NextEnergy Solar Fund (NESF) announced its interim results for the six months to 30 September 2024. The company’s NAV total return fell 2.6%, while the shareholder total return was 18.2%. At the time of publishing, the discount stood at 28%. The company announced that it was on track to deliver its target dividend of 8.43p per ordinary share for the financial year ending 31 March 2025 for a yield of c.11%. Forecast target cash dividend cover for the year is expected to be around 1.1x – 1.3x. Discussing the performance, the manager, Ross Girer commented that “Ongoing macroeconomic pressures and recent capital outflows from UK equity markets have driven unprecedented discounts across all listed renewable investment companies. NextEnergy Solar Fund has not been immune to those pressures but remains well placed to capitalise on the renewed momentum towards a low carbon energy system which has been steadily accelerating since the general election in the UK.”
Given the challenges faced over the first half of 2024, the company has focused on its capital allocation including recycling capital from certain existing investments to fund share buybacks, pay-down short-term revolving credit facilities, invest in the health of existing assets and progress value accretive opportunities to grow the platform into the future. Notably, during the period, NESF delivered the third phase of its capital recycling programme through the sale of Staughton, a 50MW operational subsidy-free solar asset located in Bedfordshire. This sale represents the largest transaction in the programme to date, raising £30.3m in proceeds, which provides an attractive return for shareholders and represents a 21.5% premium to Staughton’s holding value as at 30 September 2024.
The company has now sold approximately 145MW of solar assets, raising £72.5m in proceeds. The company continues to run a competitive sales process for the remaining two assets in the capital recycling programme, where the board and investment adviser hope to deliver long-term stable returns and value to NESF shareholders.
The board initiated a meaningful share buyback programme of up to £20m in the period, where the ordinary shares presented an attractive investment opportunity given the size of the current discount. The company continues to steadily buy back shares and has purchased 8.6m ordinary shares as of 20 November 2024 for a total consideration of £6.8m. The board will continue to review the company’s share price discount to NAV alongside the company’s level of gearing and maintain full discretion and flexibility over any future increases to the size of the share buyback programme.
NESF: NextEnergy Solar Fund delivers on capital recycling program during challenging first half
