NextEnergy Solar Fund Ltd · LSE:NESF
NextEnergy Solar Fund — H1 FY2024 Earnings Presentation
58 slides from NextEnergy Solar Fund's earnings presentation, November 2023
Slide 1: Interim Results Presentation
Generating a more sustainable future Interim Results Presentation Period ended 30 September 2023
Slide 2: Speakers & contents
Speakers & contents ▪ Introduction to NextEnergy Solar Fund & its Manager P3 ▪ Key Highlights P5 ▪ Portfolio & Strategy P8 Helen Mahy Chair ▪ Performance & Capital Structure P12 NextEnergy Solar Fund ▪ ESG, Sustainability & Outlook P17 ▪ Q&A P20 ▪ Appendix P21 Ross Grier Chief Operating Officer & He
Slide 3: Why NextEnergy Solar Fund
Introduction Why NextEnergy Solar Fund (“NESF”) A Specialist Solar Energy & Energy Storage Fund Diversified portfolio of operating solar assets Strong inflation-linked revenues Attractive dividend yield & dividend target Proactive management to drive shareholder value Attractive growth prospects for
Slide 4: NESF Key Highlights
WEXTENERGY = SOLAR FUND = : NESF Key Highlights
Slide 5: Key highlights (as at September 2023)
Highlights Key highlights (as at 30 September 2023) Gross Asset Value Ordinary Shareholders’ NAV NAV Per Ordinary Share Financial Highlights £1,194m £640.0m 108.3p (31 March 2023: £1,218m) (31 March 2023: £674.4m) (31 March 2023: 114.3p) Dividend Target FY23/24 Dividend Cover In Period Dividend Decl
Slide 6: Dividend track record
Introduction Dividend track record 10 Year Dividend Growth CAGR Dividend growth track record 4.75% +11% y-o-y increase 9.0 8.35p 8.0 7.52p FY23/24 forecasted dividend 7.05p 7.16p 6.87p cover1 7.0 6.65p 6.25p 6.31p 6.42p 1.3x 6.0 5.25p 5.0 Pence (p) FY23/24 dividend target1 4.0 8.35p 3.0 2.0 1.0 Tota
Slide 7: NAV bridge: six-month period
Highlights NAV bridge: six-month period NAV Bridge 31 March 2023 – 30 September 2023 A decrease in short-term (2023- The increase in discount rate for Other movements in Continued drawdown in Reflects the change in valuation residual value includes 2027) UK power price forecasts The upward revision
Slide 8: Portfolio & Strategy Update
NEXTENERGY SOLAR FUND Portfolio & Strategy Update
Slide 9: Operating portfolio
Portfolio & Strategy Operating portfolio Operating Solar Assets Installed capacity2 Commitment to NPIII ESG1 Weighted average asset life 100 933MW $50m 26.4 years (31 March 2023: 99) (31 March 2023: 889MW) x x By Location 3 By Installed Capacity3 0.8% 0.8% 3.3% 10.1% 24.0% UK Italy 0-5 MWp Other Int
Slide 10: Track record of operating outperformance
Portfolio & Strategy Track record of operating outperformance ▪ Energy generated during the period was 599GWh (31 March 2023: 639GWh) Power Generation Performance against Budget (%) ▪ During the period, solar irradiation across 10.00% the portfolio was 6.1% above budget (2022: 9.10% 9.9%) 9.00% 8.00
Slide 11: Protecting future cash flows
Portfolio & Strategy Protecting future cash flows ▪ NESF continues to lock in power price hedges over a rolling 36-month period Hedging position of budgeted generation on c.50% revenue through sales desk1 ▪ This proactive risk mitigation helps 2023/24 2024/25 2025/26 secure and underpin both dividen
Slide 12: Strategic growth & pipeline
Portfolio & Strategy Strategic growth & pipeline ▪ Pursue international Solar PV and UK energy storage Solar PV ▪ Actively recycle capital through capital recycling programme ▪ Continue to maintain its Capital recycling programme + International expansion + Co-investment opportunities disciplined ap
Slide 13: Active management – Capital Recycling Programme
Portfolio & Strategy Active management – Capital Recycling Programme ▪ Post period end, first phase of the Capital Recycling Programme Subsidy-free solar asset Installed Capacity Status Location Update successfully complete Hatherden 60MW Ready-to-build Hampshire, UK Sold in Phase 1 ▪ Sale of Hather
Slide 14: Capital Structure
NEXTENERGY SOLAR FUND Capital Structure
Slide 15: Disciplined capital structure (as at September 2023)
Capital Structure Disciplined capital structure (as at 30 September 2023) Total Gearing to GAV1 Preference Shares Weighted Average Cost of Debt Weighted Average Cost of Capital2 46.4% c.£200m 4.2% 6.3% (Gearing level limit of 50% GAV) (Fixed preferred dividend of 4.75% p.a) (3.9% excluding preferenc
