NextEnergy Solar Fund (LSE:NESF) — Interim Results

0:01 Good afternoon, and welcome to NEXTENERGY SOLAR FUND LIMITED Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses, which is appropriate to do so. Before we begin, I would like to submit the following poll.

0:32 And I would now like to hand you over to managing director, Ross Good afternoon to you. Hi. Thank you, everybody, for joining the interim results. I'm Ross Greer. I'm actually COO these days of NEXTENERGY CAPITAL, but thank you for the intro. I'm also joined today by Stephen Rosser, who is our investment director focused on the NEXTENERGY SOLAR FUND and also our UK legal council. So we'll take you through some slides today to to give you the the kind of highlights from the most recent set of results and then as we've said open up to the q and a which is usually the most interesting part of these sessions. It's been a solid six months for their platform we've done a number of key things within this period which I'll take you through.

1:18 Now as you know, the sector across the board has been impacted with share prices running at a discount to net asset value. So we've been particularly focused as a manager on what we can do to narrow that discount. Albeit, can't do all of that by ourselves. We do need markets and the macroeconomic environment to support us in transitioning back to NAV and back into a a premium to NAV so we can continue on with the very successful growth story that the NEXTENERGY SOLAR FUND has had, especially over the last decade. So things we've highlighted for this period include that we delivered on phase two of a capital recycling program. As a reminder, what we are doing there is selling down strategically identified pool of assets.

2:05 What we're looking to do there is to achieve premium to the holding value of those assets. So there's no fire sale situation here. What we're doing instead is looking to achieve premium from those disposals, and then that allows us to reinvest that into the forward trajectory of the platform. We're doing that predominantly through down paying our revolving credit facility first and also in funding a share buyback program for today. But ultimately, we'll then also be looking at how we can allocate capital to accretive growth opportunities for the future as well. We also, as I've just mentioned, within period, commenced a meaningful share buyback of up to £20,000,000, of which we funded 5,000,000 within period. One of the highlights for us through the summer was the very successful, AGM that we ran, which had a discontinuation vote.

2:58 Investors voted overwhelmingly against discontinuation in this cycle, which we take as a really good mark of support for continuing on the good work that we're doing as a management team and that our board are doing in extracting value long term for our investors from the NEXTENERGY SOLAR FUND platform. So thank you again for the support in continuing this journey. The team has done a great job in the period of also refinancing our revolving credit facility. Stephen will chat chat a little bit about capital structure in due course, so I won't steal all of his thunder through these highlights. But Tim did a great job of of securing attractive margins of one point two and one point five over Sonia for those refinances, which just shows that the debt markets remain alive and this type of a product and type of a platform still remains attractive for debt providers.

3:45 You'll hear us talk a lot about the the differentiator you get in in NEXTENERGY SOLAR FUND with having a specialist manager. One of those key things is continuing to invest proactively in the operational assets. We've got more than 300 professionals who really understand the life cycle of solar and storage assets, and we know exactly how we should be extracting value from them over time. So we do run strategic reinvestment programs to ensure asset health, asset longevity for the portfolio over time. So we can continue to do that great job of delivering operational excellence and strong revenues to continue to service that dividend over the long term as well. Just after the period, we also completed on phase three of our capital recycling program, delivering 30,000,000 of proceeds and delivering a further asset disposal at an attractive premium as well.

4:36 So another great result from the team. What What we've now seen across the market is that we have sufficient data points on that mark to market basis from the disposal values that show that our NAV is robust. So what we're seeing is premiums in each one of those disposals that show we're able to achieve a market sell in excess of how we hold that asset

4:55 in our robust net asset value calculation. So at this point, combining our own data points and also those that we've seen in the market, we think we have a really good cross section of all the different types of assets that we hold, all of which in those external data points show a premium to the way that we hold it. So NAV for us is robust and market perception of that NAV is we believe now confirming that same that same situation as well. So we hopefully hopefully through this period we've particularly pushed through any any kind of market perception that that NAVs were overvalued in this space. And and actually now we're starting to look towards the future and the growth prospects of the fund having demonstrated that underlying value from the asset pool. As we've said, you know, some operational challenges this year, but but ultimately still great set of results, within period for the platform delivering 45,000,000 of income from the underlying assets and ultimately paying out 25,000,000 in dividends.

