NextEnergy Solar Fund Ltd · LSE:NESF
NextEnergy Solar Fund — FY2023 Earnings Presentation
73 slides from NextEnergy Solar Fund's earnings presentation, June 2023
Slide 1: Full Year Results Presentation
Generating a more Full Year Results Presentation sustainable future Period ended 31 March 2023
Slide 2: Speakers & contents
Speakers & contents ▪ Introduction to NextEnergy Solar Fund P3 ▪ FY22/23 Overview P4 ▪ Update on Pipeline and Strategy P7 Michael Bonte-Friedheim Group CEO & Founding Partner ▪ Operational Update P10 NextEnergy Group ▪ Financial Update P13 ▪ Sustainability P16 ▪ Outlook P17 ▪ Q&A and Appendix P18 Ro
Slide 3: Introduction to NextEnergy Solar Fund
Introduction Introduction to NextEnergy Solar Fund A Specialist Solar+ Fund focused on solar and energy storage Supported by strong inflation-linked revenues Diversified portfolio with 99 operating solar assets Strong dividend yield / +11% FY24 target dividend Exciting >£500m pipeline to fuel future
Slide 4: Key financial highlights
FY22/23 Overview Key financial highlights (as at 31 March 2023) Gross Asset Value Ordinary Shareholders’ NAV NAV per ordinary share £1,218m £674.4m 114.3p (31 March 2022: £1,150m) (31 March 2022: £668.5m) (31 March 2022: 113.5p) Dividend Paid In Period Dividend Cover In Period Total gearing1 7.52p 1
Slide 5: NAV bridge: 12-month period
FY22/23 Overview NAV bridge: 12-month period ▪ Ordinary shareholders’ NAV increased to £674.4m equivalent to 114.3p per NAV Bridge 31 March 2022 – 2023 ordinary share ▪ Main contributors to the change in the Company's NAV over the year were: – A large increase in power price forecasts (+14.6p per or
Slide 6: NextEnergy Solar Fund portfolio
FY22/23 Overview NextEnergy Solar Fund portfolio Operating Solar Assets Portfolio map 99 Commitment to NPIII ESG1 $50m Installed capacity2 865MW Direct asset ownership and co-investments Weighted average asset life Via NextPower III ESG (NPIII LP) commitment (see page 40) 26.3 years (1) NextPower II
Slide 7: Portfolio growth & pipeline
Update on Pipeline and Strategy Portfolio growth & pipeline ▪ Pursue international Solar PV and UK energy storage Solar PV ▪ Actively recycle capital through capital recycling programme ▪ Increase energy storage Capital recycling programme sale + International expansion + Co-investment opportunities
Slide 8: Solar strategy delivering value
Update on Pipeline and Strategy Solar strategy delivering value Solar PV Capital recycling programme International expansion Co-investment opportunities ▪ Programme to accelerate the next ▪ $50m commitment into ▪ 50MW Spanish solar co- phase of the Company's growth NextPower III ESG, an investment a
Slide 9: Energy storage strategy providing growth opportunities
Update on Pipeline and Strategy Energy storage strategy providing growth opportunities Energy Storage Stand-alone batteries Co-located batteries ▪ £100m Joint Venture Partnership vehicle with Eelpower ▪ Co-located battery retrofit programme introduced across the current operating solar portfolio ▪ £
Slide 10: Revenue generation as at March 2023 (FY)
Operational Update Revenue generation as at 31 March 2023 (FY) EBITDA Margin (Actual per MW) Year Ended 31 March 2023 Actual per MW(1) Budget per MW(1) Delta vs Comments Budget 78.9% Solar Irradiation Conversion Factor(2) [A] [B] (kWh/m2) (%) 1,277 78.8% 1,188 81.6% +7.5% (3.5%) Actual irradiation f
Slide 11: Track record of operating outperformance
Operational Update Track record of operating outperformance ▪ Energy generated during the year was 870 GWh (2022: 773 GWh) Power Generation Performance against Budget (%) ▪ The portfolio achieved a generation 10.00% 9.10% outperformance vs budget of 3.8% 9.00% (2022: 1.8%) leading to c.£4.8m in 8.00
Slide 12: Risk Management from protecting future cash flows
Operational Update Risk Management from protecting future cash flows ▪ Sustained high power price environment continues to offer Hedging position of budgeted generation on c.50% revenue through sales desk1 attractive hedging opportunities ▪ NESF has a specialist energy sales 2023/24 2024/25 2025/26
Slide 13: Summary statement of comprehensive income
Financial Update Summary statement of comprehensive income Total net Income Year ended Year ended Year ended 31 March 2023 31 March 2022 31 March 2021 £66.0m Income Statement (audited) £m (audited) £m (audited) £m (31 March 2022: £143.7m) Income1 79 65 60 Earnings per ordinary share Movement in Inve
