TIDMNESF
RNS Number : 7674W
NextEnergy Solar Fund Limited
17 November 2017
17 November 2017
NextEnergy Solar Fund Limited
("NESF" or the "Company")
Interim results for the period ended 30 September 2017
Focused Growth with Value Adding Acquisitions
NextEnergy Solar Fund, a specialist investment company that
invest in solar power plants, announces its interim results for the
period ended 30 September 2017.
Summary
-- Investment portfolio of 58 solar PV plants for a total of
c.539MW installed capacity in operation. NESF is the largest listed
solar energy fund on the London Stock Exchange in terms of both
installed solar capacity and market capitalisation.
-- Continuous operating asset outperformance - energy generated
from the portfolio amounted to 307GWh, +2.0% above budget.
-- Company issued 115m new shares further to the Company's 350m
share issuance programme. The issue was significantly
oversubscribed.
-- NAV per share remained stable over the period (105.1p
compared to 104.9p) mainly due to a decrease in power price
forecasts being offset by a reduction in the discount rate,
valuation increases of new assets and operating performance.
-- Equity discount rate lowered by 0.25% to 7.0% for unlevered
assets. Risk premium for levered assets remained unchanged at
between 0.7% and 1.0%.
-- Company drew down final tranche of the GBP150m long-term
facility refinancing the Apollo portfolio.
-- Total Shareholder Return and NAV Total Return during the
six-month period were 4.7% and 3.2% respectively (annualised
returns since IPO in April 2014 were 9.3% and 7.1%
respectively).
-- Cash dividend cover of 1.14x. Reported profit for the period
was GBP14.0m and earnings per share was 2.69p.
-- On track to pay target dividend of 6.42p for the year ending
31 March 2018. The first quarterly dividend of 1.605p was paid in
September 2017; a second quarterly dividend of 1.605p to be paid in
December 2017, as announced on 7 November 2017.
-- Executing the pipeline of acquisition targets and further
solar opportunities under consideration in the UK for another
193MW.
-- Following the period end, first investment overseas with
acquisition of a portfolio of eight operating solar plants with an
installed capacity of 34.5MW located in Italy. The portfolio was
acquired at attractive risk adjusted returns. The transaction
included foreign exchange, financing and brown power risk
mitigation features.
Financial highlights
As at 30 September 2017
NAV GBP602.5m
Number of shares 573.1m
NAV per share 105.1p
Share price 112.5p
Market capitalization GBP644.7m
Dividend yield 5.7%
Kevin Lyon, Chairman of NESF, commented:
"NESF has continued to make excellent financial and operational
progress during the first half of the year, and consolidated its
position as the largest listed renewable solar energy fund in the
UK.
We have now fully invested the equity raised in July and are on
track to invest the remainder of the proceeds of the recent
long-term refinancing in value-adding acquisitions.
We were also very pleased to announce our first international
investment, acquiring a high-quality portfolio of eight operating
solar plants in Italy for an equity value of GBP 48.5M. This
portfolio will generate immediate dividend cover-enhancing cash
flows with low power market risk, while the euro-denominated
long-term debt already in place and the intended currency hedge
mitigate volatility from possible changes in the exchange
rates.
Our asset portfolio performed very satisfactorily during the
summer months with an overperformance of +2.0% versus budget, in
spite of minor outages experienced on selected power plants. The
outages were primarily caused by system maintenance unrelated to
our plants.
The solar PV market is in continuous evolution and our
investment manager is actively assessing and pursuing multiple
growth opportunities, mainly in the UK, ranging from previously
constructed solar plants to subsidy free projects.
We remain confident of meeting our 6.42p total dividend
distribution target for the full year."
Half-Year Report
A copy of the half-year report has been submitted to the
National Storage Mechanism and will shortly be available at
www.morningstar.co.uk/uk/NSM. The half-year report will also be
available on the Company's website at www.nextenergysolarfund.com
where further information on the Company can also be found.
There will be an analyst presentation and conference call at
10.00am this morning for analysts. To register for the call, please
contact nextenergy@mhpc.com.
For further information:
NextEnergy Capital Limited 020 3893 1500
Michael Bonte-Friedheim
Aldo Beolchini
Cantor Fitzgerald Europe 020 7894 7667
Sue Inglis
Fidante Capital 020 7832 0900
Robert Peel
Justin Zawoda-Martin
Shore Capital 020 7408 4090
Anita Ghanekar
Macquarie Capital (Europe)
Limited 020 3037 2000
Nick Stamp
MHP Communications 020 3128 8100
Andrew Leach
Ipes (Guernsey) Limited 01481 713 843
Nick Robilliard
Notes to Editors:
NESF is a specialist investment company that invests primarily
in operating solar power plants in the UK. It is able to invest up
to 15% of its Gross Asset Value in operating solar power plants in
OECD countries outside the UK. The Company's objective is to secure
attractive shareholder returns through RPI-linked dividends and
long-term capital growth. The Company achieves this by acquiring
solar power plants on agricultural, industrial and commercial
sites.
NESF has raised equity proceeds of GBP591.9m since its initial
public offering on the main market of the London Stock Exchange in
April 2014. It also has credit facilities of GBP226m in place
(GBP150m from a syndicate including MIDIS, NAB and CBA; MIDIS:
GBP54.3m and NIBC: GBP21.7m).
NESF is differentiated by its access to NextEnergy Capital Group
(NEC Group), its Investment Manager, which has a strong track
record in sourcing, acquiring and managing operating solar assets.
WiseEnergy is NEC Group's specialist operating asset management
division and over the course of its activities has been providing
operating asset management, monitoring, technical due diligence and
other services to over 1,300 utility-scale solar power plants with
an installed capacity in excess of 1.9 GW.
Further information on NESF, NEC Group and WiseEnergy is
available at www.nextenergysolarfund.com, www.nextenergycapital.com
and www.wise-energy.eu.
Highlights
-- Investment portfolio as at the date of distribution of this
Interim Report of 58 solar PV plants for a total of c.539MW
installed capacity in operation. NESF is the largest listed solar
energy fund on the London Stock Exchange in terms of both installed
solar capacity and market capitalisation.
-- Continuous operating asset outperformance - energy generated
from the portfolio amounted to 307GWh, +2.0% above budget.
-- Company issued 115m new shares further to the Company's 350m
share issuance programme. The issue was significantly
oversubscribed.
-- NAV per share remained stable over the period (105.1p
compared to 104.9p) mainly due to a decrease in power price
forecasts being offset by a reduction in the discount rate,
valuation increases of new assets and operating performance.
-- Equity discount rate lowered by 0.25% to 7.0% for unlevered
assets. Risk premium for levered assets remained unchanged at
between 0.7% and 1.0%.
-- Company drew down final tranche of the GBP150m long-term
facility refinancing the Apollo portfolio.
-- Total Shareholder Return and NAV Total Return during the
six-month period were 4.7% and 3.2% respectively (annualised
returns since IPO in April 2014 were 9.3% and 7.1%
respectively).
-- Cash dividend cover of 1.14x. Reported profit for the period
was GBP14.0m and earnings per share was 2.69p.
-- On track to pay target dividend of 6.42p for the year ending
31 March 2018. The first quarterly dividend of 1.605p was paid in
September 2017; a second quarterly dividend of 1.605p to be paid in
December 2017, as announced on 7 November 2017.
-- Executing the pipeline of acquisition targets and further
solar opportunities under consideration in the UK for another
193MW.
-- Following the period end, first investment overseas with
acquisition of a portfolio of eight operating solar plants with an
installed capacity of 34.5MW located in Italy. The portfolio was
acquired at attractive risk adjusted returns. The transaction
included foreign exchange, financing and brown power risk
mitigation features.
Corporate Summary
The Company is a closed-ended investment company limited by
shares, registered and incorporated in Guernsey under the Companies
(Guernsey) Law, 2008, as amended, on 20 December 2013, with
registered number 57739. The Company is a Registered Closed-ended
Collective Investment Scheme regulated by the GFSC pursuant to the
Protection of Investors (Bailiwick of Guernsey) Law 1987, as
amended.
The Company has 573,059,889 shares in issue, with no shares held
in treasury, all of which are admitted to the premium listing
segment of the Official List of the UKLA and are traded on the
London Stock Exchange's main market for listed securities under the
ticker "NESF".
The Company makes its investments through UK HoldCos and
underlying SPVs which are ultimately wholly-owned by the Company.
References to the Company's activities (investment in solar PV
plants) refer to activities through the UK HoldCos. The UK HoldCos
are registered and incorporated in England and Wales under the
Companies Act 2006, as amended:
-- NextEnergy Solar Holdings Limited, incorporated on 24 March
2014, with registered number 08956168
-- NextEnergy Solar Holdings II Limited, incorporated on 13
February 2015, with registration number 09438822
-- NextEnergy Solar Holdings III Limited, incorporated on 20
July 2015, with registration number 09693016
-- NextEnergy Solar Holdings IV Limited, incorporated on 16
March 2016 with registration number 10066420
The Company controls the investment policy of each of the UK
HoldCos and their wholly-owned SPVs to ensure that each will act in
a manner consistent with the investment policy of the Company.
The Investment Manager is NextEnergy Capital IM Limited, a
company incorporated in Guernsey with registered number 57740
licensed under the POI Law and regulated by the GFSC. The
Investment Manager has appointed NextEnergy Capital Limited, a
company incorporated in England and Wales on 23 October 2006 with
registered number 05975223, to provide investment advice, pursuant
to an Investment Advisory Agreement.
Chairman's Statement
Introduction
I am pleased to present, on behalf of the Board, the Interim
Report and Financial Statements for NextEnergy Solar Fund Limited
for the six-month period ended 30 September 2017.
In June of this year, we completed a further successful capital
raise issuing 115m new shares pursuant to the Company's 350m share
issuance programme. The issue was significantly oversubscribed
which demonstrates the strong backing of our investors who have
been consistently supporting our growth since the IPO. Following
this capital raise, we have a total of 573.1m shares in issue,
including shares issued pursuant to the Company's scrip dividend
offering.
The Company has also drawn down the last tranche of the
long-term debt facility that it entered into in January 2017.
Together with the capital raise, the Company now has sufficient
cash to deploy into the significant pipeline that it is
pursuing.
Since our IPO in April 2014, the Company has rapidly grown to
establish itself as the largest solar energy focused investment
company listed on the London Stock Exchange in terms of both
installed capacity and market capitalisation.
At the date of distribution of this Interim Report, the
Company's portfolio comprised 58 assets amounting to c.539MW
installed solar capacity and an invested capital of GBP700m (date
of distribution of 31 March 2017 Annual Report: 48 assets, c.483MW
and c.GBP554m invested capital).
Thanks to the disciplined investment strategy of the Investment
Manager, NESF has acquired its portfolio at attractive values
compared to market average acquisition values, which will
contribute to meeting NESF's targets.
Over the 3.5 years since the IPO, NESF has achieved an
annualised Total Shareholder Return of 9.3% and an annualised NAV
Total Return of 7.1%, in line with the target range of 7-9%
shareholder equity return per annum for investors. This is a
positive result considering the challenging market conditions faced
by the UK solar sector during this time.
In addition, NESF's operating asset management strategy has been
yielding consistent levels of over-performance in terms of
electricity generation compared to the Company's acquisition
budgets.
We continue to focus exclusively on solar power projects. Our
investment strategy is driven by our belief that solar power
projects have significantly lower risk in terms of revenue,
operation and finance than other renewable energy technologies. We
also believe that the solar expertise of the NextEnergy Capital
Group can generate operating and financial outperformance on the UK
assets acquired. We believe that this expertise can be readily
transferred across geographies. Indeed, following the period end,
we have announced our first investment overseas. The acquisition of
a 34.5MW portfolio of operating solar assets in Italy adds value to
the portfolio on a risk adjusted basis and diversifies our market
risk, while reducing the overall exposure to brown power prices
across our asset base. In addition, implementing the foreign
exchange hedge limits the effect of any currency fluctuations on
the returns this portfolio will generate for us.
As approved at the AGM in August 2017, the investment policy
permits the Company to invest up to 15% of the Gross Asset Value in
solar assets in OECD countries (other than the UK).
During the period, the Company has delivered a strong set of
operating and financial results and we have significantly increased
our asset base by the further debt and equity capital raising
transactions.
Financial Results and Performance
Financial Results
Profit before tax for the six-month period was GBP14.0m (2016:
GBP25.3m) with earnings per share of 2.69p (2016: 8.46p). Cash
dividend cover was 1.14x (2016: 1.2x). Further details are provided
on page 29 and 30 of the Investment Manager's Report.
The Company's annualised Ongoing Charges Ratio ("OCR") was 1.1%
(2016: 1.2%) for the period, which is in line with our budget. The
budgeted OCR for the full year ending 31 March 2018 is 1.1%,
reflecting the advantage of a larger capital base for the whole of
this period compared to the prior year.
Portfolio Performance
We are particularly pleased with the operational performance of
the portfolio during the period. Overall, energy generated by
NESF's plants during the period was 307GWh (2016: 284GWh),
approximately +2.0% above budget. This continues the trend of
energy generation outperformance relative to budget.
During the six-month period, solar irradiation across the
portfolio was +0.5% above expectation (2016: +0.0% above
expectation). NESF's Asset Management Alpha was +1.5%, which
highlights how the principal driver for our consistent
outperformance continues to rest with the structure and quality of
NESF's asset management outsourcing strategy. This outperformance
was achieved despite several plant outages resulting from grid
operators' activities unrelated to our plants. Had the Distribution
Network Operators ("DNO") outages been excluded, the Asset
Management Alpha would have been +2.5%. Further details are
provided in the Investment Manager's Report.
The electricity generated by our portfolio during the period is
equivalent to a saving of 108,000 tonnes of carbon emissions and
sufficient to power some 81,000 households during the same
period.
Net Asset Value
At the period end, the Company's NAV was GBP602.5m, equivalent
to 105.1p per share (31 March 2017: NAV of GBP478.6m, 104.9p per
share). This stable NAV per share over the period is mainly due to
a decrease in power price forecasts being offset by a reduction in
the discount rate, valuation increases of new assets and operating
performance.
We reduced the unlevered discount rate from 7.25% to 7.0% to
reflect the increasing market value of UK operating solar assets,
while we continue to value asset portfolios with leverage at higher
discount rates of up to 8.0%. Overall, the weighted average
discount rate decreased during the period from 7.9% to 7.5%.
Further details on the Company's NAV and discount rate are
included in the Investment Manager's Report.
Portfolio Growth
The Company's Investment Adviser carefully reviews acquisition
targets that are identified in the market. There has been
significant activity in the UK solar sector in terms of assets
being offered for sale. The Investment Adviser pursues only a small
proportion of opportunities it identifies.
During the period the Company focused on integrating the
acquisition of the nine assets that had been acquired in the prior
financial year as well as the ongoing operation of those acquired
previously. The Investment Adviser also focused on developing a
strong pipeline of new opportunities subsequent to the raising of
additional capital and started executing new acquisitions. As a
result, the portfolio grew from 41 to 58 assets at the date of
distribution of this report.
As the UK solar market continued to mature and reached the end
of its revenue-subsidised period, we have noticed greater
competition for large portfolios of operating assets. This was
particularly the case in auction-style sell-side processes in which
a wide range of established investors and new entrants were
involved. Our Investment Adviser upheld a very diligent approach
and sought to maintain our track record of investing at prices
below market average by focusing on smaller portfolios of several
solar plants to be built for us. During the period, the Company
added another 51MW of attractively priced assets and is in
negotiation for another 193MW.
This strategy of focusing on smaller assets results both in an
accretion in the value of the Company's portfolio as well as
mitigating risk through diversification (both regional and by asset
size), with an average size of our solar PV plants, excluding
rooftop assets, of 10.1MW. Larger PV plants offered on the
secondary market are purportedly associated with lower operating
expenditure due to economies of scale, but this is not necessarily
a benefit for investors. Based on the Investment Adviser's
experience in bidding for these assets, every efficiency and/or
scale benefit (even those still unproven) are already priced in by
vendors so that there is limited scope for upside for acquirers. As
a result, we have found that larger assets or portfolios do not
present any particular economic advantage to the Company. The
Company's position as the largest listed solar energy fund investor
in the UK solar market allows our Operating Asset Manager to best
negotiate any service on behalf of NESF, thus recreating the same
economies of scale that would be available to the vendor of a
larger single asset.
