US Solar Fund (USF) has announced its annual results for the financial year ending 31 December 2022.
- Over the 12 month period USF’s portfolio grew to 543MWDC.
- USF’s NAV fell slightly from its half-year level, falling from the $321.2m it reported in June to $320.0m. USF’s portfolio actually increased in value over the year, however it was more than offset by the operating costs, tax losses, and dividend.
- USF reported a NAV total return since inception of 9.98%, however due to its widening discount it has reported a negative share price return of -5.95% since inception.
- USF paid a dividend of 5.58 cents per share, a 1.5% increase on the previous year, and was fully covered. USF reported a dividend coverage ratio of 1.2x as of its financial year end. The target dividend for next year will be 5.66 cents per share.
- Notable transactions over the year include the acquisition of a second 50MWDC tranche of MS2 in May 2022, bringing total ownership to 100MWDC or 50% of the project. In August, USF announced that it had sold a purchase option over this 50% interest in MS2 to MN8, a renewable energy business. The other 50% of the asset was sold to MN8 as part of a broader portfolio transaction during 2022.
- USF’s board announced that it was undertaking a strategic review of the options available to maximise value for shareholders and that it expected to conclude the strategic review by the end of Q1 2023.
- USF saw its discount widen substantially over the 12 months, ending its financial year on a 12.8% discount, compared to the 1.6% discount it traded on as of 31 December 2021.
- Liam Thomas, previously CEO of USF’s investment manager, ceased full-time employment with the investment manager as of 31 December 2022.
Chairman, Gill Nott, commented:
“The company’s share price performance continued to be disappointing compared to its peers. Ongoing and unexpected softness in long-term US electricity price forecasts has offset the otherwise favourable discount rate compression the company has achieved as it completed construction projects and they became operational. Additionally, the supply of “construction-ready” projects in the US has become more limited as market participants have increased their risk appetite and acquired earlier stage projects than previously, invested in development pipelines, or invested in development platforms. These factors have prevented the company from growing as all stakeholders had hoped…..
“USF’s ability to acquire projects that align with the investment strategy has been limited by both its inability to raise capital due to muted NAV and share price performance and the previously described changes in the US market. At inception, USF was able to acquire high-quality, construction-ready projects from credible developers. However, as capital continued to flow into the sector, risk appetites increased and market participants who previously took little to no development risk began investing directly in development pipelines or development platforms. This limited the supply of projects available for USF to purchase and increased the price of those projects that were available…..
“We are seeing important and exciting developments around climate policy and renewables adoption. In 2019, the UK was the first G7 economy to pass a net zero target. Today, after just four years, the countries that have a net zero target account for 91% of the world’s GDP. In the US, the White House has repeatedly committed to taking meaningful action regarding climate change, including reducing US greenhouse gas emissions 50-52% below 2005 levels in 2030, reaching 100% carbon pollution-free electricity by 2035 and achieving a net-zero emissions economy by 2050. These efforts will require a significant shift toward clean energy, suggesting the outlook for renewable energy in the US is positive and, while we have been pleased to participate in this exciting market during a time of great growth and development, acquiring a high-quality portfolio of assets, it is disappointing that US Solar has not been in a position deliver ongoing growth for shareholders.
“The board continues to consider the needs of all shareholders and, while it is too early in the strategic review to provide further information, we look forward to providing an update as the process progresses.”
USF : US Solar’s share price disappoints despite a robust NAV and dividend