Slide 16: ESG, Sustainability & Outlook
ESG, Sustainability & Outlook
Slide 17: An impact ESG investment
ESG An impact ESG investment ▪ NESF is classified as Article 9 fund under EU Green Impact Data Track Record SFDR and Taxonomy Metric Units FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 HY2023 ▪ Establishment of ESG Board Committee, chaired by Josephine Bush, Non-Executive GHG avoide
Slide 18: Going forward
Outlook Going forward Deliver the Capital Recycling Programme & reduce debt Drive growth through Solar PV & Energy Storage strategy Provide an ongoing attractive dividend to shareholders Focus on adding NAV-accretive value to shareholders Continue to optimise the running of the existing large portfo
Slide 19: Q&A
NEXTENERGY =e SOLAR FUND —— ‘ Q&A
Slide 20: Appendix: About NextEnergy Solar Fund
Appendix: About NextEnergy Solar Fund
Slide 21: Key facts
Appendix: Key facts Key Facts Fund Structure ▪ Guernsey-domiciled closed-end investment ▪ Launched in 2014 Issue / Listing ▪ Premium listing of ordinary shares on the London Stock Exchange ▪ Stock ticker code: NESF ▪ Board of Directors: 6 Independent Board Members ▪ Investment Manager: NextEnergy Ca
Slide 22: NextEnergy Solar Fund structure
Appendix: Structure NextEnergy Solar Fund structure
Slide 23: NextEnergy Solar Fund Board of Directors
Appendix: Governance NextEnergy Solar Fund Board of Directors Helen Mahy Patrick Firth Jo Peacegood Vic Holmes Josephine Bush Paul Le Page Chair Non-executive Director Non-executive Director Senior Independent Director Non-executive Director Non-executive Director
Slide 24: NextEnergy Capital Investment Committee
Appendix: Governance NextEnergy Capital Investment Committee Michael Bonte- Giulia Guidi Ross Grier Aldo Beolchini Friedheim Founding Partner and Group Head of Environmental, Social COO, Head of UK Investment Managing Partner and Chief CEO of NextEnergy Group and Governance (ESG) at NextEnergy Capit
Slide 25: NextEnergy Capital Investment Management Board of Directors
Appendix: Governance NextEnergy Capital Investment Management Board of Directors Joseph D’Mello Jeremy Thompson Charlotte Denton
Slide 26: Value add of NextEnergy Group
Introduction Value add of NextEnergy Group Investment Management Asset Management Development Incubator Foundation ▪ c.$3.9bn Solar AUM ▪ 1,250+ solar and ▪ Green and brownfield ▪ Targeting startups ▪ International charity battery assets project development focused on founded in 2016 ▪ Over 400 sola
Slide 27: Value add of WiseEnergy
Appendix: Structure Value add of WiseEnergy WiseEnergy is NESF’s operating asset manager ▪ WiseEnergy is a global solar asset manager part of the NextEnergy Group, with over 11 years experience monitoring and delivering operating optimisation and outperformance ▪ WiseEnergy oversees all elements of
Slide 28: Appendix: NAV
NEXTENERGY SOLAR FUND Appendix: NAV
Slide 29: NAV bridge breakdown: 6-month period to 30 September 2023
Appendix: NAV NAV bridge breakdown: 6-month period to 30 September 2023 ▪ Increase of 0.75% in the discount NAV bridge1: 31 March 2023 – 30 September 2023 rate for unlevered operating UK solar NAV p/share NAV assets At 31 March 2023 114.3p £674.4m ▪ Inflation assumptions updated to New assets at cos
Slide 30: Discount rate assumptions (30 September 2023)
Appendix: NAV Discount rate assumptions (30 September 2023) ▪ Increase of 0.75% in the discount rate for unlevered operating UK solar assets over the last six-months (31 March 2023: 6.75%) Discount Rates Discount rate assumptions As at 30 September 2023 As at 31 March 2023 Weighted average discount
Slide 31: Inflation assumptions (30 September 2023)
Appendix: NAV Inflation assumptions (30 September 2023) ▪ The Company continues to take a consistent approach to its inflation assumptions, using external third-party, independent inflation data from HM Treasury Forecasts and long-term implied rates from the Bank of England for its UK assets. For in
Slide 32: Forecast power prices (real 2023)