Overall, considering each site's irradiation and ROC banding,
the group of assets added to the portfolio over the period was
secured at attractive investment values compared to the average
costs for solar plants observed in the market.
Capital Raising and Financing
The Company raised a further GBP126.5m in June 2017 from the
issue of 115m new shares, taking the total shares in issue to
573.1m, including 44,646 shares and 1,627,044 shares issued in June
2017 and September 2017 respectively by way of scrip dividends. The
strong demand from existing shareholders underlines the backing we
enjoy among parties that have supported our growth since the IPO in
April 2014. This new capital and additional debt drawdowns during
the period is being deployed into the extensive pipeline of assets
under negotiation to secure new portfolio assets for the
Company.
During the period, the Company drew down the last two tranches
of the Apollo debt facility (GBP99m remaining at 31 March 2017). At
the period-end, the Company had total financial debt outstanding of
GBP268.5m (31 March 2017: GBP269.8m) on a pro-forma look-through
basis, including project level debt. Of the total financial debt,
GBP246.8m was long-term fully amortising debt, while the remaining
GBP21.7m was drawn under the Company's short-term credit facility.
This represents a gearing level of 31%, which is comfortably
beneath our stated maximum debt-to-GAV level of 50%.
Following period end, the Company also repaid the GBP43m debt
facility associated with the Three Kings portfolio. This is a
preparatory step ahead of the refinancing of the same portfolio
together with the newly acquired assets planned for H1 2018.
Dividend and Dividend Growth
The Company continues to achieve all its dividend and dividend
growth objectives. For the year 2017/18, the Company is targeting a
total dividend of 6.42p per share (2016/17: 6.31p) in 4 quarterly
distributions. The next dividends are due for payment on 29
December 2017, 29 March 2018 and 29 June 2018.
Market Developments and Outlook
With the end of the ROC regime on 1 April 2017, the UK solar
sector has experienced a reduction in new solar plant
constructions, with all the major operators focused on
consolidating and onboarding the assets constructed before that
deadline.
With a total of 12.8GW connected at the end of Q2 2017 there is
a significant secondary market opportunity in the UK with many
assets assumed to be held by short term investors that could be
acquired in due course. The Investment Adviser has been observing
growing appetite for these operating assets and as such the Company
has reduced the discount rate to reflect the greater value of its
portfolio. We expect to continue acquiring ROC based solar assets,
although on a more opportunistic basis to maintain the price
diligence which distinguishes the Company's investment
strategy.
Nevertheless, the cost of new solar energy installations has
been continuing on a downward trajectory and as a result there is
less or no need for subsidies in many regions of the UK for solar
to be cost competitive with other energy sources. In September, the
UK had its first non-subsidy utility scale solar PV plant connected
to the grid.
The Company has acquired the rights to four subsidy-free
utility-scale projects and it is the intention to build them within
the next 12 months.
We therefore expect the next stage of growth in UK solar energy
to be driven by cheaper system costs and possibly integration with
electricity storage technologies. The UK's recent Fifth Carbon
Budget considers scenarios in which solar will reach between 20 and
40GW of installed capacity by 2030 compared to the current 12GW.
Solar plants built during this next phase will not require
Government incentives and will compete with other forms of
electricity generation.
In parallel, the Company continues to focus on maximising the
operating performance of the assets currently owned and exploring
further value-enhancing opportunities around the existing
portfolio.
Kevin Lyon
Chairman of the Board of Directors
16 November 2017
Investment Manager's Report
About NextEnergy Capital
The Investment Manager and Investment Adviser are both members
of the NextEnergy Capital Group. The NextEnergy Capital Group is a
specialist investment and operating asset manager focused on the
solar energy sector, with a 95-strong team of which 48 are focused
on the UK solar market. Through its operating asset management
division, WiseEnergy, the NextEnergy Capital Group has been
managing and monitoring over 1,300 utility-scale solar plants and
approximately 3,000 solar rooftop installations over the course of
its activity (comprising an installed capacity of approximately
1.9GW and an estimated GBP3.5bn asset value) for a client base
which includes leading European banks and equity investors
(including private equity funds, listed funds and institutional
investors). The NextEnergy Capital Group also manages NextPower II
LP, a EUR150m private equity fund dedicated to solar PV investments
in Italy.
Investment Objective
The Company seeks to provide investors with a sustainable and
attractive dividend that increases in line with RPI over the long
term. In addition, the Company seeks to provide investors with an
element of capital growth through the reinvestment of net cash
generated in excess of the target dividend in accordance with the
Company's investment policy.
Investment Policy
The Company seeks to achieve its investment objective by
investing exclusively in solar PV plants.
The Company invests in solar PV assets primarily in the UK. Up
to 15% of the Company's GAV (calculated at the time of investment)
may be invested in solar PV assets that are located outside the UK.
Investments outside the UK will be made only in OECD countries that
the Investment Manager and Investment Adviser believe have a stable
solar energy regulatory environment and provide investment
opportunities with similar, or better, investment characteristics
and returns relative to investments in the UK.
The Company intends to continue to acquire solar PV plants that
are primarily ground-based and utility-scale and which are on sites
that may be agricultural, industrial or commercial. The Company may
also acquire portfolios of residential or commercial
building-integrated installations. The Company targets solar PV
plants that are anticipated to generate stable cash flows over
their asset lifespan.
The Company typically seeks to acquire sole ownership of
individual solar PV plants through SPVs, but may enter into joint
ventures or acquire majority interests, subject, in each case, to
the Company maintaining a controlling interest. Where an interest
of less than 100% in a particular solar PV plant is acquired, the
Company intends to secure controlling shareholder rights through
shareholders' agreements or other legal arrangements. Investments
by the Company in solar PV plants may be either by way of equity or
a mix of equity and shareholder loans.
The Company has built up a diversified portfolio of solar PV
plants and its investment policy contains restrictions to ensure
risk diversification. No single investment (or, if an additional
stake in an existing investment is acquired, the combined value of
both the existing and the additional stake) by the Company in any
one solar PV plant will constitute (at the time of investment) more
than 30% of the Company's GAV. In addition, the four largest solar
PV plants will not constitute (at the time of investment) more than
75% of the Company's GAV.
The Company will continue, primarily, to acquire operating solar
PV plants, but may also invest in solar PV plants that are under
development (that is, at the stage of origination, project planning
or construction) when acquired. Such assets will constitute (at the
time of investment) not more than 10% of the Company's GAV in
aggregate.
The Company may also agree to forward-fund by way of secured
loans the construction costs of solar PV plants where it retains
the right (but not the obligation) to acquire the relevant plant
once operational. Such forward-funding will not fall within the 10%
development restriction above but will be restricted to no more
than 25% of the Company's GAV (at the time such arrangement is
entered into) in aggregate and will only be undertaken where
supported by appropriate security (which may include financial
instruments as well as asset-backed guarantees).
The right to forward-fund, subject to the above limitations,
enables the Company to retain flexibility in the event of changes
in the development pipeline over time. In addition, the Company
will not employ forward-funding and engage in development activity
in relation to the same project or asset.
A significant proportion of the Group's income is expected to
result from the sale of the entirety of the electricity generated
by the solar PV plants within the terms of PPAs to be executed from
time to time. These are expected to include the monetisation of
ROCs and other regulated benefits and the sale of electricity
generated by the plants to energy consumers and energy suppliers
(Brown Power). Within this context, the Company expects to execute
PPAs with creditworthy counterparties at the appropriate time.
The Company will continue to diversify its third-party
suppliers, service providers and other commercial counterparties,
such as developers, engineering and procurement contractors,
technical component manufacturers, PPA providers and landlords.
In pursuit of the Company's investment objective, the Company
may employ leverage, which will not exceed (at the time the
relevant arrangement is entered into) 50% of the Company's GAV in
aggregate. Such leverage will be deployed for the acquisition of
further solar PV plants in accordance with the Company's investment
policy. The Company may seek to raise leverage at any of the SPV,
UK Holdco or Company level. The Company has a preference for
medium- to long-term amortising debt financing.
The Company invests with a view to holding its solar PV plants
until the end of their useful life. However, assets may be disposed
of or otherwise realised where the Investment Manager determines,
in its discretion, that such realisation is in the best interests
of the Company. Such circumstances may include (without limitation)
disposals for the purposes of realising or preserving value, or of
realising cash resources for reinvestment or otherwise. The Company
will seek to optimise and extend the lifespan of its assets and may
invest in their repowering and/or integration of ancillary
technologies (e.g. energy storage) on its solar PV plants to fully
utilise grid connections and balance the electricity grid with a
view to generating greater revenues. The Company expects to
re-invest any cash surplus (in excess of that required to meet the
Company's dividend target and ongoing operating expenses) in
further investments, thereby supporting its long-term net asset
value.
The Company may invest cash held for working capital purposes
and pending investment or distribution in cash or near-cash
equivalents, including money market funds. The Company may (but is
not obliged to) enter into hedging arrangements in relation to
interest rates and/or power prices.
Where investments are made in currencies other than sterling,
currency hedging may be carried out to seek to provide protection
to the level of sterling dividends and other distributions that the
Company aims to pay on its shares and in order to reduce the risk
of currency fluctuations and the volatility of returns that may
result from such currency exposure. This may involve the use of
forward foreign exchange contracts to hedge the income from assets
that are exposed to exchange rate risk against sterling and foreign
currency borrowings to finance foreign currency assets.
Hedging transactions (if carried out) will only be undertaken
for the purpose of efficient portfolio management to protect or
enhance returns from the Company's portfolio and will not be
carried out for speculative purposes. At the date of distribution
of this report, there are no hedging arrangements in place.
As required by the Listing Rules, any material change to the
investment policy of the Company will be made only with the
approval of the FCA and of its shareholders by ordinary
resolution.
In the event of any breach of the Company's investment policy,
shareholders will be informed of the actions to be taken by the
Investment Manager by an announcement issued through the Regulatory
Information Service or a notice sent to shareholders at their
registered addresses in accordance with the Articles.
Portfolio Highlights and Performances
At period end the Company's portfolio comprised 50 separate
solar PV assets for a total installed capacity of c.505MW in
operation (31 March 2017: 41 PV assets for a total capacity of
454MW). All of the 50 solar plants in the portfolio were
operational and connected to the grid at the period end and
qualified for ROC or FiT subsidies. After 30 September 2017, the
Investment Manager continued with the execution of the pipeline of
secured opportunities. As a result, at the date of distribution of
this Interim Report, the Company has announced the acquisition of a
further eight separate solar PV plants increasing the total
investment cost to c.GBP700m, representing a total installed
capacity of c.539MW in operation.
During the period, the Company focused on completing and
integrating the solar PV assets that had been acquired in the
preceding financial year. The NextEnergy Capital Group has actively
led the completion process of all the acquisitions made by the
Company. The completion process is subject to the satisfaction of
several conditions set in the interest of the Company, including
the plant satisfactorily passing strictly-defined technical and
performance tests. The details of these tests, and whether they
refer to the delivery of preliminary, intermediate or final
acceptance certificates (or PAC, IAC, FAC as they are known) vary
across the portfolio but in general terms these are required by the
Investment Manager to ensure that the Company settles the majority
of the acquisition consideration only as and when the target solar
PV plants demonstrate the desired level of quality and ability to
meet or exceed the expected technical performances in the long
run.
The operational performance of the portfolio during the period
was very positive. The Investment Manager has provided in this
report details of the actual performance compared to expectation
for 41 of the portfolio solar PV plants, specifically only those
plants (excluding roof top assets) that, as at 30 September 2017,
had been managed and monitored by the Investment Adviser for at
least two months post completion. As a result of the Company's
operating asset management strategy, this sub-portfolio of 41 solar
PV plants generated an outperformance of +2.0% above the budgeted
generation values, for a total generation of 307GWh.
Even though we experienced some significant DNO outages at some
of our plants during the period, we managed to generate +2.0% above
budget. Otherwise, there were no other significant operational
issues or technical underperformance across the portfolio during
the six-month period. NESF's asset manager actively sought to
postpone or mitigate unexpected or planned outages due to works
conducted on the transmission grid by the various DNOs. To provide
investors full transparency on our performance all issues affecting
the availability and performance of the plants in the portfolio,
whether beyond or within our control, are taken into account when
calculating our Asset Management Alpha. Had the DNO outages been
excluded, the solar irradiation delta would have been +0.6%, the
power generation delta would have been +3.1% and the Asset
Management Alpha would have been +2.5%.
In particular, Hall Farm's energy generation was -22.1% compared
to budget. This was due to 43 days of DNO outage required for
extraordinary maintenance activity on the grid. Had this been
excluded, generation delta would have been +6.2% (year to date) and
+5.6% (since acquisition). We believe that the generation lost
during the outage will be recovered over the life of the asset, and
do not expect other major outages on this plant.
Solar Power
Assets irradiation generation
Period monitored (delta vs. budget) (delta vs. budget) Asset Management Alpha
Full Year 2014/15 6 (0.4%) +4.8% +5.2%
First Half 2015/16 17 +2.9% +5.7% +2.8%
Full Year 2015/16 23 +0.4% +4.1% +3.7%
First Half 2016/17 31 +0.0% +3.2% +3.2%
Full Year 2016/17 31 (0.3%) +3.3% +3.6%
First Half 2017/18 41 +0.5% +2.0% +1.5%
Cumulative from IPO to 30 September 2017 41 +0.7% +3.3% +2.6%
Typically, energy generation of a solar PV asset is directly
correlated with the level of solar irradiation received by the PV
plant itself, such that a higher level of solar irradiation by any
percentage should normally result in a higher energy generation by
the same percentage. Active asset management practices and
technical improvements can positively affect the technical
performance of PV plants and thus impact this direct correlation
(as well as unplanned outages or technical issues can negatively
impact it). NESF defines "Asset Management Alpha" as being the
difference between the delta of energy generation vs. budget and
the delta of solar irradiation vs. budget. The table on the
previous page summarises this analysis for the relevant periods
since IPO.
The Asset Management Alpha allows the Company to identify a
"real" outperformance of the solar portfolio due to active
management having neutralised the effects of variation in solar
irradiation. The nominal outperformance is calculated as GWh
generated by the portfolio vs. the GWh expected in the assumptions
used at the time of acquisition. In this light, the "nominal"
outperformance of the Company's portfolio during the period ended
30 September 2017 was +2.0% whereas the Asset Management Alpha of
+1.5% during the period represents the "real" outperformance due to
active asset management. The Asset Management Alpha value for the
comparable period of 2016/17 was +3.2% on a sub-portfolio of 31
plants. As a like-for-like comparison, during the period the same
sub-portfolio of 31 assets registered an Asset Management Alpha of
+1.7%.
The budgeted electricity generation and solar irradiation are
derived from the financial models prepared at acquisition of each
solar power plant and used to value and acquire such plant. An
ongoing operating outperformance vs. the acquisition budget is
expected to result in higher asset returns, other things being
equal.
NESF was the first of the six investment companies listed on LSE
focused on renewable energy to disclose the actual generating
performance of each asset compared to budget as well as the
information as to what extent the delta in energy generation was
due to exogenous weather conditions (i.e. delta in solar
irradiation vs. budget). Since then, all other renewable investment
companies have started to disclose this information to the benefit
of the listed sector transparency. Based on the information
publicly disclosed by each market participant, the Company's
portfolio has not only performed better than budget but according
to our analysis, it also outperformed each of the listed peers in
every reporting period since its IPO in terms of Asset Management
Alpha.
Investment Portfolio
The Investment Manager has achieved a high level of
diversification in the Company's portfolio. At the period end the
50 solar PV plants are located across 23 different counties of
England and Wales. The largest one representing 7.5% of the total
installed capacity and the four largest solar PV plants
representing together 23% of the total installed capacity. Leaving
aside rooftop assets, the average size of the Company's solar PV
plants is 10.1MW and the Investment Manager will seek to maintain
this level of fragmentation which is considered beneficial to
shareholders as it mitigates concentration risks. In addition, the
portfolio is diversified across 14 non-connected contractors, 13
different Tier 1 solar panel manufacturers and eight Tier 1
inverter manufacturers. This spread of counterparties effectively
diversifies the Company's key counterparty risks.
