NextEnergy Solar (NESF) has released an operational update with respect to its performance over the financial year-end period to 31 March 2020.
For the current financial year ending 31 March 2021, NESF says that around 61% of revenues in the UK will be derived from regulated revenues (renewable obligation certificates and others), and approximately 39% of revenues will be derived from the sale of its electricity generation under short-term and medium-term contracts.
Of the market revenues derived from the sale of electricity generation, NESF has secured fixed price agreements covering 95% of its electricity generation for the summer of 2020 and fixed price agreements covering 50% of its electricity generation for the 2020/21 winter. These agreements were concluded during calendar year 2019 and at prices well above the current market prices.
No significant impact from covid-19 to-date
NESF noted the following:
- Generation (unaudited) in the financial year ended 31 March 2020 was 4.7% above budget (2019: 9.1%);
- Financial debt* of 21% as at 31 March 2020 (2019: 27%);
- Full-year dividend target of 6.87p reaffirmed for financial year ended 31 March 2020 (2019: 6.65p);
- For market revenues, fixed price electricity sales contracts in place for 95% of generation for summer 2020 and 50% for winter 2020/21;
- Energisation of subsidy-free new-build asset High Garrett (8.5MW) is expected in Q3 2020; and
- Covid-19 pandemic has not had any significant impact on the company or its underlying portfolio.
Dividend re-affirmed
NESF confirmed its target of a full-year dividend of 6.87p for the financial year ended 31 March 2020, with the fourth interim dividend due to be declared in May 2020 for payment in June 2020. The forecast full-year dividend represents a yield of 5.9% based on yesterday’s closing share price of 115.6p.
Subsidy-free Construction Update
NESF has completed initial site entry works on its subsidy-free plant High Garrett, an 8.5MWp extension to an existing 5MWp ROC asset acquired in 2016. Subject to current COVID-19 impacts, major construction works are planned to commence shortly and energisation is expected to take place towards the end of Q3 2020.
2020/21 Electricity Sales
For the current financial year ending 31 March 2021, NESF estimates approximately 61% of revenues in the UK will be derived from regulated revenues (renewable obligation certificates and others), and approximately 39% of revenues will be derived from the sale of its electricity generation under short-term and medium-term contracts. Of the market revenues derived from the sale of electricity generation, the company has secured fixed price agreements covering 95% of its electricity generation for the summer of 2020 and fixed price agreements covering 50% of its electricity generation for the 2020/21 winter. These agreements were concluded during calendar year 2019 and at prices well above the current market prices.
In Italy, approximately 83% of revenues will be derived from regulated revenues (principally feed-in-tariffs) and approximately 17% of revenues will result from the sale of electricity generated under short-term contracts, of which the company has secured fixed price agreements covering 100% of its electricity generation until the end of the calendar year. These fixed price agreements were entered into during calendar year 2019 and at prices well above the current market prices. The majority of the expected cash flows from the Italian portfolio are covered by a currency hedge for the period up to 2032, which includes all hedging costs.
The power purchase agreement counterparties both in the UK and Italy are all of investment grade quality.
Covid-19 Contingency Planning
NESF says it built up a stock of spare parts during H2/2019 and is currently not expecting any significant complications along its spare parts supply chain.
Workers in the electricity sector are considered key workers and, to date, NESF has not experienced any significant technical, operational or financial impacts on its portfolio resulting from effects of the pandemic, and will continue to work with its manager, partners and suppliers to anticipate and mitigate, where possible, arising risks.
About NESF
NESF invests primarily in operating solar power plants in the UK (it may invest up to 15% of its gross assets in other OECD countries).
NESF has a portfolio comprising 90 operating solar assets, primarily on agricultural, industrial and commercial sites, with a combined installed power capacity in excess of 755MW. As at 31 December 2019, the company has gross assets of £1,032m, of which 89% is invested in the UK, and net assets of £620m. The majority of long-term cash flows from its investments are inflation-linked.
[Solar funds have recovered sharply since around the 23rd of March, when NESF’s shares were down about 25% from the beginning of the month. We said at the time that the indiscriminate selling of infrastructure and renewable energy funds had been driven by cash raising.
NESF and its main UK-listed peers, Bluefield Solar and Foresight Solar, have the vast majority of their market revenue streams secured for the year, providing a buffer against lower power prices. Solar is also widely seen as the most predictable source of renewable energy. The recovery in NESF’s shares means that at the time of writing, it is down by only 6.6% since the beginning of the year.]
NESF: Year-end update from NextEnergy Solar with no significant impact from covid-19 to-date