NextEnergy Solar sells Whitecross and launches £20m buyback programme

NextEnergy Solar Fund has sold its Whitecross solar plant, completing Phase II of its capital recycling programme and freeing up capital to put to other uses (see below).

Highlights:

• Whitecross, located in Lincolnshire, UK, is a 35.22MW utility-scale solar asset that was developed as part of the company’s self-developed project pipeline and energised late last year.
• A third-party buyer, managed by Downing LLP, purchased Whitecross through a competitive sales process.
• The sale of Whitecross raised £27m.
• The transaction is NAV accretive to shareholders and will generate an estimated uplift of 0.57p which will be reflected in the NAV as at 30 June 2024.
• The investment manager (NEC) secured potential for further consideration of £1m payable in the event the project benefits from planned changes to network charging before 31 December 2028, bringing the total transaction value to £28m.
• The total transaction value represents a 1.3x multiple on invested capital, an attractive 15% unlevered IRR, and a 18% premium to the holding value as at 31 March 2024.  It would also generate an estimated uplift of 0.70p if reflected in the company’s NAV per share as at 30 June 2024.

Proceeds from the transaction will be used to reduce the company’s drawn short-term debt via its revolving credit facilities. In addition, NextEnergy Solar Fund has announced that its board has approved an initial share buyback programme of up to £20m, reflecting its view that the company’s current discount to NAV is unjustified. The board says that, based on the historical and projected financial and operational performance of NextEnergy Solar Fund’s diversified high-quality solar plant portfolio, and the recent data points from the company’s asset sales, it believes that the valuation underlying NextEnergy Solar Fund’s NAV remains robust and has therefore launched the buyback programme. At the same time, it continues to maintain a disciplined approach to capital allocation and considers the buyback programme to be in the best interest and value to its shareholders at this point in time. However, it will continue to review the discount to NAV, alongside the level of gearing and will maintain full discretion and flexibility over future increases to the size of the programme.

Comments from Helen Mahy, chairwoman of NextEnergy Solar Fund

“NextEnergy Solar Fund continues to maintain a strong financial platform in a challenging environment.  After careful consideration and review, the board of directors have taken action aimed at narrowing the company’s current share price discount to its net asset value and implemented a share buyback programme.  We are confident that the programme will strengthen the company’s share price performance and are pleased with the ongoing progress against the company’s strategic objectives, by completing the second phase of its capital recycling programme.  The board and investment adviser view the current size of the company’s discount to NAV as unjustified and this programme is in the best interests of our shareholders.  The board remains committed to maintaining a disciplined approach to capital allocation and continues to prioritise narrowing the discount.”

[QD view: This is great news for NextEnergy Solar’s shareholders. The share price has already jumped by about 4% on the news, but should have a lot further to go as buybacks kick in and hopefully the company publishes more good news on the next phase of the recycling programme. Three 50MW plants (Grange, South Lowfield, and Staughton) are still up for sale. The Whitecross sale price implies these might fetch about £115m. That would be transformative for NextEnergy Solar’s balance sheet.]

NESF : NextEnergy Solar sells Whitecross and launches £20m buyback programme