On the next pages is a summary of the overall investment
portfolio at the period end with various relevant breakdown
analysis:
Remaining
life
Plant of the % of
Announcement Regulatory Status(2) capacity Investment plant equity
Power plant Location date regime(1) (7) (MW) (GBPm) (years) proceeds
Higher
1 Hatherleigh Somerset 01/05/2014 1.6 Completed 6.1 7.3(6) 20.5 1.2%
2 Shacks Barn Northants 09/05/2014 2.0 Completed 6.3 8.2(6) 19.8 1.4%
3 Gover Farm Cornwall 23/06/2014 1.4 Completed 9.4 11.1(6) 22.2 1.9%
4 Bilsham West Sussex 03/07/2014 1.4 Completed 15.2 18.9(6) 22.1 3.2%
5 Brickyard Warwickshire 14/07/2014 1.4 Completed 3.8 4.1(6) 22.1 0.7%
6 Ellough Suffolk 28/07/2014 1.6 Completed 14.9 20.0(6) 21.5 3.4%
7 Poulshot Wiltshire 09/09/2014 1.4 Completed 14.5 15.7(6) 21.4 2.7%
8 Condover Shropshire 29/10/2014 1.4 Completed 10.2 11.7(6) 22.1 2.0%
9 Llywndu Ceredigion 22/12/2014 1.4 Completed 8.0 9.4 22.2 1.6%
Cock Hill
10 Farm Wiltshire 22/12/2014 1.4 Completed 20.0 23.3(6) 21.9 3.9%
11 Boxted Airfield Essex 31/12/2014 1.4 Completed 18.8 20.6(6) 22.5 3.5%
12 Langenhoe Essex 12/03/2015 1.4 Completed 21.2 22.9(6) 22.5 3.9%
13 Park View Devon 19/03/2015 1.4 Completed 6.5 7.7(6) 22.5 1.3%
14 Croydon Cambridgeshire 27/03/2015 1.4 Completed 16.5 17.8(6) 22.2 3.0%
Hawkers
15 Farm Somerset 13/04/2015 1.4 Completed 11.9 14.5(6) 22.5 2.4%
16 Glebe Farm Bedfordshire 13/04/2015 1.4 Completed 33.7 40.5(6) 32.2 6.8%
17 Bowerhouse Somerset 18/06/2015 1.4 Completed 9.3 11.1(6) 22.5 1.9%
18 Wellingborough Northants 18/06/2015 1.6 Completed 8.5 10.8(6) 21.7 1.8%
19 Birch Farm Essex 21/10/2015 FiT Completed 5.0 5.3(6) 22.7 0.9%
Thurlestone
20 Leicester Leicestershire 21/10/2015 FiT Completed 1.8 2.3 15.6 0.4%
21 North Farm Dorset 21/10/2015 1.4 Completed 11.5 14.5(6) 22.2 2.4%
Ellough
22 Phase 2 Suffolk 03/11/2015 1.3 Completed 8.0 8.0(6) 23.3 1.4%
23 Hall Farm Leicestershire 03/11/2015 FiT Completed 5.0 5.0(6) 23.2 0.8%
24 Decoy Farm Lincolnshire 03/11/2015 FiT Completed 5.0 5.2(6) 23.1 0.9%
25 Green Farm Essex 26/11/2015 FiT Completed 5.0 5.8 23.5 1.0%
26 Fenland Cambridgeshire 11/01/2016 1.4 Completed 20.4 23.9(3)(4) 22.8 4.0%
27 Green End Cambridgeshire 11/01/2016 1.4 Completed 24.8 29.0(3)(4) 22.9 4.9%
28 Tower Hill Gloucestershire 11/01/2016 1.4 Completed 8.1 8.8(3)(4) 22.5 1.5%
29 Branston Lincolnshire 05/04/2016 1.4 Completed 18.9 27.4
30 Great Wilbraham Cambridgeshire 05/04/2016 1.4 Completed 38.1 27.5
31 Berwick East Sussex 05/04/2016 1.4 Completed 8.2 97.9(3)(5) 24.0 16.5%
32 Bottom Plain Dorset 05/04/2016 1.4 Completed 10.1 28.0
33 Emberton Buckinghamshire 05/04/2016 1.4 Completed 9.0 27.6
34 Kentishes Essex 22/11/2016 1.2 Completed 5.0 4.4 24.2 0.7%
35 Mill Farm Hertfordshire 04/01/2017 1.2 Completed 5.0 4.2 24.2 0.7%
Long Ash
36 Lane Dorset 04/01/2017 1.2 Operational 5.0 5.7 24.5 1.0%
37 Bowden Somerset 04/01/2017 1.2 Completed 5.0 5.4 24.4 0.9%
38 Stalbridge Dorset 04/01/2017 1.2 Completed 5.0 5.3 24.5 0.9%
39 Aller Court Somerset 21/04/2017 1.2 Completed 5.0 5.4 24.5 0.9%
40 Rampisham Dorset 21/04/2017 1.2 Completed 5.0 5.8 25.0 1.0%
41 Wasing Berkshire 21/04/2017 1.2 Completed 5.0 5.2 24.2 0.9%
42 Flixborough Lincolnshire 21/04/2017 1.2 Completed 5.0 5.0 25.0 0.8%
43 Hill Farm Oxfordshire 21/04/2017 1.2 Completed 5.0 5.4 24.5 0.9%
44 Forest Farm Hampshire 21/04/2017 1.2 Completed 3.0 3.2 34.5 0.5%
45 Birch CIC Essex 12/06/2017 FiT Completed 1.7 1.7 22.7 0.3%
46 Barnby Moor Nottinghamshire 12/06/2017 1.2 Completed 5.0 5.4 24.8 0.9%
Bilsthorpe
47 Moor Nottinghamshire 12/06/2017 1.2 Completed 5.0 5.4 25.2 0.9%
48 Wickfield Wiltshire 12/06/2017 1.2 Completed 4.9 5.5 25.6 0.9%
49 Bay Farm Suffolk 29/08/2017 1.6 Completed 8.1 9.8 22.4 1.7%
50 Honington Suffolk 29/08/2017 1.6 Completed 13.6 16.6 22.3 2.8%
Total 504.9 580.8 98.1%
To be
A Francis/Gourton Wrexham 16/06/2017 None built 10.0 - - -
To be
B Glebe Worcestershire 16/06/2017 None built 19.6 - - -
To be
C Radbrook Warwickshire 16/06/2017 None built 20.7 - - -
To be
D Moss Cheshire 16/06/2017 None built 9.5 - - -
(1) An explanation of ROC regime is available at www.ofgem.gov.uk/environmental-programmes/renewables-obligation-ro.
(2) As at the distribution of this Interim Report.
(3) Acquired with previous debt finance attached.
(4) Part of the Three Kings portfolio.
(5) Part of the Radius portfolio.
(6) Part of the Apollo portfolio.
(7) Completed - the asset is operational and the acquisition was completed.
Operational - the asset is operational but the acquisition has
not yet been completed.
1. Higher Hatherleigh
Period ended Since
Sep-2017 Acquisition
MWh Generated 4,265 21,870
Solar Irradiation
vs Expectations (3.8%) (1.5%)
Energy Generation
vs Budget (0.4%) +3.4%
Location Wincanton, Somerset
Capacity 6.1MW
Regulatory Regime 1.6 ROCs
EPC Moser Baer/Daylighting
Power
Panels JA Solar
Inverter Power-One
Operational Since Apr-13
Acquisition Date May-14
2. Shacks Barn
Period ended Since
Sep-2017 Acquisition
MWh Generated 4,196 22,303
Solar Irradiation
vs Expectations (4.7%) +0.2%
Energy Generation
vs Budget +0.2% +7.9%
Location Silverstone, Northants
Capacity 6.3MW
Regulatory Regime 2.0 ROCs
EPC Moser Baer/Daylighting
Power
Panels JA Solar
Inverter Power-One
Operational Since Mar-13
Acquisition Date May-14
3. Gover Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 6,646 27,196
Solar Irradiation
vs Expectations +0.7% +0.5%
Energy Generation
vs Budget (0.3%) +2.4%
Location Truro, Cornwall
Capacity 9.4MW
Regulatory Regime 1.4 ROCs
EPC Moser Baer/Daylighting
Power
Panels BYD
Inverter ABB
Operational Since Oct-14
Acquisition Date Jun-14
4. Bilsham
Period ended Since
Sep-2017 Acquisition
MWh Generated 11,830 46,500
Solar Irradiation
vs Expectations +3.3% +1.5%
Energy Generation
vs Budget +4.9% +4.8%
Location Bognor Regis, West
Sussex
Capacity 15.2MW
Regulatory Regime 1.4 ROCs
EPC Engie (GDF Suez)
Panels Renesola
Inverter ABB
Operational Since Nov-14
Acquisition Date Jul-14
5. Brickyard
Period ended Since
Sep-2017 Acquisition
MWh Generated 2,568 10,317
Solar Irradiation
vs Expectations (3.0%) (0.1%)
Energy Generation
vs Budget +0.0% +4.0%
Location Leamington Spa,
Warwickshire
Capacity 3.8MW
Regulatory Regime 1.4 ROCs
EPC Moser Baer/Daylighting
Power
Panels BYD
Inverter ABB
Operational Since Nov-14
Acquisition Date Jul-14
6. Ellough
Period ended Since
Sep-2017 Acquisition
MWh Generated 10,851 48,855
Solar Irradiation
vs Expectations (2.2%) (1.8%)
Energy Generation
vs Budget +2.0% +4.7%
Location Ellough, Suffolk
Capacity 14.9MW
Regulatory Regime 1.6 ROCs
EPC Lark Energy
Panels Hanwha Q Cells
Inverter Power Electronics
Operational Since Mar-14
Acquisition Date Jul-14
7. Poulshot
Period ended Since
Sep-2017 Acquisition
MWh Generated 10,172 32,427
Solar Irradiation
vs Expectations (2.2%) (2.8%)
Energy Generation
vs Budget +3.2% +2.3%
Location Trowbridge, Wiltshire
Capacity 14.5MW
Regulatory Regime 1.4 ROCs
EPC Moser Baer/Daylighting
Power
Panels BYD
Inverter ABB
Operational Since Mar-15
Acquisition Date Sep-14
8. Condover
Period ended Since
Sep-2017 Acquisition
MWh Generated 6,829 23,504
Solar Irradiation
vs Expectations (3.7%) (3.2%)
Energy Generation
vs Budget (1.3%) (0.4%)
Location Condover, Shropshire
Capacity 10.2MW
Regulatory Regime 1.4 ROCs
EPC Zaragoza Group
Panels Canadian Solar
Inverter Power Electronics
Operational Since Mar-15
Acquisition Date Oct-14
9. Llwyndu
Period ended Since
Sep-2017 Acquisition
MWh Generated 5,418 16,972
Solar Irradiation
vs Expectations (7.1%) (6.8%)
Energy Generation
vs Budget (2.5%) (1.6%)
Location Blaenporth, Ceredigion
Capacity 8.0MW
Regulatory Regime 1.4 ROCs
EPC Greencells
Panels BYD
Inverter Huawei
Operational Since Feb-15
Acquisition Date Dec-14
10. Cock Hill Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 14,008 44,330
Solar Irradiation
vs Expectations +2.6% (1.7%)
Energy Generation
vs Budget +0.1% +0.9%
Location Trowbridge, Wiltshire
Capacity 20.0MW
Regulatory Regime 1.4 ROCs
EPC Greencells
Panels Jinko Solar
Inverter Huawei
Operational Since Mar-15
Acquisition Date Dec-14
11. Boxted Airfield
Period ended Since
Sep-2017 Acquisition
MWh Generated 14,100 51,593
Solar Irradiation
vs Expectations +2.4% +0.8%
Energy Generation
vs Budget +4.9% +4.2%
Location Colchester, Essex
Capacity 18.8MW
Regulatory Regime 1.4 ROCs
EPC Push Energy
Panels Yingli
Inverter SMA
Operational Since Mar-15
Acquisition Date Dec-14
12. Langenhoe
Period ended Since
Sep-2017 Acquisition
MWh Generated 16,459 60,536
Solar Irradiation
vs Expectations +4.9% +3.7%
Energy Generation
vs Budget +8.3% +7.9%
Location Condover, Shropshire
Capacity 21.2MW
Regulatory Regime 1.4 ROCs
EPC Zaragoza Group
Panels Canadian Solar
Inverter Power Electronics
Operational Since Mar-15
Acquisition Date Dec-14
13. Park View
Period ended Since
Sep-2017 Acquisition
MWh Generated 4,555 14,586
Solar Irradiation
vs Expectations (6.0%) (6.5%)
Energy Generation
vs Budget (5.1%) (2.9%)
Location Ashburton, Devon
Capacity 6.5MW
Regulatory Regime 1.4 ROCs
EPC Sunetik
Panels Astronergy
Inverter SMA
Operational Since Mar-15
Acquisition Date Mar-15
14. Croydon
Period ended Since
Sep-2017 Acquisition
MWh Generated 11,826 43,445
Solar Irradiation
vs Expectations +3.1% +2.7%
Energy Generation
vs Budget +8.7% +5.8%
Location Royston, Cambridgeshire
Capacity 16.5MW
Regulatory Regime 1.4 ROCs
EPC Push Energy
Panels Yingli
Inverter SMA
Operational Since Mar-15
Acquisition Date Mar-15
15. Hawkers Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 8,484 27,644
Solar Irradiation
vs Expectations (3.4%) (3.8%)
Energy Generation
vs Budget (1.2%) (0.3%)
Location Theale, Somerset
Capacity 11.9MW
Regulatory Regime 1.4 ROCs
EPC Greencells
Panels Jinko Solar
Inverter Huawei
Operational Since Mar-15
Acquisition Date Apr-15
16. Glebe Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 23,507 83,135
Solar Irradiation
vs Expectations +0.4% +1.7%
Energy Generation
vs Budget +4.6% +7.7%
Location Podington, Bedfordshire
Capacity 33.7MW
Regulatory Regime 1.4 ROCs
EPC Bejulo
Panels Canadian Solar
Inverter SMA
Operational Since Mar-15
Acquisition Date Mar-15
17. Bowerhouse
Period ended Since
Sep-2017 Acquisition
MWh Generated 6,723 20,722
Solar Irradiation
vs Expectations +2.3% (1.6%)
Energy Generation
vs Budget +2.0% +0.0%
Location Banwell, Somerset
Capacity 9.3MW
Regulatory Regime 1.4 ROCs
EPC Sunetik
Panels LDK
Inverter SMA
Operational Since Mar-15
Acquisition Date Jun-15
18. Wellingborough
Period ended Since
Sep-2017 Acquisition
MWh Generated 5,657 19,513
Solar Irradiation
vs Expectations (3.8%) (2.5%)
Energy Generation
vs Budget (1.3%) +2.5%
Location Wellingborough, Northants
Capacity 8.5MW
Regulatory Regime 1.6 ROCs
EPC Lark Energy
Panels LDK
Inverter Power Electronics
Operational Since Mar-15
Acquisition Date Jun-15
19. Birch Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 3,753 10,376
Solar Irradiation
vs Expectations +2.1% +1.2%
Energy Generation
vs Budget +5.1% +4.6%
Location Colchester, Essex
Capacity 5.0MW
Regulatory Regime FiT
EPC Push Energy
Panels Yingli
Inverter Ingeteam
Operational Since Jun-15
Acquisition Date Sep-15
20. Thurlestone Leicester
Period ended Since
Sep-2017 Acquisition
MWh Generated 1,057 4,134
Solar Irradiation N/A(3) N/A
vs Expectations
Energy Generation N/A(3) N/A
vs Budget
Location Leicester, Leicestershire
Capacity 1.8MW
Regulatory Regime FiT
EPC Stepnell
Panels Znshine Solar
Inverter Power-One
Operational Since Apr-13
Acquisition Date Oct-15
21. North Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 8,632 23,460
Solar Irradiation
vs Expectations (4.7%) (7.8%)
Energy Generation
vs Budget (3.1%) (5.0%)
Location Wimborne, Dorset
Capacity 11.5MW
Regulatory Regime 1.4 ROCs
EPC British Solar Renewables
Panels Jinko Solar
Inverter Gamesa
Operational Since Mar-15
Acquisition Date Oct-15
22. Ellough Phase 2
Period ended Since
Sep-2017 Acquisition
MWh Generated 6,048 10,088
Solar Irradiation
vs Expectations +3.6% +5.8%
Energy Generation
vs Budget +7.0% +9.9%
Location Ellough, Suffolk
Capacity 8.0MW
Regulatory Regime 1.3 ROCs
EPC Lark Energy
Panels Hanwha Q Cells
Inverter Power Electronics
Operational Since Mar-16
Acquisition Date Aug-16
23. Hall Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 2,596 4,130
Solar Irradiation
vs Expectations +0.9% (1.0%)
Energy Generation
vs Budget (22.1%)* (14.0%)*
Location Newbold Vernon, Leicestershire
Capacity 5.0MW
Regulatory Regime FiT
EPC Push Energy
Panels Hanwha Q Cells
Inverter Ingeteam
Operational Since May-16
Acquisition Date Nov-15
24. Decoy Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 3,597 5,217
Solar Irradiation
vs Expectations (0.5%) (1.3%)
Energy Generation
vs Budget +4.0% +4.0%
Location Crowland, Lincolnshire
Capacity 5.0MW
Regulatory Regime FiT
EPC Push Energy
Panels Hanwha Q Cells
Inverter Ingeteam
Operational Since Jan-16
Acquisition Date Nov-15
* Underperformance is due to DNO outages. Had this been
excluded, delta would have been +6.2% (YTD) and +5.6% (since
acquisition). We belive that the generation lost during the outage
will be recovered over the life of the asset.