Slide 14: Dividend track record
Financial Update 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 Total declared dividends1 7.05p 7.16p 6.87p 6.65p £305.8m 7.0 6.25p 6.31p 6.42p 6.0 5.25p 5.0 Pence (p) Forecasted FY23/24 dividend 4.0 cover2 ~1.3x–1.5x 3.0
Slide 15: Optimised capital structure (as at March 2023)
Financial Update Optimised capital structure (as at 31 March 2023) £800.0 Financial Debt Gearing1 £700.0 28% £131.0 RCF / Short term debt outstanding £600.0 c.£166m £38.7 Total Debt (£m) £500.0 £135m RCF Preference Shares £135.0 ▪ 16% £400.0 £7.7 £31.3 ▪ £70m RCF Long term debt outstanding £39.8 ▪ M
Slide 16: An impact ESG investment
Sustainability An impact ESG investment ▪ NESF is classified as Article 9 fund under EU Green Impact Data Track Record SFDR and Taxonomy ▪ Establishment of ESG Board Committee, Metric Units FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 chaired by Josephine Bush, Non-Executive GHG av
Slide 17: Going forward
Outlook Going forward Drive growth through Solar PV & Energy Storage strategy Investor returns backed by a large diversified operating portfolio Provide an attractive, growing dividend to shareholders Focus on adding NAV-accretive value to shareholders Continue to optimise the running of the existin
Slide 18: Q&A / Appendix
NEXTENERGY SOLAR FUND 18
Slide 19: Appendix: About NextEnergy Solar Fund
Appendix: About NextEnergy Solar Fund
Slide 20: 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 21: NextEnergy Solar Fund structure
Appendix: Structure NextEnergy Solar Fund structure
Slide 22: NextEnergy Solar Fund Board of Directors
Appendix: Governance NextEnergy Solar Fund Board of Directors Kevin Lyon Patrick Firth Jo Peacegood Vic Holmes Josephine Bush Helen Mahy Chairman Non-executive Director Non-executive Director Senior Independent Director Non-executive Director Non-executive Director
Slide 23: 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 UK Managing Director at Managing Partner and Chief CEO of NextEnergy Group and Governance (ESG) at NextEnergy Capital
Slide 24: NextEnergy Capital Investment Management Board of Directors
Appendix: Governance NextEnergy Capital Investment Management Board of Directors Joseph D’Mello Jeremy Thompson Charlotte Denton
Slide 25: Value add of NextEnergy Group
Appendix: Structure Value add of NextEnergy Group Investment Management Asset Management Development Incubator Foundation ▪ c.$3.4bn Solar AUM ▪ 2,855+ solar and ▪ Green and brownfield ▪ Targeting startups ▪ International charity battery assets project development focused on founded in 2016 ▪ Over 3
Slide 26: Value add of NextEnergy Capital
Appendix: Structure Value add of NextEnergy Capital NextEnergy Capital is NESF’s Investment Manager and Investment Adviser ▪ NextEnergy Group launched its investment management, NextEnergy Capital (NEC), in 2014 ▪ NEC has since launched five institutional funds; o NextEnergy Solar Fund (“NESF”) o Ne
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
Bs Appendix: NAV aa NTE
Slide 29: NAV bridge breakdown: 12-month period to March 2023
Appendix: NAV NAV bridge breakdown: 12-month period to 31 March 2023 ▪ Increase of 1.0% in the discount rate NAV bridge: 31 March 2022 – 31 March 2023 for unlevered operating UK solar NAV p/share NAV assets At 31 December 2022 (as originally announced) 113.5p £668.5m Correction (1.3p) (7.6m) ▪ Infla
Slide 30: NAV correction
Appendix: NAV NAV correction ▪ The Company has laid out below the changes to the NAVs for the period 31 March 2022 to 31 March 2023. ▪ As part of the Company’s continual improvement of internal systems, the Company identified that the reporting module within its accounting software included an exces
Slide 31: Discount rate assumptions (31 March 2023)
Appendix: NAV Discount rate assumptions (31 March 2023) ▪ The Company has not made any changes to its discount rate assumptions for the quarter (31 December 2022: 6.75%) Discount Rates Discount rate assumptions As at 31 March 2023 As at 31 December 2022 Weighted average discount rate UK unlevered Un
Slide 32: Inflation assumptions (31 March 2023)
Appendix: NAV Inflation assumptions (31 March 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 intern
Slide 33: 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 34: NAV sensitivities (31 March 2023)