Appendix: NAV Forecast power prices (real 2023) ▪ Forward power prices significantly above Blended power curves (capture price) previous forecasts ▪ The Company’s current UK 20-year average power price forecast represents an increase of 8.4% compared to that used at the end of the previous financial
Slide 33: NAV sensitivities (30 September 2023)
Appendix: NAV NAV sensitivities (30 September 2023) ▪ NAV sensitivities NAV per share updated every six months at interim and full-year results ▪ The sensitivity highlights the percentage change in the portfolio valuation resulting from a change in the underlying variables ▪ It also shows the impact
Slide 34: Appendix: Portfolio
NEXTENERGY Appendix: Portfolio
Slide 35: Evolution of portfolio since IPO
Appendix: Portfolio Evolution of portfolio since IPO IPO 2015 2017 2019 2021 2023 • £85.6m raised at • £100.2m raised, • £126.5m raised,100% • 755MW total installed • 865MW total installed • Capital Recycling IPO in April 2014 100% deployed six deployed within 14 capacity capacity Programme (“CRP”)
Slide 36: Investment policy limits (30 September 2023)
Appendix: Portfolio Investment policy limits (30 September 2023) ▪ The Company may also invest in standalone energy storage systems (not ancillary to or co- ▪ 4.6% of GAV currently located with solar PV assets owned by the Company) up to an aggregate limit of 10% of the invested Technological Limit
Slide 37: Portfolio breakdown (30 September 2023)
Appendix: Portfolio Portfolio breakdown (30 September 2023) By Subsidy/PPA1 By Installed Capacity1 By Revenue Type1 1.6% 0.1% 1.1% 2.9% 1.2 ROCs 11.3% 11.6% 1.3 ROCs 10.8% 24.0% Brown Power - Fixed PPA 1.4 ROCs 11.1% ROCs 1.6 ROCs 0.9% 2.0 ROCs 0-5 MWp FiTs (UK & Italy) 47.1% 3.8% FiTs UK 6-10 MWp B
Slide 38: The Italian Solis portfolio
Appendix: Portfolio The Italian Solis portfolio ▪ High risk-adjusted returns (9.4% at Business Case: Solis Acquisition and Performance acquisition) ▪ Acquisition of eight solar plants in Italy in December 2017 for a total installed capacity of 34.5MW ▪ Positive contribution to dividend and total val
Slide 39: Private Solar Fund Investment: NextPower III ESG
Appendix: Portfolio Private Solar Fund Investment: NextPower III ESG ▪ NextPower III ESG (“NPIII”) was launched by NextEnergy Capital in 2018 to target utility- scale solar in OECD countries ▪ NESF made a $50m commitment to NPIII in June 2021 ▪ NPIII is targeting a gross investor IRR of between 13%
Slide 40: Appendix: Capital Structure
Appendix: Capital Structure
Slide 41: Optimised capital structure – details
Appendix: Capital Structure Optimised capital structure – details (30 September 2023) 590m Ordinary Shares in issue, targeting a total dividend of 8.35p per ordinary Equity ◼ share for the financial period ending 30 September 2023 Preference shares ◼ Two £100m tranches issued in November 2018 and Au
Slide 42: Financial debt outstanding (30 September 2023)
Appendix: Capital Structure Financial debt outstanding (30 September 2023) [provided semi-annually] Financial debt gearing Total gearing No. of Termination Applicable 29.8% 46.4% power Loan to Facility Provider / Type Borrower Tranches Amount Outstanding (inc. options rate plants Value(2) Amount arr
Slide 43: Preference shares
Appendix: Capital Structure Preference shares On 8 November 2018, the Shareholders approved the issuance of £200m of Preference Shares. The Company issued ▪ The issuance of £200m the first tranche of £100m in November 2018, and the second tranche of £100m Preference Shares were issued in preference
Slide 44: Long term debt repayment profile
Appendix: Capital Structure Long term debt repayment profile ▪ As at 30 September 2023, Apollo Repayment Profile c.£168m of the financial debt was £18 long-term fully amortising £16 £14 ▪ The charts show the precise £12 yearly repayment profile for both £10 (£'m) £8 long-term debt facilities (intere
Slide 45: Appendix: Energy Storage
NEXTENERGY SOLAR FUND Appendix: Energy Storage
Slide 46: NextEnergy has the right platform to deploy energy storage