25. Green Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 3,585 4,471
Solar Irradiation
vs Expectations +1.2% +1.5%
Energy Generation
vs Budget (0.1%) +0.7%
Location Wix, Essex
Capacity 5.0MW
Regulatory Regime FiT
EPC Moser Baer/Daylighting Power
Panels Atersa
Inverter Power Electronics
Operational Since Dec-15
Acquisition Date Nov-15
26. Fenland
Period ended Since
Sep-2017 Acquisition
MWh Generated 14,953 38,828
Solar Irradiation
vs Expectations +0.4% +1.2%
Energy Generation
vs Budget +5.6% +6.5%
Location Waterbeach, Cambridgeshire
Capacity 20.4MW
Regulatory Regime 1.4 ROCs
EPC Hanwha Q Cells
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-15
Acquisition Date Jan-16
27. Green End
Period ended Since
Sep-2017 Acquisition
MWh Generated 17,569 45,661
Solar Irradiation
vs Expectations +0.4% +0.6%
Energy Generation
vs Budget +2.2% +3.2%
Location Ely, Cambridgeshire
Capacity 24.8MW
Regulatory Regime 1.4 ROCs
EPC Hanwha Q Cells
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-15
Acquisition Date Jan-16
28. Tower Hill
Period ended Since
Sep-2017 Acquisition
MWh Generated 5,988 15,067
Solar Irradiation
vs Expectations +2.4% +0.2%
Energy Generation
vs Budget +5.7% +4.4%
Location Tytherington, Gloucestershire
Capacity 8.1MW
Regulatory Regime 1.4 ROCs
EPC Hanwha Q Cells
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-15
Acquisition Date Jan-16
29. Branston
Period ended Since
Sep-2017 Acquisition
MWh Generated 12,318 30,938
Solar Irradiation
vs Expectations +3.1% +2.5%
Energy Generation
vs Budget (3.1%) +2.1%
Location Branston, Lincolnshire
Capacity 18.9MW
Regulatory Regime 1.4 ROCs
EPC Goldbeck
Panels REC
Inverter SMA
Operational Since Mar-15
Acquisition Date Mar-16
30. Great Wilbraham
Period ended Since
Sep-2017 Acquisition
MWh Generated 26,752 63,506
Solar Irradiation
vs Expectations +1.6% +1.0%
Energy Generation
vs Budget +1.7% +1.7%
Location Great Wilbraham, Cambridgeshire
Capacity 38.1MW
Regulatory Regime 1.4 ROCs
EPC Abakus Bouygues
Panels REC
Inverter Schneider
Operational Since Mar-15
Acquisition Date Mar-16
31. Berwick
Period ended Since
Sep-2017 Acquisition
MWh Generated 6,713 15,878
Solar Irradiation
vs Expectations +5.6% +4.2%
Energy Generation
vs Budget +7.8% +6.9%
Location Polegate, East Sussex
Capacity 8.2MW
Regulatory Regime 1.4 ROCs
EPC Abakus Bouygues
Panels Renesola
Inverter SMA
Operational Since Mar-15
Acquisition Date Mar-16
32. Bottom Plain
Period ended Since
Sep-2017 Acquisition
MWh Generated 7,468 17,717
Solar Irradiation
vs Expectations +0.7% (1.1%)
Energy Generation
vs Budget +0.5% +0.2%
Location Wareham, Dorset
Capacity 10.1MW
Regulatory Regime 1.4 ROCs
EPC Abakus Bouygues
Panels Renesola
Inverter SMA
Operational Since Dec-14
Acquisition Date Mar-16
33. Emberton
Period ended Since
Sep-2017 Acquisition
MWh Generated 6,179 14,746
Solar Irradiation
vs Expectations (0.3%) +0.0%
Energy Generation
vs Budget (0.5%) (0.3%)
Location Emberton, Buckinghamshire
Capacity 9.0MW
Regulatory Regime 1.4 ROCs
EPC Goldbeck
Panels REC
Inverter Schneider
Operational Since Mar-15
Acquisition Date Mar-16
34. Kentishes
Period ended Since
Sep-2017 Acquisition
MWh Generated 3,108 3,108
Solar Irradiation
vs Expectations +2.2% +2.2%
Energy Generation
vs Budget +0.7% +0.7%
Location Braintree, Essex
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC Push Energy
Panels Hanwha Q Cells
Inverter Power Electronics
Operational Since Feb-17
Acquisition Date Nov-16
35. Mill Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 3,073 3,073
Solar Irradiation
vs Expectations +1.8% +1.8%
Energy Generation
vs Budget +3.5% +3.5%
Location Great Munden, Hertfordshire
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC Push Energy
Panels Hanwha Q Cells
Inverter Power Electronics
Operational Since Feb-17
Acquisition Date Dec-16
36. Long Ash Lane
Period ended Since
Sep-2017 Acquisition
MWh Generated N/A(1) N/A(1)
Solar Irradiation N/A(1) N/A(1)
vs Expectations
Energy Generation N/A(1) N/A(1)
vs Budget
Location Bridport, Dorset
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC British Solar Renewables
Panels Jetion Solar
Inverter Gamesa
Operational Since Mar-17
Acquisition Date Dec-16
37. Bowden
Period ended Since
Sep-2017 Acquisition
MWh Generated N/A(2) N/A(2)
Solar Irradiation N/A(2) N/A(2)
vs Expectations
Energy Generation N/A(2) N/A(2)
vs Budget
Location Templecombe, Somerset
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC British Solar Renewables
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-17
Acquisition Date Dec-16
38. Stalbridge
Period ended Since
Sep-2017 Acquisition
MWh Generated N/A(2) N/A(2)
Solar Irradiation N/A(2) N/A(2)
vs Expectations
Energy Generation N/A(2) N/A(2)
vs Budget
Location Sturminster Newton, Dorset
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC British Solar Renewables
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-17
Acquisition Date Dec-16
39. Aller Court
Period ended Since
Sep-2017 Acquisition
MWh Generated N/A(2) N/A(2)
Solar Irradiation N/A(2) N/A(2)
vs Expectations
Energy Generation N/A(2) N/A(2)
vs Budget
Location Langport, Somerset
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC British Solar Renewables
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-17
Acquisition Date Feb-17
40. Rampisham
Period ended Since
Sep-2017 Acquisition
MWh Generated N/A(2) N/A(2)
Solar Irradiation N/A(2) N/A(2)
vs Expectations
Energy Generation N/A(2) N/A(2)
vs Budget
Location Rampisham, Dorset
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC British Solar Renewables
Panels Hanwha Q Cells
Inverter SMA
Operational Since Mar-17
Acquisition Date Apr-17
41. Wasing
Period ended Since
Sep-2017 Acquisition
MWh Generated 910 910
Solar Irradiation
vs Expectations (0.1%) (0.1%)
Energy Generation
vs Budget +4.0% +4.0%
Location Brimpton, Berkshire
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC Greencells
Panels Hanwha Q Cells
Inverter Huawei
Operational Since Mar-17
Acquisition Date Feb-17
42. Flixborough
Period ended Since
Sep-2017 Acquisition
MWh Generated 861 861
Solar Irradiation
vs Expectations +1.1% +1.1%
Energy Generation
vs Budget +4.4% +4.4%
Location Scunthorpe, Lincolnshire
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC Greencells
Panels Hanwha Q Cells
Inverter Power Electronics
Operational Since Mar-17
Acquisition Date Feb-17
43. Hill Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated N/A(2) N/A(2)
Solar Irradiation N/A(2) N/A(2)
vs Expectations
Energy Generation N/A(2) N/A(2)
vs Budget
Location Bicester, Oxfordshire
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC Greencells
Panels Hanwha Q Cells
Inverter Huawei
Operational Since Mar-17
Acquisition Date Apr-17
44. Forest Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated N/A(2) N/A(2)
Solar Irradiation N/A(2) N/A(2)
vs Expectations
Energy Generation N/A(2) N/A(2)
vs Budget
Location Southampton, Hampshire
Capacity 3.0MW
Regulatory Regime 1.2 ROCs
EPC Greencells
Panels Hanwha Q Cells
Inverter Huawei
Operational Since Mar-17
Acquisition Date Apr-17
45. Birch CIC
Period ended Since
Sep-2017 Acquisition
MWh Generated 1,081 1,081
Solar Irradiation
vs Expectations +1.7% +1.7%
Energy Generation
vs Budget +0.9% +0.9%
Location Colchester, Essex
Capacity 1.7MW
Regulatory Regime FiT
EPC Push Energy
Panels Yingli
Inverter Ingeteam
Operational Since Jun-16
Acquisition Date Apr-17
46. Barnby Moor
Period ended Since
Sep-2017 Acquisition
MWh Generated 677 677
Solar Irradiation
vs Expectations (3.8%) (3.8%)
Energy Generation
vs Budget +0.9% +0.9%
Location Retford, Nottinghamshire
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC Lark Energy
Panels Yingli
Inverter Power Electronics
Operational Since Mar-17
Acquisition Date Jun-17
47. Bilsthrope
Period ended Since
Sep-2017 Acquisition
MWh Generated 680 680
Solar Irradiation
vs Expectations (4.7%) (4.7%)
Energy Generation
vs Budget (0.3%) (0.3%)
Location Bilsthrope, Nottinghamshire
Capacity 5.0MW
Regulatory Regime 1.2 ROCs
EPC Lark Energy
Panels Yingli
Inverter Power Electronics
Operational Since Mar-17
Acquisition Date Jun-17
48. Wickfield
Period ended Since
Sep-2017 Acquisition
MWh Generated N/A(2) N/A(2)
Solar Irradiation N/A(2) N/A(2)
vs Expectations
Energy Generation N/A(2) N/A(2)
vs Budget
Location Swindon, Wiltshire
Capacity 4.9MW
Regulatory Regime 1.2 ROCs
EPC Lark Energy
Panels Yingli
Inverter Power Electronics
Operational Since Mar-17
Acquisition Date Jun-17
49. Bay Farm
Period ended Since
Sep-2017 Acquisition
MWh Generated 1,012 1,012
Solar Irradiation
vs Expectations (5.8%) (5.8%)
Energy Generation
vs Budget (7.5%) (7.5%)
Location Bay Farm, Suffolk
Capacity 5.0MW
Regulatory Regime 1.6 ROCs
EPC Sustain Group
Panels Chint
Inverter SMA
Operational Since Mar-17
Acquisition Date Aug-17
50. Honington
Period ended Since
Sep-2017 Acquisition
MWh Generated 1,726 1,726
Solar Irradiation
vs Expectations (6.3%) (6.3%)
Energy Generation
vs Budget (8.5%) (8.5%)
Location Honington, Suffolk
Capacity 4.9MW
Regulatory Regime 1.6 ROCs
EPC Sustain Group
Panels Hanwha Q Cells
Inverter Power Electronics
Operational Since Mar-17
Acquisition Date Aug-17
(1) Data not available as asset acquisition has not been completed.
(2) Data only available two months after completion date.
(3) Company does not monitor the solar irradiation of
Thurlestone as the investment is across multiple rooftops.
Current and Long-Term Power Prices
The Investment Manager continuously reviews multiple inputs for
power price forecasts and takes the average of two of the leading
energy market consultants' (the "Consultants") long- term
projections to derive the power curve adopted in the valuation of
the Company's portfolio. This approach allows mitigation of
inevitable forecasting errors as well as any delay in response from
the Consultants in publishing periodic (quarterly) or ad hoc
updates following any significant market development.
During the period, the Consultants revised their forecasts for
the UK wholesale power price downwards. Factors that contributed to
these revisions include the depreciation of pound sterling, the
dollar gas prices falling and the reduction of marginal cost of
capital for renewables. Furthermore, the forecast for the
penetration of renewable energy was revised upwards. As a
consequence of these drivers, at the date of distribution of this
Interim Report, both short and long-term price projections prepared
by the Consultants decreased during the period.
The power price forecasts used by the Company also reflect an
assumed "solar capture" discount which reflects the difference
between the prices available on the market in the daylight hours of
operation of a solar plant vs. the baseload prices included in the
power price estimates. This solar capture discount is estimated by
the Consultants on the basis of a typical load profile of a solar
plant located in the UK and is reviewed as frequently as the
baseload power price forecasts.
The Company's current long-term power price forecast implies an
average growth rate of approximately 1.5% in real terms over the
20-year period starting October 2017. This represents a decrease of
5.2% compared to those used at the end of the previous reporting
year (but still 39.8% below the assumptions employed at IPO). This
power price forecast also includes the latest downward revisions
published by the Consultants in July and September 2017.
Nevertheless, compared to the previous interim period end,
electricity spot prices rose from c.GBP40/MWh in September 2016(1)
to c.GBP52/MWh in September 2017(1) . The Company seeks to secure
attractive prices for the energy generated by its portfolio through
its electricity sales strategy, and was able to selectively secure
short-term contracts above the projections provided by its
Consultants.
Dividends to Shareholders
During the period, the Company paid dividends in relation to two
quarterly accounting periods. Specifically, NESF paid the fourth
interim dividend for the financial year ended 31 March 2017 (of
1.5775p per ordinary share) and the first quarterly dividend for
the year ended 31 March 2018 (of 1.6050p per ordinary share).
Therefore, during the period NESF paid total dividends of 3.1825p
per ordinary share, in line with its target dividend of
3.1825p.
In relation to dividends for the year ended 31 March 2017, the
fourth and last quarterly dividend of 1.5775p per ordinary share
(equal to GBP7,199,524) was paid to shareholders in June 2017. As a
result, the Company achieved its target for total dividend
distribution for the full financial year ended 31 March 2017 of
6.31p per ordinary share. The summary of all dividends paid by the
Company until the date of distribution of this Interim Report is
set out in the table on the next page.
As stated in the Chairman's Statement, the Company is targeting
aggregate dividends of 6.42p per share for the 2017/18 financial
year, which represents growth in line with the RPI index applicable
to the underlying portfolio revenues.
During the period, the Company generated cash income of GBP19.4m
and had net operating costs of GBP3.1m. As a result, the net
dividend cover for the period was 1.14x. The table on the next page
provides additional details and metrics.
Cash income for the six months ended 30 September 2017 includes
GBP4,078,024 which has been retained in certain subsidiaries as
their respective banking covenants only permit cash to flow out
twice a year. If these banking restrictions did not exist, the cash
would have flowed up to the Company on or before 30 September 2017,
and the fair value of the HoldCos would have reduced by the same
amount, therefore having a nil effect on the NAV per share.
