US Solar Fund saw its NAV fall from $0.78 to $0.63 over 2024, factoring in dividends of 2.25 cents, this equates to a NAV total return of -13.4%. The main driver of this fall was an increase in the discount rate used to value its forecast cash flows, which was upped from 8.8% to 10.8%.
$18.6m was distributed to shareholders funded by the earlier sale of its Mount Signal 2 investment (back when we thought it was planning to wind up).
Like for like, the total generation of the portfolio fell from 715GWh to 698GWh, 9.0% below budget. 2.9% was attributable to below forecast solar irradiance (versus 2.0% in 2023), and 6.1% attributable to unscheduled outages and factors such as utility grid outages.
Chair of the trust Gill Nott said “2024 has been a challenging year for US Solar Fund, and investment companies more widely, with tough market conditions continuing to impact trading activity and valuations. The board and investment manager have remained proactive in addressing issues within their control. However, the results of the US election in November 2024 and statements made by the incoming administration during the period influenced market dynamics and increased discount rates relevant to the company’s valuation.
During the year, the board delivered on its commitment to return capital to shareholders, via an $18.6m tender offer. The board has resized the company’s revolving credit facility, and reduced the dividend target on an interim basis to ensure the balance sheet remains robust. Following a detailed analysis of options available to the company to refinance its existing senior debt facilities, the board is taking steps to conclude a refinancing by the end of April 2025.
The board and investment manager will continue to monitor the market for comparable sales of performing operational portfolios, with a view to realising value from the company’s assets when the time is right. The board and I maintain an optimistic outlook for the company because of its robust operational portfolio with assets located in states which continue to support renewable generation.”
The statement says that the manager is working to enhance the portfolio’s operational efficiencies. It is replacing underperforming operations and maintenance subcontractors and “developing a master diagnostic and remediation plan to strategically and methodically address technical issues impacting overall portfolio performance”. They are optimistic that this will have a positive benefit in 2025.
The balance on the revolving credit facility has fallen from $40m to $20m and may in time be eliminated altogether. However, in the meantime, the company is negotiating a new bank facility.
Commenting on the political backdrop, the statement says: “While statements made during the November 2024 US federal election campaign, and the subsequent Executive Order entitled “Unleashing American Energy” have created policy objectives which continue to drive uncertainty within the US renewable market and more broadly, the long-term outlook for renewable energy in the US remains strong on the back of state-level mandates and the overall cost competitiveness of renewable energy.”
[The company must fix what is in its power to fix and look to ride out the next few years. Its long-term contracts for sales of energy have an average of 10.8 years to run. The shares are trading at a 47% discount to the new NAV. There is a continuation vote at the AGM, but the board suggests that now is not the right time to try to sell the portfolio – and given that it couldn’t sell it when Biden was in charge – that is probably true.]
USF : Low power output and Trump policies weigh on US Solar
