Capital Recycling Programme

NextEnergy Solar Fund Limited

27 April 2023

 

LEI: 213800ZPHCBDDSQH5447

27 April 2023

NextEnergy Solar Fund Limited

("NESF" or the "Company")

 Capital Recycling Programme

 NextEnergy Solar Fund, the specialist solar+ fund, has today launched a capital recycling programme (the "Programme") to accelerate the next phase of the Company's growth. Through the Programme, the Company aims to capture significant value from the divestment of a 236MW portfolio of subsidy-free UK solar assets, the proceeds from which will be used to:

·     Reduce gearing: materially reduce current drawings of the Company's revolving credit facilities ("RCF");

·     Invest in future long-term growth opportunities: provide flexibility to capture higher returning investment opportunities in the future, such as energy storage; and

·     Buyback shares: establish a share buyback in the future if the share price continues to trade at a material discount to the Company's net asset value per share.

NESF has pioneered investment into UK subsidy-free solar since 2017, paving the way for continued renewable investment in the UK following the withdrawal of subsidy regimes.  This effort has been crucial in attracting new investment into the sector, advancing the UK's net zero ambitions and energy security.  These assets have created additional value throughout construction and energisation which the Board and Investment Adviser do not consider to be truly reflected in the Company's recent share price.

To capture the significant value of these solar assets, NESF has initiated this Programme to divest a portfolio of five subsidy-free assets (Hatherden, Whitecross, Staughton, The Grange, and South Lowfield) and has launched a sales process to find buyers for these assets, over the coming months.  The Programme will deliver Net Asset Value ("NAV") accretive returns by realising the value generated through these investments. The Company will retain two operational subsidy-free assets and remains committed to its remaining subsidy-free solar pipeline.

Reduce Gearing

At the Interim Results for period ended 30 September 2022, the Company announced that it had increased the commitments available under its RCF with AIB Group (UK) & NatWest from £75m to £135m.  The additional commitments were 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 £70m RCF with Santander UK to fund the investment pipeline.  Out of the total £205m RCF available to the Company, c.£39m remains undrawn and available for deployment as of the 31 March 2023.  Given the significant increase in interest rates in recent months, the Board anticipates using net proceeds from the Programme to reduce the amount of drawn RCF where the Company has exposure to the high interest rate environment in the near term.  The reduction in gearing will reduce debt service burden, strengthen free cash flows, and further increase dividend cover.

Fund Growth Opportunities

The net proceeds of the Programme will also create capacity for the Company to position itself for its next phase of growth, including into value-accretive energy storage.  The Company has exclusivity over, or owns the project rights for, the majority of its pipeline of c.£500m UK 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, which when constructed will be one of the UK's largest operational standalone battery storage assets.

Commitment to buy back shares

The Board operates robust discount monitoring and management controls and has noted the prolonged period over which the Company's shares have been trading at a discount to its NAV.   The Company cannot formally instruct a share buyback until the end of the Company's current close period which runs from the 1 April 2023 through to 19 June 2023. However, the Board continues closely to monitor the current discount and confirms its commitment to buy back shares if the share price continues to trade at a material discount to the Company's net asset value per share.

Conference Call

There will be a short webcast this morning at 9.30am for both investors and analysts hosted by the investment adviser:

·     Michael Bonte-Friedheim (CEO and Founding Partner of NextEnergy Group)

·     Ross Grier (UK Managing Director, NextEnergy Capital)

·     Stephen Rosser (Investment Director and UK Counsel, NextEnergy Capital)

To register for the webcast please use the following link:

https://www.investormeetcompany.com/nextenergy-solar-fund-limited/register-investor

Unaudited NAV Update

The Company expects to publish its unaudited NAV as at 31 March 2023 during the week ending 12^th May 2023.

Kevin Lyon, Chairman of NextEnergy Solar Fund, commented:

"NESF's capital recycling programme will provide a significant boost to shareholder value.  The programme intends to crystalise value from the Company's subsidy-free assets, allowing the Company to recycle capital throughout its portfolio to reduce gearing and secure future higher-yielding opportunities for long term shareholder growth.  Taking a dynamic approach to the composition of the Company's portfolio allows NESF to adapt to current market conditions and secure capital growth opportunities from its attractive pipeline."

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

"Today's announcement sets out a structured programme for NESF to benefit from active management of its portfolio, free up capital, increase shareholder value, and position the Company for its next wave of growth.  NextEnergy Capital has added significant value to NESF through its investments in subsidy-free solar.  A successful sale process will further demonstrate the value delivered through these assets and provide an attractive return to the Company based on recent examples seen in the secondary market.  We look forward to updating shareholders on the progress of the Programme in due course."

For further information: NextEnergy Capital Michael Bonte-Friedheim	020 3746 0700 [e-mail]
Ross Grier
Stephen Rosser
Peter Hamid (Investor Relations)
RBC Capital Markets	020 7653 4000
Matthew Coakes
Elizabeth Evans 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 Editors¹:

About NextEnergy Solar Fund

NESF is a specialist solar+ fund listed on the premium segment of the London Stock Exchange and is a constituent of the FTSE 250.  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 utility-scale solar energy and energy storage infrastructure assets.  The majority of NESF's long-term cash flows are inflation-linked via UK government subsidies. 

The NESF portfolio has a combined installed power capacity of 865MW (excluding NextPower III MW on an equivalent look-through basis).  NESF 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 assets.  As at 31 December 2022, the Company had an unaudited gross asset value of £1,252m.  For further information on NESF please visit www.nextenergysolarfund.com

Table breakdown of 236MW subsidy-free portfolio:

Subsidy-free solar asset	Installed Capacity	Status	Location
Hatherden	50MW	Ready-to-build	Hampshire, UK
Whitecross	36MW	Under construction	Lincolnshire, UK
Staughton	50MW	Operational	Bedfordshire, UK
The Grange	50MW	Operational	Nottinghamshire, UK
South Lowfield	50MW	Operational	Yorkshire, UK

Article 9 Fund

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 & NEC website.

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: Has over 16 years specialist solar expertise having invested in over 350 individual solar plants across the world.  NextEnergy Capital currently manages four institutional funds with a total capacity in excess of 2.4GW+ and has asset under management of $3.3bn.  www.nextenergycapital.com  

·      WiseEnergy®:  Provides solar asset management, monitoring and technical due diligence services to over 1,350 utility-scale solar power plants with an installed capacity in excess of 1.8GW.  WiseEnergy clients comprise leading banks and equity financiers in the energy and infrastructure sector.  www.wise-energy.com

·    Starlight: Has developed over 100 utility-scale projects internationally and continues to progress a large pipeline of c.10GW of both green and brownfield project developments across global geographies.

Notes:

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

 

END