5:52 And if we can, Pete, please, to next slide. Dividend from our perspective is a is a key component of what the NEXTENERGY SOLAR FUND continues to deliver investors. So we have a super attractive around 11% yield, and a target dividend in year of 8.43p. We put a range out at the beginning of the year to say we anticipate being 1.1 to 1.3 times covered. We'll be at the narrower end of that, we think, by the end of the year, but we will still be comfortably cash covered, which is great news. Obviously, there's a seasonality in our revenues, so you see more cash cover in this period. But over an annualized basis, what matters to us is we're coming in on positive cash basis relative to that dividend commitment. And we've paid around 370,000,000 in distributions since the IPO, which is a great result for shareholders who've been with us for for for the vast majority of that journey.

6:48 As I've said already, one of the key focuses for us in this period has been tackling that discount to NAV. And we do believe that as a manager, we have done everything we can within our power to start to narrow that discount, and we continue to do so as we look into the rest of this year and on into 2025. We were very early in coming to the market to say we think market dynamics have changed and that the, we now see a sustained discount, and therefore, we are going to run a strategic set of disposals, which I've spoken about already through our capital recycling program. And that we also intended to, continue to drive forward on things like our, our, share buyback regime, which we tactically, implemented at the right time relative to what we saw peers do. What we were seeking to achieve there was not necessarily a spike in share price, but to narrow our relative discount to what we see across the peer group. And therefore, as we start to see the green shoots of optimism in the market with rate cuts, with gilts trending down the way, and also with political stability over the long term from things like Clean Power 30, which are coming out, are those seeds of optimism we need to transition back to ultimately trading at NAV, if not a premium to NAV, and continuing on with that growth journey.

8:06 We've also achieved a whole bunch of other stuff within the, period, including doubling down on the resilience within our board with a new chairlady, and also with new non execs who are now fully embedded in the process having served, the best part of a year with us. And that continues to push forward our governance and transparency as a platform as well, which we do believe, is industry leading across the board. As we look to the future, you can continue to see, progress for us in in these strategic initiatives, one of which is bringing forward the next phase of our capital recycling program, but also looking towards how we continue to invest in optimizing our asset portfolio, but then beyond that into how we can access the exciting opportunities for growth we have through the secured pipeline within NEXTENERGY SOLAR FUND itself.

8:57 So having said that, now is the right time for me to hand over to Steven to take you through the key financial highlights in a little bit more detail. Over to you, Steven. Thank you, Ross, and good afternoon, everybody. Very briefly briefly just touching on the key highlights here on the slide. So cash income, as Ross has talked about, 45,000,000 over the period. That reflects total cash receipts after debt from the underlying portfolio.

9:25 Net asset value at the end of the period, 97.8p per share, and as you can see, the gross asset value of the platform, 1,100,000,000 there. We maintain our dividend target at 8.43p for the year, and and Ross has already talked about expectations that we will come in towards the narrow end of the dividend cover range at around 1.1 times. But still an attractive dividend yield at around 11%. Gearing is at around 48% at the end of the period, and so comfortably within our investment policy, and around 70% of that gearing is fixed fixed rate debt or or fixed coupon because that includes the preference shares of which there are 200,000,000 currently outstanding.

10:15 At the end of the period, the portfolio comprised of a 102 assets. As you can see here, 983 megawatts, and we maintain our commitment to the international fund, NEXT Power three, which is a $50,000,000 commitment and really allows that international diversification and exposure to some of those attractive attractive markets. We've touched on briefly, and we'll talk a little bit more later, post period, a change to this following the sale of Staunton. So current operational assets will not be a 101. If you move the slides on, Peter. Thank you. So just touching very briefly on the breakdown of the net asset value movements over the period.

11:01 Key movements here really driven by, power price forecast outlook, and you can see here also, with the impact of, a degree of underperformance on the assets, which will come on to talk about, root causes there, but also the impact of, the ongoing growth and evaluation of NEXT POWER three, and also the profit delivered on the sale of, White Cross as key movers over that period. So we maintain a disciplined capital structure for the fund, and it's really a sort of game of three thirds in very simplistic terms. So a foundation of long term amortizing debt, which is all of the fixed rate, a preference share strip, which is 200,000,000 at a fixed coupon of 4.75%.

11:52 And then we have on top of that a revolving credit facility or, in fact, two revolving credit facilities that allow us to invest to drive the growth of the fund, between equity raises. That's the only proportion of our debt that is not interest rate hedged, so we obviously manage that very, very tightly. And as a key area of focus for our capital recycling program, as Ross has already touched on.