Appendix: Energy Storage NextEnergy has the right platform to deploy energy storage ▪ 14 years experience as a Manager Existing deep knowledge of UK power markets ▪ C.$3.9bn Solar AUM ▪ Over 400 solar assets acquired Experience of managing storage assets, co-located with solar since 2018 ▪ 2.4GW+ ac
Slide 47: Five key reasons to increase energy storage in NESF
Appendix: Energy Storage Five key reasons to increase energy storage in NESF Battery storage benefits from intermittency of renewables ▪ As the UK decarbonises, renewables are expected to provide the backbone of the future energy mix. However, renewables are a cause of strain on the grid due to thei
Slide 48: Opportunities secured through energy storage joint ventures
Appendix: Energy Storage Opportunities secured through energy storage joint ventures 2022 2023 onwards 4 5 6 Project Camilla Project Lion Investment Policy Increase Under Construction Project Rights Acquired Look to increase the investment mandate Camilla up to 25%, in order to capitalise on existin
Slide 49: Energy storage joint venture breakdown
Appendix: Energy Storage Energy storage joint venture breakdown Joint Venture Partnership 1 (“JVP1”) Joint Venture Partnership 2 (“JVP2”) JVP1 JVP2 Battery storage investment opportunities £100m £200m £300m ▪ Owned 70% by NESF and 30% by Eelpower ▪ Owned 75% by NESF and 25% by Eelpower Total announc
Slide 50: Overview of UK energy storage revenue streams
Appendix: Energy Storage Overview of UK energy storage revenue streams Years Hours Minutes Seconds Capacity Market Wholesale Market Balancing Mechanism ▪ Ensures national security of ▪ Provides platform to buy and ▪ Ensures balance is maintained in the power system in each daily half-hour trading su
Slide 51: Energy storage co-location retrofit programme
Appendix: Energy Storage Energy storage co-location retrofit programme ▪ NESF has held two co-located battery assets since 2018 (Salcey Farm & Pierce Farm) Budget Grid ▪ Introduced co-located retrofit programme across the UK Import portfolio of 92 solar assets, with existing grid connections Availab
Slide 52: Appendix: ESG
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Slide 53: ESG integration into the NESF investment process
Appendix: ESG ESG integration into the NESF investment process ▪ ESG factors are considered throughout the investment process, from potential excluded activities during the project selection phase, to initial screening and full due diligence during the pre-acquisition phase ▪ ESG clauses are include
Slide 54: ESG considerations for energy storage
Appendix: ESG ESG considerations for energy storage Mineral Mineral Extraction Due diligence Audits Extraction ▪ COBALT: most of global supply originates from the DRC, of which c. 30% derives from small-scale miners ▪ NextEnergy Capital (“NEC”) carries out ▪ NEC plans to adopt the third party workin
Slide 55: Biodiversity and social enhancement
Appendix: ESG Biodiversity and social enhancement ▪ NESF benefits from a dedicated Biodiversity team to ensure that land management and native fauna and flora are being considered throughout the Total acres of wildflowers Portfolio with enhanced across portfolio biodiversity measures investment and
Slide 56: EU Taxonomy and Sustainable Finance Disclosure Regulation
Appendix: ESG EU Taxonomy and Sustainable Finance Disclosure Regulation ▪ The Sustainable Finance Disclosure Regulation (SFDR) is a European regulation introduced to improve transparency in the market for sustainable investment products, to prevent greenwashing and to increase transparency around su
Slide 57: The NextEnergy Foundation
Appendix: Structure The NextEnergy Foundation ITALY UNITED KINGDOM ▪ Established in 2016, the Partner Etifor Partner Depher CIC Foundation’s mission is to Years 2022-2024 Years 2022-2024 alleviate poverty through the Restoring forest area and recreating the Addressing fuel poverty alleviaton nexus w
Slide 58: Important notice
Important notice This document is issued by NextEnergy Capital Limited (“NEC”), which is authorised and regulated by the UK Financial Conduct Authority (“FCA”) with registered number 471192. The contents of this document are strictly private and confidential and accordingly may not be published, rep
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