NESF now has 100 operating solar assets. Image: NESF.
Increased power price forecasts boosted NextEnergy Solar Fund’s (NESF) full year results as its revenue grew by 19% to £114 million.
The company continued to grow its portfolio of assets both in the UK and internationally through its private ESG solar infrastructure fund NextPower III LP. This included energising its 50MW South Lowfield asset in Northe Yorkshire and stepping into the energy storage sector through a £100 million joint venture with Eelpower.
NESF’s first standalone 50MW battery asset as part of this partnership is under construction and is expected to be energised in early 2023. This will have a one-hour duration initially but preparations are underway to extend that to two hours. Additionally, its first co-located battery storage projects via its retrofit program went live during the last financial year.
NextPower III LP took its first step into the Spanish market in Q1 2022, through a co-investment transaction that saw it take on a 25% stake in a 50MW project under construction in Cádiz.
With high power prices boosting the value of these assets, the company saw its net asset value grow to £668.5 million for the year ending 31 March 2022, up £580.8 million over the course of the previous year. More than half (57%) of the company’s revenue is derived from government subsidies and long-term power purchase agreements (PPAs), whilst the remaining 43% is derived from the company’s in house electricity sales team, allowing it to opportunistically capture favourable market conditions.
NESF continued its focus on PPAs over the past year, including signing a 15 year corporate PPA with brewer AB InBev on 100MW, covering c.75% of electricity generated.
The company’s EBITDA for its portfolio increased c.22% during FY21/22 to £90 million, up from £74 million over the course of the previous year.
Over the course of the last financial year, the company’s portfolio generated 773GWh, up from 738GWh in the previous year. This represents an overperformance of 1.8% versus 6.2% the previous year, increasing revenues by £2 million against budget down from £4.8 million.
However, NESF noted that distribution network operator (DNO) outages had a significant impact on this, without which portfolio generation would have been 3.6% over budget.
During the pandemic, DNO’s were not able to perform their periodic maintenance works, pushing it into 2021/22 meaning there was a disproportionately high number of times NESF was asked to isolate their assets to allow for works.
“NESF's portfolio continues to outperform technically, financially and operationally, providing vital low-cost of production power generation to the UK, in an environment of rising inflationary pressure, with increased focus on energy security,” said Michael Bonte-Friedheim, CEO and founder of NextEnergy Group.
“NESF remains well placed to deliver shareholders an attractive, inflation-protected income, while pursuing more of the exciting growth prospects the sector offers. NESF continues to build new solar projects in the UK, which will contribute to the decarbonisation of the power generation sector and the reduction of imported hydrocarbons."
The company’s ordinary shareholders annualised total return for the last financial year was 11%, up from 5.1% in the previous year. Its dividends per ordinary share were 7.16p – up from 7.05p as of 31 March 2021 – and it has increased its target dividend for FY22/23 by 5% to 7.52p per ordinary share.
Since the start of the new financial year in April 2022, NESF has continued to expand its portfolio as it hit a 100 asset milestone whilst monitoring the continued volatility in the energy market.
Construction has started at its 36MW Whitecross subsidy free solar farm in Lincolnshire, and grid connection works have begun at its 50MW Hatherden subsidy free solar farm. Both of these sites will contribute towards the company’s 150MW subsidy free solar target.
It has also identified an additional four potential co-located battery locations at existing NESF solar sites, which have been moved into the development stage.
"The twelve months to 31 March 2022 marked the second year of living with COVID-19, alongside macroeconomic and geopolitical uncertainty, and rising inflation. Despite these challenges, NESF has generated a steady revenue stream and provided investors with a reliable attractive dividend, with the Company's portfolio performing strongly throughout the year,” said Kevin Lyon, chairman of NESF.
“NESF weathered the turbulence that the past year has thrown at it and capitalised on rising power prices, with ordinary shareholders' NAV at £668.5m compared to 2021's figure of £580.8m, a significant uplift.”