12:22 Looking at the performance of the portfolio over the period, you probably all remember that it was relatively wet, and perhaps not as much a radiance as we would have hoped. So some of the upside opportunities that we were hoping for didn't materialize, but nonetheless, a solid performance, across the piece, in in in large part due to the work we do across the portfolio to maximize the uptime, of the assets. Did come in slightly, under budget at four and a half percent below, for the period driven by... Partly by the weather, and also, by outages on the electricity networks that we connect into to export our our power. What matters here is that we remain, as a team, laser focused on all of the things that drive that asset performance.

13:13 We have an active and ongoing program to invest in the the health of our assets, and we have already replaced inverters at a at a number of assets with with more in the pipeline as they come to their their... The end of their their useful life. We also, manage spare parts in a very strategic and and intelligent way to minimize some of the impacts that you can sometimes see on, you know, particular sort of single points of weakness So we're not exposed to excessively long lead times there at wherever wherever possible, all of which contributes to that sort of solid underlying foundation from the portfolio.

13:53 All of that together, plus our power sales and hedging strategy gives us high visibility of of our future cash flows. And as a reminder, over half of the revenue expectations for the portfolio come from the subsidies in the form of renewable obligation certificates and and feed in tariff. And then through our energy sales desk, within within the manager, we have, an active hedging pro... Program where we are actively looking to take clips of power and hedge those out to prices favorable to the adviser curves wherever we are able to proportionally more in the front end as we're sort of, you know, closer into a year out. It's slightly less further out depending on where the liquidity is in the market.

14:39 But that's a very active program, and you'll continue to see that evolve over time, all of which, you supports the outlook we have on on dividend coverage. So to focus a little bit more on our capital recycling program, as a bit of a reminder, we have, completed three phases now, one within the period and one post the period. Each of those at a premium to the carrying value and having recycled in total 72,500,000 between the three of them.

15:12 We have driven the premier there in different ways across the portfolio, ranging from finding battery rights and securing CFDs for some of the projects, and also just making sure that we are delivering the highest quality assets into the market we've been been able to do. So as you can see there, NAV uplift, a prospective from the most recent sale, which is Staunton. So that's a 50 megawatt asset expected to be 0.92p per share when that's folded into the next NAV update.

15:50 In terms of pipeline and future growth, the the outlook for NEXTENERGY SOLAR FUND is is bright in a macro sense. So solar, as you probably all know, is the cheapest, lowest levelized cost of electricity, but also the fastest technology to deploy. So it isn't really a surprise that it's a core component of the government's clean power 2030 agenda, and Ross particularly works as part of the SOLAR task force there to really drive the the road map, all of which presents huge opportunities for NESF.

16:24 We continue to see storage as a really complementary technology for solar and a really important part of the energy, system as as the system evolves. So opportunities there, which, which are very attractive to drive future growth. Some of which... And a a good deal of which we have within the platform itself as proprietary projects that are not dependent on third parties. They are, you know, we're able to deploy capital into them when the time is right, and we're able to drive that value accretive growth for, shareholders both across solar PV, but also energy storage, and also internationally. Pete, I think I've just covered your subsequent slide as well. Yep.

17:09 So looking forwards, you know, really a really bright outlook as I as I mentioned for the fund. We remain, as you would expect, laser focused on actively doing what we can to narrow the current share price discount to the net asset value. We are... We have mobilized the fourth phase of our capital recycling program. We'll be driving that to completion and look forward to updating you all in due course on that. We remain focused on maintaining the discipline in our capital structure.

17:39 And as Ross has mentioned, you know, having refinanced the RCFs at at attractive rates over the over the period, you know, we will be keeping, close tabs on what makes sense to do there as we look forward. I've touched a little bit on optimizing the existing portfolio. You know, that remains a key area of focus for us and is very much the underpinning supported by the 350, I think it is now, professionals across the whole of the NEXTENERGY business who, you know, who who are... I mean, there's nobody better placed to really drive that, that type of value. Using the pipeline and then the other opportunities we see in the market to focus on adding NAV accretive value where the opportunities present and driving that growth, as we talked about, is through solar PV and energy storage particularly, all of which together is really what drives our ability to provide that ongoing attractive dividend, to shareholders. So with that, I'll hand back to Alex.

