VH Global Sustainable Energy Opportunities (GSEO) has announced its annual results for the year ended 31 December 2023, during which it provided a total annualised NAV total return of 14.5%. Its chairman describes the year as one of building value in the portfolio, which is now 58% operational and by early 2025, the current portfolio is expected to be fully operational. GSEO says that, as additional assets under construction become operational, it should benefit from further capital growth and cash flow generation.
GSEO’s net asset value (NAV) per share was 116.46p as at 31 December 2023, an increase of 7.6% from the previous year. As at 31 December 2023, GSEO has achieved a 10% annualised NAV total return since IPO including dividends, which is in line with the company’s target total return.
Cash received from the portfolio assets by way of distributions was £29.3m during the year (2022: £28.8m). GSEO’s profit before tax for the year was £55.3m (2022: £28.2m), resulting in earnings per share of 13.14p (2022: 7.67p per share). GSEO says that, as at 31 December 2023, it remained one of the lowest geared investment trusts in its sector with total leverage at 1.9% of NAV.
GSEO’s board firmly believes the discount to NAV at which GSEO’s shares trade materially undervalues the company. It says that as part of its active capital allocation policy, buybacks represent an attractive investment opportunity and the board announced a £10m buyback on 15 September 2023. The board consistently considers the company’s capital allocation policy in relation to the discount that GSEO shares trade on, noting that buybacks are NAV per share accretive at wide discounts.
GSEO’s discount has persisted post-period and the board extended the programme by a further £10m to a total of £20m, which it believes to be in the best interest of shareholders whilst also balancing the need to maintain a strong balance sheet. GSEO says that, as the interest rate environment becomes clearer and rates start to fall, it expects investor interest to return to the sector, and, specifically to GSEO.
Dividend
GSEO has a progressive dividend policy and increased its dividend again, while remaining fully covered. GSEO announced a dividend of 1.42p per share with respect to the period from 1 October 2023 to 31 December 2023, an increase of 2.9% vs. the prior quarter. This brings the total dividend declared for the financial year ending 31 December 2023 to 5.56p per share, exceeding the dividend target of 5.52p per share. The company is targeting a dividend of 5.68p in total for 2024, 2.9% higher than the dividend target for FY2023.
Investment activity and portfolio
Australian solar and battery storage programme updates:
- The year saw the completion of the construction of GSEO’s first solar and storage hybrid system in Australia, through the addition of a two hour 4.95MW battery energy storage system (BESS).
- The commissioning of the solar farm component of the three New South Wales sites. Installation works for the co-located BESS have commenced and the sites are expected to be hybridised within the year.
Brazilian solar PV assets:
- The completion of the tenth solar site, which brought the total operational capacity of the Brazilian sites to 27.3 MW.
- The construction of three of the remaining six sites is progressing well, with commissioning expected within H1 2024. Construction of the remaining three sites will commence upon completion of the three sites currently under construction.
Brazilian hydro facility:
- The Brazilian facility outperformed expectations in the period.
- Furthermore, SUDENE (Superintendency for Development of the Northeastern Region) tax incentives were secured for a further eight years to 2032.
United Kingdom flexible power and carbon capture and reuse programme:
- The project successfully won the UK’s Capacity Market Auction T-4 at a price of £63/kW/year indexed to inflation.
- Following the issues faced by the project’s incumbent EPC contractor in Q2 2023, the company hired a new EPC contractor to complete construction, and the need to complete the civil works at the project site resulted in a payment of additional premia, leading to an overall increase in CAPEX of £16m for the project. Despite this increase, the Investment Manager still expects returns to be in line with original expectations, due to firmer expectations for additional revenue streams of the project. All equipment is on site and the works are advancing well towards the expected commissioning of the integrated plant with CCR slated for the summer.
United States terminal storage programme:
• The assets continued their strong performance since acquisition in April 2021, through execution of the buy, expand and optimise strategy.