Appendix: NAV NAV sensitivities (31 March 2023) ▪ NAV sensitivities NAV per share updated every six months at interim and full-year results Discount rate (+/- 0.5%) (3.2)p (2.7%) 2.8% 3.4p ▪ The sensitivity highlights the percentage change in Power Price (-/+ 10%) (8.9)p (7.4%) 7.2% 8.6p the portfol
Slide 35: Appendix: Portfolio
Appendix: Portfolio
Slide 36: Evolution of portfolio since IPO
Appendix: Portfolio Evolution of portfolio since IPO IPO 2015 2017 2019 2021 • £85.6m raised at IPO • £100.2m raised, 100% • £126.5m raised,100% • 755MW total installed • 865MW total installed in April 2014 and deployed six weeks deployed within 14 capacity capacity 100% deployed later months • Awar
Slide 37: Portfolio breakdown (31 March 2023)
Appendix: Portfolio Portfolio breakdown (31 March 2023) By Subsidy/PPA1 By Installed Capacity1 By Revenue Type1 By Inverter Manufacturer1 By Solar Module Manufactuer1 By Location1
Slide 38: Investment policy limits (31 March 2023)
Appendix: Portfolio Investment policy limits (31 March 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 Gros
Slide 39: Active hedging strategy example
Appendix: Portfolio Active hedging strategy example Example: Hedging Strategy for Summer 2022 NESF consistently secures hedges above the ICE Forward Curve as well as the quarterly power price forecast for the period 100.0 % Hedged 100% 95.3 Table shows: 90.0 ICE Forward Curve for S22 90.4 90% 89.7 8
Slide 40: Private Solar Fund Investment: NextPower III ESG
Appendix: Portfolio Private Solar Fund Investment: NextPower III ESG Community Solar Paderne (17MW) asset in Albufeira, Portugal, Helios (42MW) acquired by NPIII in ▪ NextPower III ESG (NPIII) was Platform (49MW) in acquired by NPIII in Q4 2020 Q3 2021 launched by NextEnergy Briel (25MW) and New Yor
Slide 41: 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 42: Appendix: Capital Structure
Appendix: Capital Structure
Slide 43: NESF's firepower to fund pipeline (as at 31 March 2023)
Appendix: Capital Structure NESF’s firepower to fund pipeline (as at 31 March 2023) Breakdown of NESF’s debt structure Available firepower to be deployed in opportunities £700.0 RCF Debt/GAV 50% Limit Headroom c.£131m £131.0 £600.0 £38.7 £500.0 Immediate RCF Available Total Debt (£m) £135.0 £400.0 £
Slide 44: 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 45: Financial debt outstanding (31 March 2023)
Appendix: Capital Structure Financial debt outstanding (31 March 2023) [provided semi-annually] Financial debt gearing Total gearing No. of Termination Applicable 28% 45% power Loan to Facility Provider / Type Borrower Tranches Amount Outstanding (inc. options rate plants Value(2) Amount arranger (£
Slide 46: Long term debt repayment profile
Appendix: Capital Structure Long term debt repayment profile ▪ As at 31 March 2022, c.£171m of Apollo Repayment Profile the financial debt was long-term £18 fully amortising £16 £14 ▪ The charts show the precise £12 yearly repayment profile for both £10 (£'m) £8 long-term debt facilities (interest £
Slide 47: Optimised capital structure – details
Appendix: Capital Structure Optimised capital structure – details (31 March 2022) 590m Ordinary Shares in issue, targeting a total dividend of 7.52p per ordinary Equity ◼ share for the financial year ending 31 March 2023 Preference shares ◼ Two £100m tranches issued in November 2018 and August 2019
Slide 48: Appendix: Energy Storage
Appendix: Energy Storage
Slide 49: 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.$3.4bn Solar AUM ▪ Over 350 solar assets acquired Experience of managing storage assets, co-located with solar since 2018 ▪ 2.4GW+ ac
Slide 50: 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 51: NESF has an established energy storage track record
Appendix: Energy Storage NESF has an established energy storage track record 2018 2019 2020 2021 2022 2023 onwards 1 2 3 4 First two co-located batteries Strategic Relationship with EelPower Co-location retrofit across portfolio Investment Policy Increase NESF has an Existing UK portfolio of 91 Incr
Slide 52: 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 53: The strength of specialists: NextEnergy Capital & EelPower
Appendix: Energy Storage The strength of specialists: NextEnergy Capital & EelPower Background NextEnergy Capital track record Example site recently realised by Eelpower: ▪ NESF sought an industry expert with demonstrable ▪ Consistently generated more electricity than acquisition experience in deliv
