NextEnergy Solar has published its end June 2023 NAV. The NAV has slipped to 109.3p from 114.3p over the second quarter of 2023. The most significant factor in this was a decision to increase the discount rate used to value NESF’s future cash flows by 0.75%, to reflect higher interest rates.
The company has also declared the first of its new higher quarterly dividends of 2.08p, up from 1.88p, as it targets an 8.35p total dividend for the current financial year, up 11% on the previous year. It is forecasting that this will be covered 1.3–1.5x.
The portfolio generated 3.9% more power than budgeted in the quarter and, since the end of June, NextEnergy’s new Whitecross solar farm has been energised. Whitecross is one of five unsubsidised solar plants that the fund has decided to sell. We should get an announcement on this later in the year.
The energisiation of NextEnergy Solar’s first standalone battery storage asset has been delayed until Q1 2024 after the original contractor went bust. A new one has been appointed and construction is ongoing. The adviser has hired Dario Hernandez as its head of energy storage. Dario brings over 14 years of energy storage expertise, which should benefit NextEnergy Solar as it proceeds with its efforts to increase its exposure to the energy storage market.
Drivers of the NAV move
The notable drivers of NESF’s 5p move in its NAV were:
- A £27.4m or 4.7p per share hit, as the discount rate was increased by 0.75% across the board. The company’s UK unlevered assets are now valued using a 7.5% discount rate, UK levered assets use between 8.2% and 8.5%, the Italian assets use 9.0%, and the subsidy free (uncontracted) assets and projected returns beyond a 30-year asset life are discounted at 8.5% per annum.
- The modelled return for the quarter of £15.2m or 2.5p per share offset by a 2.2p (£13.2m) dividend.
- Higher near-term inflation rate assumptions, offset by lower long-term inflation rate assumptions added £3.9m or 0.7p. These come from HM Treasury forecasts and long-term implied rates from the Bank of England for the UK assets, and IMF forecasts for the overseas ones.
- Power price forecasts have been shaved slightly, taking off £2.0m or 0.3p per share.
NESF : NextEnergy Solar NAV dips on higher discount rate