the international solar infrastructure sector, principally targeting projects in carefully selected OECD countries, including the US, Portugal, Spain, Chile, Poland and Italy.  NPIII ESG is a fund that provides a positive social and environmental impact to the countries it has and will invest into.  NPIII completed its fundraise with a total of $896m, including a SMA raised.  The target of the fund was $750m.

·    NextPower UK ESG ("NPUK ESG") is a private unlevered fund investing in greenfield subsidy-free solar projects, with PPA's, in the UK.  NPUK ESG was launched in December 2021.  The UK Infrastructure Bank is providing financing to the initial seed assets of the fund, and plans to invest up to £250m, half of the fund's total target fund size, on a match-funding basis.

WiseEnergy

WiseEnergy® is NextEnergy Capital Group's operating asset manager.  WiseEnergy is a leading specialist operating asset manager in the solar sector.  Since its founding, WiseEnergy has provided solar asset management, monitoring and technical due diligence services to over 1,300 utility-scale solar power plants with an installed capacity in excess of 2.2GW.  WiseEnergy clients comprise leading banks and equity financiers in the energy and infrastructure sector. 

www.wise-energy.com

Starlight

Starlight is NextEnergy Group's development company that is active in the development phase of solar projects.  It has developed over 100 utility-scale projects internationally and continues to progress a large pipeline of c.2.5GW of both green and brownfield project developments across global geographies.

Notes:

^1: All financial data is unaudited as at 31 March 2022, being the latest date in respect of which NESF has published financial information