(1) Source: N2EX - UK baseload - day ahead
Amount per
Month of ordinary
Dividends paid payment share (p) Total (GBP)
First interim for year
2014/15 Dec-14 2.6250 4,635,750
Second interim for year
2014/15 Jul-15 2.6250 6,309,188
First interim for year
2015/16 Dec-15 3.1250 8,686,160
Second interim for year
2015/16 Jul-16 3.1250 8,686,160
First quarterly dividend
for year 2016/17 Sep-16 1.5775 4,058,499(1)
Second quarterly dividend
for year 2016/17 Dec-16 1.5775 4,031,158(1)
Third quarterly dividend
for year 2016/17 Mar-17 1.5775 5,443,550(1)
Fourth quarterly dividend
for year 2016/17 Jun-17 1.5775 7,148,285(1)
First quarterly dividend
for year 2017/18 Sep-17 1.6050 7,335,774(1)
Total cash dividends paid
to date 19.415 56,334,524
Second quarterly dividend
for year 2017/18 Dec-17 1.6050 9,171,229(4)
Cash income Total for
period
Cash income for period
to 30 September 2017 19,403,044(5)
Net operating costs for
period to 30 September
2017 (2,928,029)
Net cash income 16,475,015
Gross dividend Net dividend
cover cover
Cash dividend paid during
period 14,484,059(2) 1.3x 1.1x
Cash dividend in respect
of the financial period 16,507,003(3) 1.2x 1.0x
(1) The scrip dividend option came into effect on 25 August
2016. During the period, a scrip dividend payment was elected by
some shareholders. A total of 1,671,690 additional shares were
issued resulting in a lower total cash dividend pay-out. If the
elections were not made, the total amount to be paid out would have
be GBP7,199,524 and GBP9,171,497 for the fourth and first quarterly
dividends of 2016/17 and 2017/18 respectively.
(2) This amount represents the post scrip dividend paid during
the six-month period. If the shares from the scrip dividend were
included the total amount paid during the year would have been
GBP16,371,021. The gross dividend cover would have been 1.2x and
the net dividend cover would have been 1.0x.
(3) This amount represents the post scrip dividend for the first
2 quarterly dividends for the year 2017/18 (including the dividend
payable on 29 December 2017). If the shares from the scrip dividend
were included, the total amount paid would have been GBP18,368,392.
The gross dividend cover would have been 1.1x and the net dividend
cover would have been 1.0x.
(4) Before election of scrip dividend is considered.
(5) Cash income differs from the income in the Condensed
Statement of Comprehensive Income by GBP2.98m. This is because the
Condensed Statement of Comprehensive Income is on an accruals
basis.
In line with the Board's decision to move to quarterly
dividends, as announced in April 2016, the forward-looking target
dividend calendar is set out in the table below:
Date of Amount per
expected ordinary
Dividend for year 2017/18 payment share (p)
December
Second interim 2017 1.6050
Third interim March 2018 1.6050
Fourth interim June 2018 1.6050
Total 4.8150
Operating Costs and Profits for the Period
Profit before tax for the period ended 30 September 2017 was
GBP14.0m (30 September 2016: GBP25.3m), with earnings per share of
2.69p (2016: 8.46p).
The reduction in profit before tax is due to the unrealised net
change in the fair value of the Investment Portfolio, as described
below.
The operating costs of the Company for the period amounted to
GBP3.1m, in line with expectations. The Company's annualised OCR
for the period was 1.1% (2016: 1.2%), in line with the budget. The
budgeted OCR for the year ending 31 March 2018 is 1.1%.
Valuation of the Investment Portfolio
The Investment Manager is responsible for carrying out the fair
market valuation of the Company's underlying investment portfolio,
as described in note 6 of the Financial Statements. The resulting
fair market value of the Company's investment portfolio is
presented to the Company's Board of Directors for their review and
approval. The valuation is carried out quarterly or more often if
capital increases or other relevant events arise. The valuation
principles used are based on a DCF methodology, and take into
account IPEV guidelines.
The Investment Manager reviews multiple sources and inputs in
determining the fair market value of the underlying investments,
including analysing all announced solar transactions in the UK
during the period as well as undertaking a DCF analysis of each
investment made by the Company. The Investment Manager exercises
its judgement based on its expertise in the UK, and other relevant
jurisdictions' solar PV markets and in assessing the expected
future cash flows from each investment. In the DCF analysis, the
fair value for each operating asset is derived from the present
value of the investment's expected future cash flows, using
reasonable assumptions and forecasts for revenues and operating
costs, and an appropriate discount rate.
For solar PV plants not yet operational or where the completion
of the acquisition is not imminent at the time of valuation, the
acquisition cost is used as an appropriate estimate of fair
value.
The Board reviews the operating and financial assumptions,
including the discount rates, used in the valuation of the
Company's underlying portfolio and approves them based on the
recommendation of the Investment Manager. The valuation process
comprises the analysis of multiple factors, all relevant to
ascertaining the fair value of the portfolio, including:
-- discount rates implied in the price at which comparable
transactions have been announced in the UK solar sector (including
those where the Investment Manager submitted a bid for the same
projects that was not deemed competitive by the vendors);
-- discount rates publicly disclosed by the Company's peers in the UK solar sector;
-- discount rates applicable for other comparable infrastructure
assets classes or regulated energy sectors; and
-- risk premia over relevant risk-free rates.
During the period, the UK solar market experienced an increase
in pricing competition for operating assets driven by factors that
include:
-- entrance of new UK-based and international investors
searching for operating solar portfolios in the UK; and
-- closure of previous subsidies regime for solar PV plants in
UK and absence of any incentive framework for future installations,
which has instigated a scarcity effect on ROCs assets.
These changing dynamics were evidenced by the experience of the
Investment Manager in bidding for solar assets in the UK.
As a result, the Company further lowered its discount rate for
unlevered operating solar assets by 0.25% (from 7.25% to 7.0%) and
will continue to monitor this rate.
For those operating solar assets with fully-amortising long-term
project level debt (the Apollo portfolio, the Radius portfolio and
the Three Kings portfolio) the Company is continuing to adopt a
levered discount rate to capture the greater level of risk
associated with the cash flows available to equity investors after
debt service. The appropriate level of risk premium due to project
level debt was evaluated taking into account various factors for
each specific asset including level of financial gearing, maturity
profile and cost of debt. This range was unchanged from the
previous year (0.7 - 1.0%) and as a result the discount rates
applied to these levered portfolios range up to 8.0%.
The resulting weighted average discount rate for the Company's
portfolio is 7.5% (31 March 2017: 7.9%).
The Company does not adopt WACC as a discount rate for its
investments, as it believes that the reduction in WACC deriving
from the introduction of long-term debt financing does not reflect
the greater level of risk to equity investors associated with
levered assets or levered portfolios. However, for the purposes of
transparency, the Company's pre-tax WACC as at 30 September 2017
was 5.9%. Compared to the WACC as at 31 March 2017 of 5.9%, this
value reflects, on one side, the lower than expected cost of debt
secured under the GBP150m long-term refinancing and, on the other
side, a reduction in the overall gearing from 36% to 31%, as
further described below.
The DCF methodology implemented in the portfolio valuation
assumes a valuation time-horizon capped to the current terms of the
lease on the properties where each individual solar PV asset is
located. These leases have been typically entered into for a
25-year period from commissioning of the relevant PV plants
(specific terms may vary). However, the useful operating life of
the Company's portfolio of solar PV plants is expected to be longer
than 25 years. This is due to many factors, including:
-- solar PV plants with technology components similar to the
ones deployed in the Company's portfolio have demonstrated to be
capable of operating for over 40 years, with levels of technical
degradation lower than that assumed or guaranteed by the
manufacturers;
-- local planning authorities have already granted initial
planning consents that do not expire and/or have granted
permissions to extend initial consented periods; and
-- the Company owns rights to supply electricity into the grid
through connection agreements that do not expire.
The Company has begun extending the useful life of its assets,
mainly by extending the terms of the property leases for some
projects with the intention of extending leases for others in due
course.
The Company's NAV is calculated on a quarterly basis based on
the valuation of the investment portfolio determined by the
Investment Manager and the overlay of other net assets provided by
the Administrator. It is then reviewed, questioned and approved by
the Board of Directors. All variables relating to the performance
of the underlying assets are reviewed and incorporated in the
process of identifying relevant drivers for the DCF valuation.
The Company experienced NAV growth during the period ended 30
September 2017 mainly driven by the issue of new shares in June
2017 raising GBP126.5m and the increase in the valuation of its
investment portfolio over the period. As a result, NAV grew over
the period from GBP478.6m to GBP602.5m as at 30 September 2017.
As the Company reports its financial results under IFRS 10 the
change during the period in fair value of its assets impacts the
profit and loss of the Company.
The change of NAV per share during the period from 104.9p to
105.1p was affected by a number of positive and negative
factors.
-- the downward revisions in the forecasts for long-term power
prices adopted by the Company, which were 5.2% lower compared to
the assumptions employed at 31 March 2017;
-- the downward revisions in the forecasts for short-term
inflation (possibly reflecting the impact of the recent increase in
base rates in the UK);
-- the value uplift generated by the Company completing
acquisitions of new assets whose internal rate of return was higher
than the discount rate applied when valuing them on a discounted
cash flow basis;
-- the value uplift generated by the change in unlevered
discount rates reflecting an increase in market value of UK solar
assets;
-- the operating results achieved by the Company's solar PV plants; and
-- the dividends paid during the period and the Company's operating costs.
NAV Bridge (Movement) (GBPm)
Opening NAV (March 2017) 478.6
Further Capital Raising 126.5
Capital Raising Costs (2.1)
Cash Dividends Paid to Investors (14.5)
Income from Investments 16.4
Change in Fair Value of Investments 0.5
Net Operating Costs (2.9)
Closing NAV (September 2017) 602.5
A driver for the movement in NAV was the revaluation of the
investment portfolio which accounted for an uplift of GBP0.5m. This
represented the movement in the difference between the acquisition
cost and closing fair value of the portfolio at the end of the
current and prior period. The revaluation is summarised in the net
changes in financial assets at fair value in the Condensed
Statement of Comprehensive Income.
As at 30 September 2017, the Company's investment portfolio was
valued at GBP377.6m, comprising 49 investments valued through
discounted cash flow methodology and one investment valued at
investment cost. Among the 50 investments, the Apollo portfolio is
considered as one portfolio investment consisting of 21 solar PV
plants and the Radius portfolio is considered as one portfolio
investment consisting of five solar PV plants. At the date of
distribution of this Interim Report, the Company has committed to
acquiring a further eight assets at an acquisition cost of
c.GBP116.2m.
The valuation of the investment portfolio is net of the project
level debt: GBP45.4m project financing advanced by Bayerische
Landesbank to the 53MW Three Kings portfolio (comprising Fenland,
Green End and Tower Hill), acquired by the Company in January 2016;
GBP55m project financing arranged by MIDIS in conjunction with the
acquisition of the 84MW Radius portfolio signed by the Company in
March 2016; and GBP150m project financing arranged by MIDIS, NAB
and CBA in the context of refinancing short-term facilities used in
the process of building the Apollo portfolio of c.241MW.
One investment was valued at investment cost (see footnote 1
below) which comprised the investment in a solar PV plant for which
the relevant milestones and technical tests had not yet been
finalised at the period end and as such their completion was not
deemed imminent. At the period end, this solar PV plant was
operational and the Company was in the process of completing its
acquisition.
Directors' Directors'
Valuation 31 Valuation 30
March 2017 September 2017
Investment (GBP) (GBP)
Total Investment Portfolio 333,868,112 390,400,731
Residual net assets of HoldCos 4,481,716 8,891,384
Short-term debt facilities (21,680,000) (21,680,000)
Receivable from Apollo refinancing 99,193,549 -
Total Investment in HoldCos(1) 415,863,377 377,612,115
(1) A summary of the total investment in the HoldCos is provided
in note 6 (Investments) of the Condensed Financial Statements.
Sensitivity Analysis
Sensitivities on the Company's NAV and detailed disclosure on
the asset valuation methodologies are provided below and in note 14
of the Financial Statements.
Sensitivity on energy generation is usually a P10/P90
probability analysis on solar irradiation over 10 years, which is a
technical standard employed across the broader renewable energy
asset class and is particularly relevant for wind assets given the
significant volatility of wind energy sources year on year. The
Investment Manager, based on its experience, considers that for
solar PV assets more appropriate and meaningful information is
provided by the sensitivity analysis of the aggregated effect of
solar irradiation and technical performance (in a reasonable range
of -/+ 5% over the life of the DCF valuation horizon) which results
in (6.9%)/ +7.5% impact on the portfolio valuation.
In addition to the above sensitivities on NAV, the Investment
Manager has performed further sensitivities on actual cash
generation. This analysis takes into account the impact of selected
changes in valuation assumptions over the 12 months to September
2018. In this analysis, should energy prices fall by 10% from
current forecasts, NESF would experience a reduction of 3.4% in its
net operating cashflows, such impact being mitigated by the fixed
price PPAs in place over the period. Also, should the portfolio
achieve an overperformance of 5% throughout the 12 months to
September 2018 (whether due to higher solar irradiation or asset
management), total operating cashflows would increase by 9.1%.
Conversely, these sensitivities on cash generation would have
similar but opposite results in their respective inverted
scenario.
Since the Company's IPO in April 2014, the long-term power price
forecast used by the Company has been revised several times with a
cumulative reduction of c.39.8%. For the purpose of illustration,
had the power price forecasts remained in line with those at the
time of the IPO, the Company's NAV would be 130.8p per share.
Capital Deployment Timeline
The Company has completed multiple capital raisings since
inception: its IPO of 85.6m new ordinary shares in April 2014, a
second issue of 91.0m new ordinary shares in November 2014, a
placing of 4.0m new ordinary shares in December 2014, a placing of
59.8m new ordinary shares in February 2015, and a further placing
of 37.6m new ordinary shares in September 2015. The Company had tap
issues of 64.1m new ordinary shares over the summer 2016, an issue
of 110.3m new ordinary shares in November 2016 and a further issue
of 115m new ordinary shares in June 2017. All issues following the
IPO have been completed pursuant to the placing programme announced
on 10 November 2014, the tap issuance programme announced on 15
July 2016, and the share issuance programme announced on 15
September 2016. Furthermore, an additional 5.7m ordinary shares (31
March 2017: 4.0m ordinary shares) have been issued since the IPO as
a result of shareholders electing a scrip dividend.
The Company's issued share capital comprised 573,059,889
ordinary shares as at 30 September 2017. This figure may be used by
shareholders and other investors as the denominator for the
calculations by which they will determine if they are required to
notify their interest in, or a change to their interest in, the
Company under the FCA's Disclosure and Transparency Rules.
Date Equity Raised Equity Invested Time to Deployment
(GBPm)
April 2014 85.6 100% by September 5 months
2014
November/December 99.6 100% by January 6 weeks
2014 2015
February 2015 61.4 100% by April 6 weeks
2015
September 2015 38.8 100% by November 6 weeks
2015
July/August/September 64.7 Used to repay Immediate
2016 debt facility
November 2016 115.3 100% by August 10 months
2017
June 2017 126.5 On-going On-going
Date Debt Raised (GBPm) Lender Amount Deployed
July 2015 22.7 NIBC c.100%
January 2016 45.4 Bayern Landesbank c.100%
March 2016 55.0 MIDIS c.100%
January 2017 150.0 Macquarie/NAB/CBA On-going
During the period the share price increased from 110.50p to
112.50p.
As a result of share price movements, and taking into account
dividends paid, returns for investors are as follows:
6 Months to
30 September Total Since Annualised
2017 IPO Since IPO
Total Shareholder
Return 4.7% 31.9% 9.3%
NAV Total Return 3.2% 24.5% 7.1%
NESF shares are included in the FTSE All-Share Index as well as
the FTSE Small Cap Index. NESF shares outperformed the FTSE
All-Share Index by 3.4% since IPO to 30 September 2017.
Total Shareholder Return and NAV Total Return are used to review
the Company's performance against its objectives.
Financing and Cash Management
As of 30 September 2017, the total pro-forma debt position of
the Company on a look-through basis was GBP268.5m. This represents
a gearing of 31% in terms of total debt vs. GAV (which is equal to
NAV plus total financial debt outstanding). The corresponding
average cost of debt is 3.6%.
There was no material change to the total financial debt
position (GBP268.5m) during the period, except that the final two
tranches of the MIDIS/CBA/NAB debt were drawn down during the
period.
