NextEnergy Solar Fund (NESF) has published interim results for the six months to 30 September 2025, a period that combined strong operational delivery with further pressure on valuations. NAV per share fell from 95.1p to 88.8p, largely reflecting lower third-party forecasts for UK power prices and battery revenues, as well as the impact of dividends paid. Cash generation remained robust, with £48m of cash income versus £45m a year earlier and dividend cover improving to 1.7x. The board has reaffirmed its full-year dividend target of 8.43p per share for the year to 31 March 2026, which equates to a yield of around 16% on the current share price, with full-year cover guided at 1.1–1.3x post-debt amortisation.
Underlying portfolio continues to deliver
Operationally, the portfolio continues to perform well. NESF’s 101 operating assets (939MW of installed capacity on a look-through basis) generated 627GWh over the half-year, with irradiation running 13% above budget and generation 7.6% ahead, adding about £2.5m of extra cash. Around half of revenues come from RPI-linked subsidies, with the balance largely secured through the manager’s rolling 36-month PPA strategy, which is designed to underpin dividends and reduce merchant price volatility. Since launch, NESF has now generated 7.2TWh of electricity.
Management fee reduction and capital recycling add to NAV
The period also saw tangible progress on costs and capital recycling. A renegotiation of operating asset management fees has delivered a 23% fee reduction on renewal, adding 1.3p per share (c.£7.4m) to NAV. The capital recycling programme continues, with three asset sales completed to date (around 145MW sold, raising £72.5m and adding an estimated 2.76p per share to NAV), while the final phase – the sale of a further 100MW – remains in progress. The board is considering an expansion of this programme as part of its formal strategic options review, launched to tackle the wide discount and due to report its conclusions in the new year.
Gearing now restricting buybacks, special dividends and further borrowing
Gearing remains a key focus. Total gearing, including £200m of preference shares, stood at 49.2% at 30 September 2025, close to the 50% limit in the company’s investment policy. Following sustained share price weakness, the USS preference share subscription agreement has triggered an additional enterprise value (EV) gearing test (see our story from August 2019), which has been breached (EV gearing was 54.8% at 30 September and 58.5% at 27 November). While this does not affect day-to-day operations, it restricts buybacks, special dividends and incremental borrowing without USS consent. NESF expects to bring the ratio back below 50% through planned disposals and paying down its short-term RCF; the buyback programme has already been paused since May.
Regulatory risk firmly in the frame
Regulatory risk has also moved further into focus. NESF has updated the market on the potential impact of the UK Government’s consultation on ROC and FiT indexation: an immediate switch from RPI to CPI would reduce NAV by about 2p (c.2%), while a temporary price freeze could cut NAV by around 9p (c.10%). Against this backdrop, the company stresses that it is not in discussions with HMRC and does not expect a material impact from the recent UK Budget.
New chair now in place
There have been changes at board level too. During the period, interim chair Paul Le Page oversaw the strategic review process and the fee renegotiation; post period-end, NESF has appointed former Drax CFO Tony Quinlan as chair, effective 3 December 2025, with Le Page returning to his previous role as an independent non-executive director. Management will set out more detail on the interim performance and outlook at a webcast presentation at 10:00am on Wednesday 3 December 2025.
Matthew Read, senior analyst at QuotedData said: “NESF’s interim numbers serve as a reminder of the disconnect facing many listed renewables funds. On the ground, the portfolio continues to deliver: generation was well ahead of budget, cash flows are strong, dividend cover has improved, and management has secured meaningful fee reductions that directly feed into NAV.
“However, lower power price forecasts have taken another bite out of NAV, while elevated discount rates, persistent share price pressure and rising sector-wide funding costs are weighing on the EV. The trigger of the USS EV gearing covenant simply underlines the lack of room for manoeuvre, and the need for asset sales to restore flexibility. Therefore, the disappointing lack of progress on the capital recycling programme is more acute. The potential NAV hit from the government’s ROC/FiT indexation consultation adds yet another layer of uncertainty, even if the numbers are manageable in the base case.
“The strategic review has a lot to consider. The appointment of Tony Quinlan – someone with deep knowledge of UK power markets – is welcome, and it will be interesting to see whether the board concludes that a more fundamental repositioning or restructuring could help unlock the trapped value. For now, the investment case rests on a high but well-covered dividend, solid portfolio performance, and the hope that clearer policy signals and a lower-rate environment will eventually help sentiment to recover.”