18:39 Perfect. Thank you very much, Steven and Ross. Thank you for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated in the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via our investor dashboard. Ross, Steven, as you can see, we have received a number of questions throughout today's presentation. And Peter, if I may now hand back to you and kindly ask you three other questions where appropriate to do so, and I'll pick up from you at the end. Thank you. Great. Thank you. Thank you very much, Alex. We've received a number of questions today, so we will try our best to go through all of them. For those questions, which we cannot get to, we will reply to you via the investor meets company platform. So rest assured, you will have your question answered. But if we start with the first question, which came as a presubmitted one.

19:35 Five years ago, the product, brackets electricity, was lower in price. Today, it costs far more, yet the share price is much lower. Why is this? And, Steven, should I hand over to you for this question? Thank you, Peter. Yeah. Really happy to take that one. I mean, it's a it's a really interesting question. Our understanding is that the movement in the share price, particularly since September 22, across the whole of the renewable investment company space is mainly a reflection of macroeconomic factors. You know, that's really changed the dynamics of supply and demand for investment company shares over the period. So that's probably the biggest driver of of share price.

20:14 In particular, you know, we know that institutional investors have seen significant capital outflows over that period for a variety of reasons, which they have to fund by liquidating holdings that they've got. That creates a surplus of supply with with a sort of corresponding impact on on share price. Over the same period, the yield on UK gilts has also increased. So that means that the the premium... The investment premium that investment companies have been able to offer has been, you know, more compressed at the same time. But as as interest rates start to come down over the next year or so, we expect to see all of that trend reverse. And as as we've talked about through the presentation, in the meantime, what NESF has been focused on or what is the management team been focused on is taking all the active steps that we can to narrow the share price discount to the net asset value, including through the capital recycling program that we've talked about through which we've sold three assets and recycled 72,500,000, but also through having initiated the share buyback

21:17 program that we've that we've touched on under which, I think, to date, we've bought back about £7,000,000 worth of shares. Peter, I think that's right. Yeah. That's correct. Yeah. Great. Thanks, Steven. So moving on to the next question. I've read that NESF is operationally worse than its peers. Why is this? What can be done better? Steven, I think that sits sits nicely with you again. Yeah. It it does sit with me, that one. I think, again, another interesting question.

21:45 Not a not a paradigm I recognize, I confess. But in any comparison, I think it's really important to understand whether that's being made on a like for like basis. You've You've given the sort of underlying factors like the location of the assets, their age, the technology that's installed. I'm not sure it's actually possible to do a like for like comparison. But if we look at publicly available data for comparable asset classes, we we see see that NESF has generated more clean power from solar than its closest

22:16 peers. And that that efficiency, so generation per megawatt installed, is very similar, if not slightly favorable for for NESF. As I've touched on earlier on, the the team supporting NESF remain focused on maintaining the high performance from the assets in the portfolio. We're already very well advanced in in replacing some of the inverters at the end of their operating life and prioritizing those that are most in need of attention. Managing spare parts in an intelligent way is also an an important component there. Great. Thanks, Steve. And I think before moving on to the next question, I think if I just add one more section to to to that question, I think one of the one of the benefits for for NESF is the investment managers and NEXTENERGY CAPITAL that looks after the funds.

23:06 NEXTENERGY CAPITAL is a specialist investment manager. It's one of the world's leading specialist solar managers. It's managing over three gigawatts of solar. So in nominal terms, that's about 4,300,000,000 of solar. So, like, the expertise that the team have really do deliver in the performance of the assets, looking at the deals that are going across the table and the various funds that we manage. That is a real differentiator for for NEXTENERGY SOLAR FUND. Right. There's a lot of questions, so we'll we'll crack on through. Next question, can NESF continue to pay a dividend of over 8p per share, and is it possible to make more information available?

23:43 I'll... So shall I take that one, Pete? So NESF has, you know, a strong track record over ten years of paying a dividend that's always been cash covered. Target dividend for this year, as we touched on, is 8.43p, and we expect at the end of the period to be around 1.1 times one top... Point one times covered. The dividend policy itself and the annual dividend targets beyond that are determined by the NESF board. They do review multiyear projections and, you know, supported by the sort of visibility of the future cash flows that we've touched on in the in the presentation there. NESF is actually one of the one off, if if not the most transparent in terms of, you know, what we publish around future cash flows.

24:30 So we're pretty confident that the the the information that needs to be out there is out there. Great. Thanks, Steven. And where do you show income in the NAV bridge?