The table below provides detailed information on the total debt
outstanding as at 30 September 2017 (please note the repayment of
Bayern LB debt post period end):
Termination
Facility Amount (including
Amount Outstanding options Applicable
Provider/Arranger Type Borrower Tranches (GBP) (GBP) to extend) Rate
Tranche
A - Medium
term 48,387,098 48,387,098 31-Dec-26 2.91%(1)
Tranche
B - Floating
Long Term 24,193,548 24,193,548 30-Jun-35 3.68%(1)
NESH (Apollo Tranche
Fully-amortising portfolio C - Index
long-term level Linked RPI index+
MIDIS/CBA/NAB debt debt) Long Term 38,709,677 38,234,694 30-Jun-35 0.36%
Tranche
D - Fixed
Long Term 38,709,677 38,709,677 30-Jun-35 3.82%
Debt Service
Reserve
Facility 7,500,000 0 30-Jun-26 1.50%
Acquisition Fund/NESH 3m Libor
NIBC facility II level 21,680,000 21,680,000 04-Jul-19 + 2.20%(2)
Three
Kings
portfolio
level
Fully-amortising debt (part
Bayern long-term of NESH
LB debt III) 45,398,000 43,287,385 30-Jun-33 3.91%(1)
NESH IV
(Radius
Fully-amortising portfolio Inflation
long-term level linked RPI index+
MIDIS debt debt ) Tranche 27,500,000 26,500,049 30-Sep-34 1.44%
Fixed
Tranche 27,500,000 27,500,000 30-Sep-34 4.11%
Total 268,492,451
(1) Applicable rate represents the swap rate for 100% of the interest.
(2) Applicable rate represents the swap rate for 75% of the interest.
The Investment Manager did not charge any additional fees to the
Company in conjunction with the structuring, execution and
monitoring of any of these financial debt facilities.
The debt financing strategy of the Company is supported by
strong indications of support from equity investors for both
further capital increases to increase the Company's size and the
employment of financial leverage up to the 50% maximum level to
optimize equity returns. Additional comfort on the employment of
structural debt comes from the evidence of robust and increasing
appetite from institutional debt capital providers for long-term
dated securities backed by solar PV assets, as demonstrated by the
GBP150m long-term refinancing transaction.
As at 30 September 2017 the Company's assets included cash
totalling GBP220.8m held at Barclays Bank, Lloyds Bank and Deutsche
Bank.
On 24 October 2017, the Company repaid the Bayern LB loan
facility of GBP43.3m. This was in preparation for the refinancing
of a larger portfolio of NESH III assets which is planned for next
calendar year.
Description of the Principal Risks and Uncertainties
The Company has in place risk management procedures and internal
controls to monitor and mitigate the main risks faced as well as a
process to review the effectiveness of those controls. The
Investment Manager assists the Company in regularly identifying,
assessing and mitigating those risk factors likely to impact the
financial or strategic position of the Company. The Company's risk
matrix is regularly reviewed on at least a semi-annual basis, and
includes:
-- External and Market Risks;
-- Investment Strategy;
-- Investment Process and Management of Assets;
-- Monitoring Process;
-- Valuation Process;
-- Financial and Accounting Process; and
-- Governance, Tax and Regulatory Compliance.
Based on the Board's assessment, the principal risks faced by
the Company are:
-- Adverse changes to regulatory framework
Uncertainty for the future regulatory framework for solar PV in
the UK, Italy and the EU and the risk that further planned
acquisitions do not take place, affecting the Company's growth
potential, or that regulatory changes may affect the profitability
and valuation of the current portfolio. The Company actively
monitors regulatory changes within the industry.
-- Increased competition
Risk that the heightened competition for solar assets will make
it more difficult for the Company to continue acquiring assets in
the secondary market at attractive values. This increased
competition may be fuelled by investors with aggressive financial
structures seeking lower returns than the Company for the same
solar PV assets. The Company is involved in competitive tenders for
solar assets and therefore becomes aware of competitor's
returns.
-- Reduction in energy prices
Exposure to the wholesale energy market impacts the prices
received for energy generated and revenues forecasted by the
operating assets of the Company. This also exposes the Company to a
risk of further reduction in forward price curves. The Company
endeavours to agree fixed power contracts where appropriate.
-- Uncertainty of Brexit
The UK government held a referendum on 23 June 2016 for the UK
to vote either to remain in or leave the European Union where the
majority of those voting elected to leave the European Union. As a
result of the referendum vote, the UK triggered Article 50 of the
Treaty on European Union on 29 March 2017 and commenced Brexit
negotiations with the European Union. The Investment Manager
believes Brexit is likely to have a very limited effect on the
Company's financial and operating prospects. The UK's 2008 Climate
Change Act enshrines the Government's commitment to reduce the
country's greenhouse gas emissions by 80% compared to 1990 levels,
and it is considered unlikely that the government will introduce
primary legislation to reverse this commitment as a result of
Brexit. The most relevant impact of Brexit for the Company has been
the higher volatility in the value of sterling vs. foreign
currencies which in turn affects UK power prices due to cost of
natural gas and electricity import (commodities mainly traded in
USD and EUR denominated contracts). UK interest rates have also
become more volatile since the referendum vote on 23 June 2016.
Further implications of Brexit on the Company are not identifiable
at present. This risk is beyond the control of the Company, but the
Company closely monitors Brexit developments and their impact on
the solar industry.
Post Period-End Update
Since 30 September 2017, the following relevant events
occurred:
-- The Bayern LB loan of GBP43.3m, financing the Three Kings
portfolio, was repaid in October 2017, reducing gearing from 31% to
27% of GAV.
-- On 1 November 2017, the Company announced the acquisition of
its first overseas PV solar asset. A portfolio of eight plants
totalling 34.5MW with an investment value of c.GBP116.2m was
acquired in the South of Italy. All eight plants have been
operational since 2011 and receive Italian FiT, which is a fixed
value, accounting for c.80% of total expected revenues until 2031.
The portfolio is financed with non-recourse fully amortising
project financing debt with fixed interest rates. Shortly following
closing, NESF intends to put in place a GBP/EUR foreign currency
hedging structure covering future cash flows generated by this
portfolio to eliminate currency fluctuation exposure on revenue
returns.
-- On 7 November 2017, the Company announced an interim dividend
of 1.605 pence per ordinary share for the quarter ending 30
September 2017, to be paid on 29 December 2017 to shareholders on
the register as sat close of business on 16 November 2017.
-- Mainly as a result of the above investments, as of the date
of distribution of this report the Company's cash and cash
equivalents was reduced from GBP220.8m to GBP127.1m.
NextEnergy Capital IM Limited
16 November 2017
Statement of Directors' Responsibilities
To the best of their knowledge, the directors of NextEnergy
Solar Fund Limited confirm that:
(a) The Interim Report and Condensed Half-Yearly Financial
Statements have been prepared in accordance with IAS 34 Interim
Financial Reporting;
(b) The Interim Report, comprising the Chairman's Statement and
the Investment Manager's Report, meets the requirements of an
interim management report and includes a fair review of information
required by:
(i) DTR 4.2.7R of the UK Disclosure and Transparency Rules,
being an indication of important events that have occurred during
the period from 01 April 2017 to 30 September 2017 and their impact
on the Condensed Half-Yearly Financial Statements, and a
description of the principal risks and uncertainties for the
remaining six months of the year; and
(ii) DTR 4.2.8R of the UK Disclosure and Transparency Rules,
being related party transactions that have taken place in the
period from 01 April 2017 to 30 September 2017 and that have
materially affected the financial position or performance of the
Company during that period, and any material changes in the related
party transactions disclosed in the last Annual Report; and
(c) The Condensed Half Yearly Financial Statements give a true
and fair view of the assets, liabilities, financial position and
profit of the Company as required by DTR 4.2.4R of the UK
Disclosure and Transparency Rules.
The Company's Directors believe that the Company has adequate
resources to continue in operational existence. Note 12 to the
Annual Report and financial statements for the year ended 31 March
2017 includes the Company's objectives, policies and processes for
managing its capital; its financial risk management objectives;
details of its financial instruments and its exposure to credit
risk and liquidity risk. The Directors have undertaken a rigorous
review of the Company's ability to continue as a going concern
including reviewing the level of the Company's assets and
significant areas of financial risk including the timing of future
investment transactions, expenditure commitments and forecast
income and cashflows. As a result, the Directors have, at the time
of approving these condensed financial statements, a reasonable
expectation that the Company has adequate resources to meet its
liabilities and continue in operational existence. The Directors
have therefore concluded that it is appropriate to adopt the going
concern basis of accounting in preparing these interim financial
statements.
The maintenance and integrity of the Company's website is the
responsibility of the Directors. Legislation in Guernsey governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
By order of the Board
For NextEnergy Solar Fund Limited
Patrick Firth
Director
16 November 2017
Financial Statements
Condensed Statement of Comprehensive Income
For the period ended 30 September 2017
Unaudited Unaudited
1 April 2017 to 1 April 2016 to 1 April 2016 to
30 September 2017 31 March 2017 30 September 2016
Notes (GBP) (GBP) (GBP)
Income
Income 5 16,420,871 35,307,178 17,038,776
Net changes in fair value of financial assets at fair
value through profit or loss 6 527,962 19,560,833 10,267,502
Total net income 16,948,833 54,868,011 27,306,278
Expenditure
Management fees 16 2,417,500 3,406,093 1,438,706
Legal and professional fees 225,707 946,888 230,777
Administration fees 134,291 258,551 129,108
Regulatory fees 110,865 94,175 21,505
Audit fees 94,232 151,018 109,828
Directors' fees 19 69,518 160,250 61,500
Insurance 14,567 27,125 27,125
Sundry expenses 2,658 8,131 2,278
Total expenses 3,069,338 5,052,231 2,020,827
Operating profit 13,879,495 49,815,780 25,285,451
Finance income 141,309 13,391 4,518
Profit and comprehensive income for the period/year 14,020,804 49,829,171 25,289,969
Earnings per share 11 2.69p 13.81p 8.46p
There were no potentially dilutive instruments in issue at 30
September 2017.
All activities are derived from ongoing operations.
There is no other comprehensive income or expense apart from
expenditure that is disclosed above and consequently a Condensed
Statement of Other Comprehensive Income has not been prepared.
The accompanying notes are an integral part of these condensed
interim financial statements.
Condensed Statement of Financial Position
As at 30 September 2017
Unaudited Unaudited
30 September 2017 31 March 2017 30 September 2016
Notes (GBP) (GBP) (GBP)
Non-current assets
Investments 6 377,612,115 415,863,377 348,348,830
Total non-current assets 377,612,115 415,863,377 348,348,830
Current assets
Cash and cash equivalents 220,750,213 59,831,343 1,846,373
Trade and other receivables 7 19,153,719 11,165,786 10,561
Total current assets 239,903,932 70,997,129 1,856,934
Total assets 617,516,047 486,860,506 350,205,764
Current liabilities
Trade and other payables 8 15,024,500 8,277,677 151,462
Total current liabilities 15,024,500 8,277,677 151,462
Net assets 602,491,547 478,582,829 350,054,302
Equity
Share Capital and Premium 10 590,599,799 464,340,864 347,762,824
Reserves 11,891,748 14,241,965 2,291,478
Total equity attributable to shareholders 602,491,547 478,582,829 350,054,302
Net assets per share - (pence) 13 105.1p 104.9p 102.0p
The accompanying notes are an integral part of these condensed
interim financial statements.
The financial statements were approved and authorised for issue
by the Board of Directors on 16 November 2017 and signed on its
behalf by:
Patrick Firth Vic Holmes
Director Director
Condensed Statement of Changes in Equity
For the period ended 30 September 2017
Share Capital Treasury Retained
and Premium Shares Earnings Total Equity
(GBP) (GBP) (GBP) (GBP)
For the period 1 April 2017 to 30 September 2017 (Unaudited)
Shareholders' equity at 1 April 2017 464,340,864 - 14,241,965 478,582,829
Profit and comprehensive income for the period - - 14,020,804 14,020,804
Shares issued(1) 126,258,935 - - 126,258,935
Dividends declared - - (16,371,021) (16,371,021)
Shareholders' equity at 30 September 2017 590,599,799 - 11,891,748 602,491,547
For the period 1 April 2016 to 31 March 2017
Shareholders' equity at 1 April 2016 314,956,625 (32,084,000) (9,061,747) 273,810,878
Profit and comprehensive income for the year - - 49,829,171 49,829,171
Shares issued 149,384,239 32,084,000 - 181,468,239
Dividends declared - - (26,525,459) (26,525,459)
Shareholders' equity at 31 March 2017 464,340,864 - 14,241,965 478,582,829
For the period 1 April 2016 to 30 September 2016
(unaudited)
Shareholders' equity at 1 April 2016 314,956,625 (32,084,000) (9,061,747) 273,810,878
Profit and comprehensive income for the period - - 25,289,969 25,289,969
Shares issued 32,806,199 32,084,000 - 64,890,199
Dividends paid - - (13,936,744) (13,936,744)
Shareholders' equity at 30 September 2016 347,762,824 - 2,291,478 350,054,302
The accompanying notes are an integral part of these condensed
interim financial statements.
(1) Shares issued during the period comprise shares issued
amounting to GBP126,500,000 and scrip dividends amounting to
GBP1,886,962, less share issue costs of GBP2,128,027.
Condensed Statement of Cash Flows
For the period ended 30 September 2017
1 April 2017 to 1 April 2016 to 1 April 2016 to
30 September 2017 31 March 2017 30 September 2016
Cash flows from operating activities Notes (GBP) (GBP) (GBP)
Profit and comprehensive income for the period/year 14,020,804 49,829,171 25,289,969
Adjustments for:
Proceeds from investments 98,384,545 94,314,352 48,532,271
Purchase of investments (59,605,321) (175,150,217) (71,146,920)
Movement in investment payable - (47,468,639) (47,468,639)
Change in fair value on investments 6 (527,962) (19,560,833) (10,267,502)
Finance income (141,309) (13,391) (4,518)
Operating cash flows before movements in working
capital 52,130,757 (98,049,557) (55,065,339)
Changes in working capital
Movement in trade receivables (7,942,728) (11,152,786) 2,439
Movement in trade payables 6,746,823 8,139,852 13,637
Net cash used in operating activities 50,934,852 (101,062,491) (55,049,263)
Cash flows from investing activities
Finance income 96,104 13,391 4,518
Net cash generated from investing activities 96,104 13,391 4,518
Cash flows from financing activities
Proceeds from issue of shares 10 124,371,973 145,078,148 31,614,114
Proceeds from treasury shares 10 - 32,084,000 32,084,000
Dividends paid 12 (14,484,059) (22,219,368) (12,744,659)
Net cash generated from financing activities 109,887,914 154,942,780 50,953,455
Net movement in cash and cash equivalents
during period/year 160,918,870 53,893,680 (4,091,290)
Cash and cash equivalents at the beginning of the
period/year 59,831,343 5,937,663 5,937,663
Cash and cash equivalents at the end of the
period/year 220,750,213 59,831,343 1,846,373
The accompanying notes are an integral part of these condensed
interim financial statements.
Notes to the Financial Statements
For the period ended 30 September 2017
1. General Information
The Company was incorporated with limited liability in Guernsey
under the Companies (Guernsey) Law, 2008, as amended, on 20
December 2013 with registered number 57739, and is regulated by the
GFSC as a registered closed-ended investment company. The
registered office and principal place of business of the Company is
1, Royal Plaza, Royal Avenue, St Peter Port, Guernsey, Channel
Islands, GY1 2HL.
On 16 April 2014, the Company announced the results of its
initial public offering, which raised net proceeds of GBP85.6
million. The Company's ordinary shares were admitted to the premium
segment of the UK Listing Authority's Official List and to trading
on the Main Market of the London Stock Exchange as part of its
initial public offering which completed on 25 April 2014.
Subsequent fundraisings also took place, increasing total equity to
GBP590.6m as at 30 September 2017 (31 March 2017: GBP464.3m).
Details can be found in note 10.
The Company seeks to provide investors with a sustainable and
attractive dividend that increases in line with the retail price
index over the long-term by investing in a diversified portfolio of
solar PV assets that are located in the UK. In addition, the
Company seeks to provide investors with an element of capital
growth through the reinvestment of net cash generated in excess of
the target dividend in accordance with the Company's investment
policy.
The Company currently makes its investments through holding
companies and Special Purpose Vehicles, which are wholly-owned by
the Company. The Company controls the investment policy of each of
the holding companies and its wholly-owned SPV's in order to ensure
that each will act in a manner consistent with the investment
policy of the Company.
The Company has appointed NextEnergy Capital IM Limited as its
Investment Manager pursuant to the Management Agreement dated 18
March 2014. The Investment Manager is a Guernsey registered
company, incorporated under the Companies (Guernsey) Law, 2008,
with registered number 57740 and is licensed and regulated by the
GFSC and is a member of the NEC Group. The Investment Manager is
licensed and regulated by the GFSC and will act as the Alternative
Investment Fund Manager of the Company.
