Ahead of its interim results, due out next month, US Solar Fund (USF) has provided a brief update on its 6-month market outlook. In general, the USF team highlights the resilience of the portfolio over the first 6 months of 2023.
- USF’s discount rate remains at 4.1%, as it is based on the 20 year US treasury rate which remains unmoved from December 2022 to June 2023, with the US government bond yield stabilising relative to the UK and Europe.
- The performance of USF’s assets reflects the lower operational volatility of solar generation assets, though this is against a backdrop of poorer weather conditions in 2023, which has been partially mitigated by its regional diversity. Non-weather losses have improved by 20% over the first half of 2023.
- USF’s debt facility remains fully hedged against interest rate risks. These arrangements are currently significantly in-the-money due to the rise in interest rates. 95% of USF revenues that are forecast to be received over the next nine years are contracted payments earned under fixed price PPAs and are thus highly predictable.
- USF’s forthcoming NAV valuation, implemented by an external valuer, will reflect the outcome of the recently concluded strategic review which did not result in receipt of any offers. The valuer will also compare USF’s valuations to those of recent transactions in the US renewable sector, which are expected to increase the risk premiums for USF’s assets, reducing the value of its NAV. The board also expects rising inflation to negatively effect USF’s NAV in the short term, due to the increase in operating costs.
- The board expects USF’s 2023 dividend to be fully covered.