NextEnergy Solar reports that, at 31 March 2016, the company’s NAV was GBP273.8m, equivalent to 98.5p per share (March 2015: NAV of GBP248.4m, 103.3p per share) mainly affected by reductions in power price forecasts and removal of LECs (which had a combined negative impact on NAV of 14.6p per share).
As experienced during the previous reporting period, several issues impacted the Company’s NAV over the course of the reporting year. The Company was affected by the continuing decline of the market price of electricity, and they have revised power price forecasts downward again to reflect current market conditions. Targeted dividends were paid during the year, while new assets acquired or completed were NAV-accretive at the time of completion.
They have further reduced their power price forecasts to take current market conditions into account, reducing forecasts by an average 21% over the forecasting term. The unlevered discount rate remains unchanged at 7.5%, while they have valued asset portfolios with leverage acquired during the year at discount rates up to 8.5% to reflect project leverage. As a consequence, the weighted average discount rate across the portfolio increased to 7.7% from 7.5%.
At year-end, the Company’s portfolio comprised 33 assets amounting to c.414MW installed solar capacity and an invested capital of c.GBP481.0m (2015: 16 assets, 217MW and GBP251.6m invested capital).
Profit before tax was GBP2.0m (2015: GBP8.5m) with earnings per share of 0.78p (2015: 9.13p) negatively impacted by reduction in fair value of investments. Cash dividend cover was 1.2x. Overall, energy generated by our plants was 225GWh, approximately 4.1% above our budget. This is the Company’s second year of energy generation outperformance relative to budget. During the previous financial year, energy generation from the portfolio amounted to 23GWh.
During the year, solar irradiation across the portfolio was 0.4% above expectations, partially explaining the operational outperformance.
The total dividend for the year was 6.25p per share (2015: 5.25p), paid in two half-yearly distributions. Their target is to grow future dividends in line with UK retail price index growth, starting with the 2016/17 financial year. The UK retail price index published by the Office for National Statistics and applicable to the value of ROCs during the 2016/17 financial year was 1.0% and therefore they are targeting to grow the dividend to 6.31p per share for the 2016/17 financial year.
During the month of April 2016, the board decided to move to a quarterly dividend schedule, beginning with the 2016/17 financial year. We expect to pay out four equal dividends starting in September 2016 and continuing on a quarterly basis thereafter.
NESF : NextEnergy Solar returns held back by power prices