The Investment Manager has appointed NextEnergy Capital Limited
as its Investment Adviser pursuant to the Investment Advisory
Agreement. The Investment Adviser is a company incorporated in
England with registered number 05975223 and is authorised and
regulated by the FCA.
The financial statements are presented in pounds sterling
because that is the currency of the primary economic environment in
which the Company operates.
2. Significant accounting policies
Basis of preparation
The condensed interim financial statements have been prepared on
a going concern basis in accordance with IAS 34 Interim Financial
Reporting. The interim financial information should be read in
conjunction with the annual report and audited financial statements
for the year ended 31 March 2017, which have been prepared in
accordance with IFRS.
Seasonal and cyclical variations
The Company's results may vary during reporting periods as a
result of the spread of irradiation during the period and, together
with other factors, will impact the NAV. Other factors include
changes in inflation and power prices.
Segmental reporting
The Chief Operating Decision Maker, which is the Board, is of
the opinion that the Company is engaged in a single segment of
business, being investment in solar power, in a single economic
environment, being the United Kingdom. The financial information
used by the Chief Operating Decision Maker to manage the Company
presents the business as a single segment.
Going concern
The Directors have reviewed the current and projected financial
position of the Company making reasonable assumptions about future
performance. The key areas reviewed were:
-- Timing of future investment transactions
-- Expenditure commitments
-- Forecast income and cashflows
The Company has cash and short-term deposits as well as
projected positive income streams and an available credit facility
(see note 20) and as a consequence the Directors have, at the time
of approving the financial statements, a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the next 12 months. Accordingly they have adopted the
going concern basis of preparation in preparing the financial
statements.
3. New and revised standards
The following accounting standards and interpretations which
have not been applied in these financial statements were in issue
but not yet effective:
IFRS 9 Financial Instruments (revised, early adoption
permitted)
IFRS 12 (amendments) Clarification of the scope of the Standard
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
The Directors are currently assessing the impact of the adoption
of the accounting standards, amendments and interpretations listed
above, but do not expect there to be a material impact on the
financial statements of the Company in future periods.
A number of amendments to IFRSs became effective for financial
periods beginning on or after 1 January 2017. However, the Company
did not have to change its accounting policies or make material
retrospective adjustments as a result of adopting these new
standards.
4. Critical accounting judgements and key sources of estimation
uncertainty
The Company makes estimates and assumptions that affect the
reported amounts of assets and liabilities. Estimates and
judgements are continually evaluated and based on historic
experience and other factors believed to be reasonable under the
circumstances.
a) Investments at fair value through profit or loss
The Company's investments are measured at fair value for
financial reporting purposes. The Board of Directors has appointed
the Investment Manager to produce investment valuations based upon
projected future cashflows. These valuations are reviewed and
approved by the Board. The investments are held indirectly through
HoldCos. A list of subsidiaries is included in note 9.
IFRS 13 establishes a single source of guidance for fair value
measurements and disclosures about fair value measurements. Fair
value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Board
bases the fair value of the investments on the information received
from the Investment Manager.
The Company classified its investments at fair value through
profit or loss as Level 3 within the fair value hierarchy. Level 3
investments amount to GBP377,612,115 (31 March 2017:
GBP415,863,377) and consist of 50 investments in solar PV plants
(held indirectly through the HoldCo's) (31 March 2017: 41), all of
which have been valued on a look through basis (except for those
solar plants not yet operational) based on the discounted cash
flows of the solar PV plants and the residual value of net assets
at the HoldCo level. The unlevered discount rate applied in the 30
September 2017 valuation was 7.0% (31 March 2017: 7.25%). The
discount rate is a significant level 3 input and a change in the
discount applied could have a material effect on the value of the
investments. Investments in solar PV plants that are not yet
operational are held at fair value, where the cost of the
investment is used as an appropriate approximation of fair value.
Level 3 valuations are reviewed regularly by the Investment Manager
who reports to the Board of Directors on a periodic basis. The
Board considers the appropriateness of the valuation model and
inputs, as well as the valuation result.
The table below sets out information about significant
unobservable inputs used at 30 September 2017 in measuring
financial instruments categorised as Level 3 in the fair value
hierarchy. Unlisted investments reconcile to the Closing Investment
Portfolio Value as per the Investments table in note 6.
Sensitivity to
change in
significant
Fair value at 30 Valuation unobservable
Description September 2017 GBP technique Unobservable input Input value inputs
Unlisted 384,535,887 Discounted cash Discount rate 7.0% (unlevered
investments flows based on assets) up to 8.0% The estimated fair
underlying (levered assets) value would
valuation of increase if the
residual assets discount rate was
at the four hold lower and vice
cos. versa.
Investments held at
cost 5,864,844 Cost n/a n/a n/a
Adjusted net
asset value
attributable to
Residual value of the Company at
net assets at fair value fair
HoldCo's (12,788,616) value n/a n/a n/a
Total 377,612,115
b) Significant judgement: consolidation of entities
The Directors have concluded that the Group controls the SPV
that holds the asset held at cost even though it does not hold 100%
ownership of the entity as at 30 September 2017. This is because
the Group has contracted to acquire this investment before year end
and has subsequently completed on these acquisitions post year end.
They are therefore included within investments as at the period
end.
The Company, under the Investment Entity Exemption rule, holds
its investments at fair value.
The Company meets the definition of an investment entity per
IFRS 10 as the following conditions exist:
1. The Company has obtained funds for the purpose of providing
investors with professional investment management services;
2. The Company's business purpose, which was communicated
directly to investors, is investing for capital appreciation and
investment income; and
3. The investments are measured and evaluated on a fair value basis.
The Company does not have any other subsidiaries other than
those determined to be controlled subsidiary investments.
Controlled subsidiary investments are measured at fair value
through profit or loss and are not consolidated in accordance with
IFRS 10. The fair value of controlled subsidiary investments is
determined as described in note 4(a).
5. Income
Period ended Year ended
30 September 2017 31 March 2017
(GBP) (GBP)
Investment income 13,820,864 27,266,676
Management fee income 2,600,007 8,040,502
Total Income 16,420,871 35,307,178
6. Investments
The Company owns the Investment Portfolio through its
investments in NextEnergy Solar Holdings Limited, NextEnergy Solar
Holdings II Limited, NextEnergy Solar Holdings III Limited and
NextEnergy Solar Holdings IV Limited. This is comprised of the
Investment Portfolio and the Residual Net Assets of the Holding
Companies. The Total Investments at fair value are recorded under
Non-Current Assets in the Condensed Statement of Financial
Position.
Period ended Year ended
30 September 2017 31 March 2017
(GBP) (GBP)
Brought forward cost of investments 404,235,982 323,400,117
Proceeds from investments (98,384,545) (94,314,352)
Purchase of investments 59,605,321 175,150,217
Carried forward cost of investments 365,456,758 404,235,982
Brought forward unrealised gains/(losses) on investments 11,627,395 (7,933,438)
Movement in unrealised gains on valuation 527,962 19,560,833
Carried forward unrealised gains on investments 12,155,357 11,627,395
Total investments at fair value 377,612,115 415,863,377
The total change in the value of the investments in the Holding
Companies is recorded through profit and loss in the Condensed
Statement of Comprehensive Income.
7. Trade and other receivables
Period ended Year ended
30 September 2017 31 March 2017
(GBP) (GBP)
Management fee receivable 175,555 3,157,728
Other receivables 32,054 13,000
Bank interest receivable 45,205 -
Due from subsidiaries 18,900,905 7,995,058
Total trade and other
receivables 19,153,719 11,165,786
Amounts due from subsidiaries are interest free and payable on
demand. See note 17.
8. Trade and other payables
Period ended Year ended
30 September 2017 31 March 2017
(GBP) (GBP)
Other payables 201,619 282,619
Due to subsidiaries 14,822,881 7,995,058
Total trade and other payables 15,024,500 8,277,677
Amounts due to subsidiaries are interest free and payable on
demand. See note 17.
9. Subsidiaries
The Company holds investments through subsidiary companies which
have not been consolidated as a result of the adoption of IFRS 10:
Investment entities exemption to consolidation. Below is the legal
entity name for the Holding Companies and the remaining legal
entities owned indirectly through the investment in the holding
companies. The country of incorporation is also their principal
place of business.
Country of Direct or Ownership at 30 Ownership at 31
Name Incorporation Indirect Holding Principal Activity September 2017 March 2017
NextPower Higher
Hatherleight Ltd UK Indirect SPV 100% 100%
Nextpower Shacks Barn
Ltd UK Indirect SPV 100% 100%
Nextpower Gover Farm
Limited UK Indirect SPV 100% 100%
BL Solar 2 Limited UK Indirect SPV 100% 100%
Sunglow Power Limited UK Indirect SPV 100% 100%
Nextpower Ellough LLP UK Indirect SPV 100% 100%
Glorious Energy
Limited UK Indirect SPV 100% 100%
SSB Condover Limited UK Indirect SPV 100% 100%
ESF Llwyndu Limited UK Indirect SPV 100% 100%
Throwbridge PV Limited UK Indirect SPV 100% 100%
Push Energy (Boxted
Airfield) Limited UK Indirect SPV 100% 100%
Push Energy
(Langenhoe) Limited UK Indirect SPV 100% 100%
ST Solarinvest Devon 1
Limited UK Indirect SPV 100% 100%
Push Energy (Croydon)
Limited UK Indirect SPV 100% 100%
Greenfields (A)
Limited UK Indirect SPV 100% 100%
Glebe Farm SPV Limited UK Indirect SPV 100% 100%
Bowerhouse Solar
Limited UK Indirect SPV 100% 100%
Wellingborough Solar
Limited UK Indirect SPV 100% 100%
Push Energy (Birch)
Limited UK Indirect SPV 100% 100%
Thurlestone-Leicester
Solar Ltd UK Indirect SPV 100% 100%
North Farm Solar Park
Limited UK Indirect SPV 100% 100%
Ellough Solar 2
Limited UK Indirect SPV 100% 100%
Push Energy (Hall
Farm) Limited UK Indirect SPV 100% 100%
Push Energy (Decoy)
Limited UK Indirect SPV 100% 100%
Empyreal Energy Ltd UK Indirect SPV 100% 100%
Fenland Renewables
Limited UK Indirect SPV 100% 100%
Green End Renewables
Limited UK Indirect SPV 100% 100%
Tower Hill Farm
Renewables Ltd UK Indirect SPV 100% 100%
Branston Solar Park
Limited UK Indirect SPV 100% 100%
Great Wilbraham Solar
Park Limited UK Indirect SPV 100% 100%
Berwick Solar Park Ltd UK Indirect SPV 100% 100%
Bottom Plain Solar
Park Limited UK Indirect SPV 100% 100%
Emberton Solar Park
Ltd UK Indirect SPV 100% 100%
Push Energy
(Kentishes) Limited UK Indirect SPV 100% 0%
Push Energy (Mill
Farm) Limited UK Indirect SPV 100% 0%
Long Ash Lane Solar
Park Limited UK Indirect SPV 0% 0%
Bowden Lane Solar Park
Limited UK Indirect SPV 100% 0%
Stalbridge Solar Park
Limited UK Indirect SPV 100% 0%
Aller Court Solar Park
Limited UK Indirect SPV 100% 0%
Rampisham Estate Solar
Park Limited UK Indirect SPV 100% 0%
INRG (Solar Parks) 17
Ltd UK Indirect SPV 100% 0%
INRG (Solar Parks) 21
Ltd UK Indirect SPV 100% 0%
Barred Straw Limited UK Indirect SPV 100% 0%
Waltham Solar Limited UK Indirect SPV 100% 0%
Birch Solar Farm CIC UK Indirect SPV 100% 0%
LE Solar 51 Limited UK Indirect SPV 100% 0%
Lark Energy Bilsthorpe
Limited UK Indirect SPV 100% 0%
Wickfield Solar
Limited UK Indirect SPV 100% 0%
Wheb European Solar
(UK) 2 Limited UK Indirect SPV 100% 0%
Wheb European Solar
(UK) 3 Limited UK Indirect SPV 100% 0%
Hanwha UK Solar 1
Limited UK Indirect SPV 100% 100%
NextPower Radius
Limited UK Indirect SPV 100% 100%
NextEnergy Solar
Holding II Limited UK Direct HoldCo 100% 100%
NextEnergy Solar
Holding III Limited UK Direct HoldCo 100% 100%
NextEnergy Solar
Holding IV Limited UK Direct HoldCo 100% 100%
NextEnergy Solar
Holding Limited UK Direct HoldCo 100% 100%
10. Share capital and reserves
Share capital and premium
Share Issuance Number of shares Gross amount raised (GBP) Issue costs (GBP) (GBP)
Issued on 20 December 2013 1 1 - 1
Issued on 25 April 2014 85,600,000 85,600,000 - 85,600,000
Cancellation of founder's
share on 24 October 2014 (1) (1) - (1)
Issued on 19 November 2014 91,000,000 95,459,000 (1,399,246) 94,059,754
Issued on 19 December 2014 4,000,000 4,120,000 (43,565) 4,076,435
Issued on 27 February 2015 59,750,000 61,405,075 (681,625) 60,723,450
Issued on 30 September
2015 37,607,105 38,848,139 (435,153) 38,412,986
Issued on 6 November 2015 30,850,000 32,084,000 - 32,084,000
Sale of treasury shares
(see below) (30,850,000) (32,084,000) - (32,084,000)
Issued on 27 July 2016 41,991,242 42,159,207 (649,635) 41,509,572
Issued on 27 July 2016 1,822,656 1,829,947 (28,202) 1,801,745
Issued on 4 August 2016 4,254,855 4,297,404 (64,461) 4,232,943
Issued on 4 August 2016 1,040,690 1,051,097 (15,766) 1,035,331
Issued on 9 August 2016 5,775,557 5,833,313 (87,500) 5,745,813
Issued on 9 September 2016 9,215,926 9,515,444 (142,732) 9,372,712
Scrip Dividend - 30
September 2016 1,139,374 1,192,085 - 1,192,085
Issued on 21 November 2016 110,300,000 115,253,272 (1,789,240) 113,464,032
Scrip Dividend - 30
December 2016 1,321,959 1,382,781 - 1,382,781
Scrip Dividend - 31 March
2017 1,568,835 1,731,225 - 1,731,225
Total issued at 31 March
2017 456,388,199 469,677,989 (5,337,125) 464,340,864
Issued on 21 June 2017 115,000,000 126,500,000 (2,128,027) 124,371,973
Scrip Dividend - 27 June
2017 44,646 51,238 - 51,238
Scrip Dividend - 29
September 2017 1,627,044 1,835,724 - 1,835,724
Total issued at 30
September 2017 573,059,889 598,064,951 (7,465,152) 590,599,799
The Company currently has one class of ordinary share in issue.
All the holders of the ordinary shares are entitled to receive
dividends as declared from time to time and are entitled to one
vote per share at meetings of the Company.
Treasury shares
On 6 November 2015 the Company issued 30,850,000 new ordinary
shares which the Company then purchased at a price of 104.0 pence
per share. The shares purchased were placed in treasury. The
treasury shares were not entitled to receive dividends and did not
hold any voting rights. On 22 July 2016 the treasury shares were
sold, as part of the capital issuance programme at a price of 100.4
pence per share.
Retained reserves
Retained reserves comprise the retained earnings as detailed in
the Condensed Statement of Changes in Equity.