Slide 54: Revenue sources for NESF batteries
Appendix: Energy Storage Revenue sources for NESF batteries Key revenue drivers Example revenue stack a 2hr duration standalone battery project 900 200 Battery Refresh 800 Volatility: Higher volatility of generation drives increased need 700 for flexibility + arbitrage opportunities* 150 Annual cycl
Slide 55: 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 56: Batteries generate revenue from multiple sources
Appendix: Energy Storage Batteries generate revenue from multiple sources Merchant trade is the backbone of a Additional Revenues Ancillary services offer strong near- diversified revenue stack term value ▪ Wholesale markets are deep, liquid and ▪ But, with new assets coming online, will exist over
Slide 57: 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 58: Understanding duration terminologies
Appendix: Energy Storage Understanding duration terminologies Three key terms are important in understanding battery assets: Rated Power, Energy Capacity, and Duration Rated Power Energy Capacity Duration the maximum amount of power a BESS the maximum amount of stored energy the length of time for w
Slide 59: Benefits of increased battery storage duration
Appendix: Energy Storage Benefits of increased battery storage duration A battery’s ‘duration’ is the ratio between the stored energy capacity (MWh) and rated power (MW) of an asset. It defines how long it takes a battery to discharge from full to no charge Ancillary Services: Wholesale Markets: Bal
Slide 60: Eelpower partner selection
Appendix: Energy Storage Eelpower partner selection Eelpower background & track record ▪ Eelpower is a specialist in the UK battery market with a strong track record and extensive experience in the delivery, management, and optimisation of battery storage assets in the UK ▪ Eelpower will provide EPC
Slide 61: 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 91 solar assets, with existing grid connections Availab
Slide 62: Indicative risk return profile shift
Appendix: Energy Storage Indicative risk return profile shift Energy Storage Risk Matrix vs Solar1 Indicative Risk-Return for Energy vs Solar Regulation Changes High 15% Technological Supply Chain Risks Investment Returns Risk Reliance on Third Party Energy Service providers Storage Investment Due D
Slide 63: Energy storage risk matrix
Appendix: Energy Storage Energy storage risk matrix Risk Description 1 Regulatory Regulation Changes Adverse changes to regulation of BESS assets, changes to or removal of future regulated revenues, etc. (e.g. Frequency response services: Enhanced Frequency Response, Dynamic Containment, etc.) Elect
Slide 64: Now is the right time to deploy energy storage
Appendix: Energy Storage Now is the right time to deploy energy storage Previously Now ▪ Evolving, early-stage technologies ▪ Technology established and tested ▪ Prohibitive capex, long return horizons ▪ Capex and return horizons reducing ▪ Uncertain revenue streams ▪ Revenue proven by pathfinder sc
Slide 65: Appendix: ESG
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Slide 66: 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 67: 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 68: 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 investment and ownership phases. ✓ Biodiversity looking forward Continue to implement best practice biodi
Slide 69: 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 70: Appendix: Other
Appendix: Other
Slide 71: Solar growth potential
Appendix: Growth Drivers Solar growth potential ▪ It is expected that $900bn is World Grid-Connected Electricity Generation Build-up of Solar and Wind – Global Installed needed to be invested into solar by Power Station Type(3) Capacity(3) energy in Europe for the continent to reach its net zero tar
Slide 72: The NextEnergy Foundation
Appendix: Structure The NextEnergy Foundation ITALY AFGHANISTAN USA UNITED KINGDOM ▪ Established in 2016, the PAKISTAN Foundation’s mission is to SYRIA alleviate poverty through the nexus with clean energy access INDIA and emissions reductions Ukraine ▪ NextEnergy Capital donates at least 5% of its
Slide 73: 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