11. Earnings per share
Period ended Year ended
30 September 2017 31 March 2017
Profit and comprehensive income for the period/year (GBP) 14,020,804 49,829,171
Weighted average number of ordinary shares 520,527,762 360,841,240
Earnings per ordinary share - pence 2.69p 13.81p
12. Dividends
Period ended Year ended
30 September 2017 31 March 2017
Amounts recognised as distributions to equity holders: (GBP) (GBP)
Interim dividend for the period ended 31 March 2016 of
3.125p per share, paid on 22 July 2016 - 8,686,160
Interim dividend for the period ended 30 June 2016 of
1.5775p per share, paid on 30 September 2016 - 5,250,584
Interim dividend for the period ended 30 September 2016 of
1.5775p per share, paid on 30 December 2016 - 5,413,940
Interim dividend for the period ended 31December 2016 of
1.5775p per share, paid on 31 March 2017 - 7,174,775
Interim dividend for the period ended 31 March 2017 of
1.5775p per share, paid on 30 June 2017 7,199,524 -
Interim dividend for the period ended 30 June 2017 of
1.605p per share, paid on 29 September 2017 9,171,497 -
Total 16,371,021 26,525,459
13. Net assets per ordinary share
As at As at
30 September 2017 31 March 2017
Shareholders' equity (GBP) 602,491,547 478,582,829
Number of ordinary shares 573,059,889 456,388,199
Net assets per ordinary share - pence 105.1p 104.9p
14. Financial risk management
Valuation methodology
The Directors have satisfied themselves as to the
appropriateness and reasonability of the methodology used, the
discount rates and key assumptions applied, and the valuation. All
completed investments are at fair value through profit or loss and
are valued using a discounted cash flow methodology. Investments
which are not yet completed are held at fair value, where the cost
of the investment is used as an appropriate approximation of fair
value.
Discount rates
The discount rates used for valuing each renewable
infrastructure investment are based on both the industry discount
rate and on the specific circumstances of each project. The risk
premium takes into account risks and opportunities associated with
the investment earnings.
The discount rates used for valuing the investments in the
Portfolio are as follows:
30 September 31 March
2017 2017
Weighted Average discount rate 7.50% 7.90%
Discount rates 7.00% to 8.00% 7.25% to 8.25%
A change to the weighted average discount rate by plus or minus
0.5% has the following effect on the valuation.
Discount rate +0.5% change Total Portfolio value -0.5% change
Directors' valuation at 30 September 2017 (GBP) (15.1m) 390.4m 16.2m
Directors' valuation - percentage movement (3.9%) 4.1%
Directors' valuation at 31 March 2017 (GBP) (11.7m) 333.9m 12.7m
Directors' valuation - percentage movement (3.5%) 3.8%
Power price
NEC Group continuously reviews multiple inputs from market
contributors and leading consultants and adjusts the inputs to the
power price forecast when a conservative approach is deemed most
appropriate. Current estimates imply an average rate of growth of
electricity prices of approximately 1.5% in real terms and a long
term inflation rate of 2.75%.
A change in the forecast electricity price assumptions by plus
or minus 10% has the following effect on the valuation.
Power price 10% change Total Portfolio value +10% change
Directors' valuation at 30 September 2017 (GBP) (28.9m) 390.4m 28.9m
Directors' valuation - percentage movement (7.4%) 7.4%
Directors' valuation at 31 March 2017 (GBP) (24.0m) 333.9m 24.4m
Directors' valuation - percentage movement (7.2%) 7.3%
Energy generation
The Portfolio's aggregate energy generation yield depends on the
combination of solar irradiation and technical performance of the
solar PV plants. The table below shows the sensitivity of the
Portfolio to a sustained increase or decrease of energy generation
by plus or minus 5% on the valuation.
5% Under Total Portfolio 5% Out
Energy generation performance value performance
Directors' valuation at
30 September 2017 (GBP) (27.1m) 390.4m 29.4m
Directors' valuation -
percentage movement (6.9%) 7.5%
Directors' valuation at
31 March 2017 (GBP) (22.7m) 333.9m 24.4m
Directors' valuation -
percentage movement (6.8%) 7.3%
Inflation rates
The Portfolio valuation assumes long-term inflation of 2.75% per
annum for investments (based on UK RPI). A change in the inflation
rate by plus or minus 0.5% has the following effect on the
valuation.
Total Portfolio
Inflation rate -0.5% change value +0.5% change
Directors' valuation at 30 September 2017 (GBP) (24.6m) 390.4m 26.0m
Directors' valuation - percentage movement (6.3%) 6.7%
Directors' valuation at 31 March 2017 (GBP) (19.4m) 333.9m 20.7m
Directors' valuation - percentage movement (5.8%) 6.2%
Operating costs
The table below shows the sensitivity of the Portfolio to
changes in operating costs by plus or minus 10% at project company
level.
Total Portfolio
Operating costs +10% change value -10% change
Directors' valuation at 30 September 2017 (GBP) (7.5m) 390.4m 7.1m
Directors' valuation - percentage movement (1.9%) 1.8%
Directors' valuation at 31 March 2017 (GBP) (6.3m) 333.9m 6.3m
Directors' valuation - percentage movement (1.9%) 1.9%
Tax rates
The UK corporation tax assumption for the Portfolio valuation
was 19% to 2020, and 17% thereafter in accordance with the UK
Government announced reductions.
15. Financial assets and liabilities not measured at fair
value
Cash and cash equivalents are level 1 items on the fair value
hierarchy. Current assets and current liabilities are Level 2 items
on the fair value hierarchy. The carrying value of current assets
and current liabilities approximates fair value as these are
short-term items.
16. Management fee expense
The Investment Manager is entitled to receive an annual fee,
accruing daily and calculated on a sliding scale, as follows
below:
-- for the tranche of NAV up to and including GBP200m, 1% of the
Net Asset Value ("NAV") of the Company.
-- for the tranche of NAV above GBP200m and up to and including GBP300m, 0.9% of NAV.
-- for the tranche of NAV above GBP300m, 0.8% of NAV.
For the period ending 30 September 2017 the Company has incurred
GBP2,417,500 in management fees of which GBPnil was outstanding at
30 September 2017. For the year ending 31 March 2017 the Company
incurred GBP3,406,093 in management fees of which GBPnil was
outstanding at 31 March 2017. For the period ending 30 September
2016 the Company incurred GBP1,438,706 in management fees of which
GBPnil was outstanding at 30 September 2016.
17. Related parties
The Investment Manager, NextEnergy Capital IM Limited, is a
related party due to having common key management personnel with
the subsidiaries of the Company. All management fee transactions
with the Investment Manager are disclosed in note 16.
The Investment Adviser, NextEnergy Capital Limited, is a related
party due to sharing common key management personnel with the
subsidiaries of the Company. There are no advisory fee transactions
between the Company and the Investment Adviser.
The Operating Asset Manager, WiseEnergy (Great Britain) Limited,
is a related party due to sharing common key management personnel
with the subsidiaries of the Company. Each of the operating
subsidiaries of the Company entered into an asset management
agreement with WiseEnergy (Great Britain) Limited. The total value
of recurring and one-off services paid to the Operating Asset
Manager during the reporting period amounted to GBP1,204,223 (for
the year to 31 March 2017: GBP1,795,295, for the period to 30
September 2016: GBP1,172,737).
At the period end, GBP14,822,881 (31 March 2017: GBP7,995,058,
30 September 2016: Nil) was owed to and from the subsidiaries, in
relation to their restructuring. See note 21. GBP2,600,007 of
management fees were received from the subsidiaries during the
period (year to 31 March 2017: GBP8,040,502, period to 30 September
2016: Nil), GBP175,555 of which was outstanding at the period end
(31 March 2017: GBP3,157,728, 30 September 2016: Nil). During the
period, the Company received investment income of GBP13,820,864
(year to 31 March 2017: GBP27,266,676, period to 30 September 2016:
GBP17,038,776) from the subsidiaries, of which GBP4,078,024 was
outstanding at the period end (31 March 2017: Nil, 30 September
2016: Nil).
NextPower Development Limited is a related party due to sharing
common key management personnel with the subsidiaries of the
Company. There are no advisory fee transactions between the
Company, its subsidiaries and NextPower Development Limited.
At the period end, the Directors owned the following shares in
the Company:
-- Kevin Lyon 160,000
-- Patrick Firth 73,632
-- Vic Holmes 110,000
18. Controlling party
In the opinion of the Directors, on the basis of shareholdings
advised to them, the Company has no immediate or ultimate
controlling party.
19. Remuneration of the Directors
The remuneration of the Directors was GBP68,750 for the period
(for the year to 31 March 2017: GBP160,250, for the period to 30
September 2016: GBP61,500) which consisted solely of short-term
employment benefits.
20. Revolving credit and debt facilities
In January 2017, NextEnergy Solar Holding Limited, a subsidiary
of the Company, closed a syndicated loan with MIDIS, NAB and CBA
for GBP157.5m ("Project Apollo") to refinance its revolving credit
facility. As at 31 March 2017, GBP51.5m of the facility was drawn.
In April 2017, an additional GBP50.8m of the facility was drawn,
and in June 2017, the remaining GBP47.7m was drawn. As part of the
facility agreement, the lenders provide and additional Debt Service
Reserve Facility of GBP7.5m and hold a charge over the assets of
NextEnergy Solar Holding Limited. As at 30 September 2017, the
outstanding amount was GBP149.5m.
In July 2015, NextEnergy Solar Holdings II Limited, a subsidiary
of the Company, agreed a loan with NIBC for GBP22.7m. In July 2016,
GBP1m was repaid and the remaining outstanding amount as at 30
September 2017 was GBP21.7m.
In January 2016, NextEnergy Solar Holdings III Limited, a
subsidiary of the Company, acquired a portfolio of three operating
plants totalling 53MW for GBP61.7m which had a long term
fully-amortising project financing of GBP45.4m in place. As at 30
September 2017, the outstanding amount was GBP43.3m.
On 31 March 2016, NextEnergy Solar Holdings IV Limited, a
subsidiary of the Company agreed the purchase of Project Radius.
The acquisition is part funded by a debt facility entered between
NextEnergy Solar Holding IV Limited and Macquarie Bank Limited for
GBP55.0m. On 14 April 2016, the facility was fully drawn down to
complete the acquisition of the Radius portfolio. As part of the
debt facility agreement Macquarie Bank Limited holds a charge over
the assets of NextEnergy Solar Holding Limited. As at 30 September
2017, the outstanding amount was GBP54.0m.
21. Restructuring at Subsidiary
During the prior year ended 31 March 2016, a subsidiary paid
dividends to the Company even though it did not have sufficient
distributable reserves at the time of declaration. As a result,
during the year ended 31 March 2017, the subsidiary undertook a
restructuring to create distributable reserves. The effect of this
was to return the Company to the position it would have been in had
the relevant dividends paid from the subsidiary been made
properly.
22. Taxation
Under the current system of taxation in Guernsey, the Company is
exempt from paying taxes on income, profit or capital gains.
Therefore, income from investments in UK solar PV plants is not
subject to any further tax in Guernsey, although these investments
are subject to tax in the UK.
23. Events after the reporting period
Since 30 September 2017, the following relevant events
occurred:
-- The Bayern LB loan of GBP43.3m, financing the Three Kings
portfolio, was repaid in October 2017, reducing gearing from 31% to
27% of the GAV.
-- On 1 November 2017, the Company announced the acquisition of
its first overseas PV solar asset. A portfolio of eight plants
totalling 34.5MW with an investment value of c.GBP116.2m was
acquired in the South of Italy. All eight plants have been
operational since 2011 and receive Italian FiT.
-- On 7 November 2017, the Company announced an interim dividend
of 1.605 pence per Ordinary Share for the quarter ending 30
September 2017, to be paid on 29 December 2017 to shareholders on
the register as at close of business on 16 November 2017.
-- Mainly as a result of the above investments, as of the date
of distribution of this report the Company's cash and cash
equivalents was reduced from GBP220.8m to GBP127.1m.
Independent review report to NextEnergy Solar Fund Limited
Our conclusion
We have reviewed the accompanying condensed interim financial
information of NextEnergy Solar Fund Limited (the "Company") as at
30 September 2017. Based on our review, nothing has come to our
attention that causes us to believe that the accompanying condensed
interim financial information is not prepared, in all material
respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
What we have reviewed
The accompanying condensed interim financial information
comprise:
-- the condensed interim statement of financial position as at 30 September 2017;
-- the condensed statement of comprehensive income for the six-month period then ended;
-- the condensed statement of changes in equity for the six-month period then ended;
-- the condensed statement of cash flows for the six-month period then ended; and
-- the notes, comprising a summary of significant accounting
policies and other explanatory information.
The condensed interim financial information has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Our responsibilities and those of the directors
The Directors are responsible for the preparation and
presentation of this condensed interim financial information in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on this condensed
interim financial information based on our review. This report,
including the conclusion, has been prepared for and only for the
Company for the purpose of complying with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements 2410, 'Review of interim financial
information performed by the independent auditor of the entity'
issued by the International Auditing and Assurance Standards Board.
A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-yearly
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
16 November 2017
Glossary of Defined Terms
AGM Annual General Meeting
AIC Association of Investment Companies
AIC Code AIC Code of Corporate Governance
AIC Guide AIC Corporate Governance Guide for Guernsey
Domiciled Investment Companies
AIF Alternative Investment Fund
AIFM Alternative Investment Fund Manager
AIFMD Alternative Investment Fund Management
Directive
Asset Management The difference between the delta of energy
Alpha generation vs. budget and the delta of
solar irradiation vs. budget
Apollo portfolio 21 plants held within NESH
Base Fee The fee that the Investment Manager is
entitled to under the Investment Management
Agreement
BEIS The Department for Business, Energy &
Industrial Strategy
Brexit The UK voting to leave the European Union
Cash Dividend The ratio of the Company's Cash Income
Cover over dividend paid during the financial
year.
CBA Commonwealth Bank of Australia
Company NextEnergy Solar Fund Limited
Consultants Two of the leading energy market consultants
CfD Contract for Difference
CRS Common Reporting Standard for automatic
exchange of tax information
CSR Corporate Social Responsibility
DCF Discounted Cash Flow
Developer NextPower Development Limited
Discount / Premium The amount by which the Companies shares
to NAV trade above or below the NAV
DNO Distribution Network Operators
EPC Engineering, Procurement and Construction
ESG Environmental, Social and Governance
EU European Union
FATCA Foreign Account Tax Compliance Act
FiT Feed-in Tariff
GAV Gross Asset Value
GFSC Guernsey Financial Services Commission
GFSC Code Guernsey Financial Services Commission
Finance Sector Code of Corporate Governance
Gross Dividend The ratio of the Company's Gross Cash
Cover Income over dividend paid during the financial
year.
Group The Company, HoldCos and SPVs
GWh Gigawatt hour - a measure of electricity
generated per hour
HoldCos Intermediate holding companies - NESH,
NESH II, NESH III and NESH IV
IAS International Accounting Standards
IFRS International Financial Reporting Standards
Investment Advisor NextEnergy Capital Limited
Investment Manager NextEnergy Capital IM Limited
IPEV International Private Equity and Venture
Capital
IPO Initial Public Offering
IRR Internal Rate of Return
ISA International Standards on Auditing
KPI Key Performance Indicator
KWh Kilowatt hour - a measure of electricity
generated per hour
LOI Letter of Intent
MIDIS Macquarie Infrastructure Debt Investment
Solutions
MWh Megawatt hour - a measure of electricity
generated per hour
NAB National Australia Bank
NAV Net Asset Value
NAV per share Net Asset Value per Ordinary Share
NAV Total Return The actual rate of return from dividends
paid and capital gains on NAV per share
over a given period of time.
NESH NextEnergy Solar Holding Limited
NESH II NextEnergy Solar Holding II Limited
NESH III NextEnergy Solar Holding III Limited
NESH IV NextEnergy Solar Holding IV Limited
Net Dividend The ratio of the Company's Net Cash Income
Cover over dividend paid during the financial
year.
NPPR National Private Placement Regime
OCR Ongoing Charges Ratio
OECD Organisation for Economic Co-operation
and Development
Official List The Premium Segment of the UK Listing
Authority's Official List
Ordinary Shares The issued ordinary share capital of the
Company.
POI Law the Protection of Investors (Bailiwick
of Guernsey) Law, 1987
PPA Power Purchase Agreement
PV Photovoltaic
PwC CI PricewaterhouseCoopers CI LLP
Radius portfolio 5 plants held with NESH IV
RCF Revolving Credit Facilities
RO Scheme Renewable Obligation Scheme
ROC Renewable Obligation Certificates
RPI Retail Price Index
SPA Share Purchase Agreement
SPVs Special Purpose Vehicles which hold the
Company's investment portfolio of underlying
operating assets
Total Shareholder The actual rate of return from dividends
Return paid and capital gains on share price
movements over a given period of time
The Company / NextEnergy Solar Fund Limited
NESF
Three Kings portfolio 5 plants held with NESH III
UK United Kingdom of Great Britain and Northern
Ireland
UK Code UK Corporate Governance Code dated April
2016
UKLA UK Listing Authority
WACC WACC Weighted Average Cost of Capital
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BRBDBBUBBGRL
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