24:43 That's an interesting one. NESF's NAV uses a discounted cash flow model. So the income would already be factored into the opening value. And then what you see is the unwind of of the DCF through the time value, so you'd see it that way.

25:03 It's important also, I think, to note that the bridge only shows overperformance or underperformance actual versus budget, if you like, rather than actual income in the period because, as as I say, that's factored into the the baseline. Thanks. Thanks, Steven. Next question. Can you comment on the net income and cash flow that covered the dividend of 1.5 times in the period?

25:29 Oh, Oh, 1.5 times dividend cover in the period. Yes. So that's really focused on the six month period to 09/30/2024. I think Ross touched on this earlier on. That's reflecting the seasonality of the way we generate cash flows across the SOLAR portfolio. So dividend cover in the period would be higher due to the assets generated more in the summer months because the longer sunlight hours, for example. But what we really are focused on is what annualized dividend cover will will look like. And as as I say, we expect that to come in around the 1.1 mark based on what we've seen in terms of irradiance and sort of generation performance over the period.

26:15 Great. Thanks, Steven. Next question. Why is the NAV decreasing quarter on quarter, and what can NESF do to stop this trend?

26:26 So so the the NAV is a... Is driven by, you know, all the components that feed into that discount... Discounted cash flow valuation. But I think key amongst which has been the, I'd call it, normalization of power prices and power price forecast, particularly post some of the extreme highs that we we saw through or following Russia's invasion of of Ukraine. So not really a surprise that the that the the ad would come down as a consequence of, you know, that rolling rolling off and and power prices normalizing in terms of expectations. But as I what we remain focused on for the portfolio is is, you know, driving the performance of the assets and then driving value through, like, recycling capital and the and the investment prospects that we have to deliver growth.

27:19 Ross, anything you'd add to that? No. I think that's covered the covered the key headlines. I think as we look to the future, we believe we'd now have a relatively stable forward picture of that power price based on our understanding of what's going on that ecosystem. So as you've kind of alluded to there, we we see opportunities in the future for there to be benefits for being a being a generator and therefore upside in the NAV relative to what's currently in in what we think is conservative approach. We take external data points only to drive our NAV. So there's no management view in in any of what we've got in there from a, you know, inflation assumption set or from a from a power price assumption over the long term as well. So we believe, as we said earlier in the call, that that our production methodology for NAV is super robust, it is on the conservative side. So so we do see opportunities for for progress in that NAV over time.

28:10 Great. Thanks. Thanks, Ross. Next question. I find it difficult to take information from your website. Have you considered using RSS to make it easy for private investors to keep up to date with developments or perhaps an email update service?

28:24 Steve and I can take this one. So we do, on the website, have a function where investors can sign up for automated responses. Obviously, the bulk of the information we put out is via RNS or RNS REACH. So, obviously, the alerts via the London Stock Exchange should be should be hitting you. But, obviously, as an as an investor relations team for NEXTENERGY SOLAR FUND, please do reach out if you have any kind of questions or you're finding it hard to do that, and we can we can assist you from that side of things. Next question. What is the long term risk of power price falling substantially with a massive build out of renewables and saturating risk? And how would the fund cope with this? Steven, that one's for you. Yeah. I can take that one. I think in the in the medium term, at least, and and potentially further out, as Ross has touched on, we actually see upside relative to what the advisers are forecasting in in the power price environment, particularly because of, you know, expectations for growth in demand and, you know, deployment of electric vehicles and electrification of other parts of the economy, you know, is is sort of accelerating at a pace that is greater than is is assumed.

29:37 And at the same time, I suspect most people have heard about all of the challenges that exist in connecting new capacity to the grid and notwithstanding work that is ongoing to manage all of those all of those queues. I I I think it's realistic to expect that the the build out of that capacity will be slower than is assumed by the adviser curves. We... So as I say, we see upside over over that sort of horizon. Further out, much harder to predict, but as I mentioned earlier on, we see energy storage as a really important part of the energy ecosystem, you know, and part of the role that it would perform sitting alongside solar and and within a solar portfolio is to provide access to different parts of the wholesale market and giving you different revenue streams to those which solar could access,

30:29 and then creating a a sort of natural hedge against against any of those movements. Hence, it being, you know, a really important part of our strategy as we look to the next sort of ten, fifteen years. Just to add add to that slightly. So, I mean, you've touched all the headlines there. The think about it in the context of NEXT being an active professional manager in the space. So when I talked earlier or or or forgive me, think it must make me... Pete, you talked earlier about NEXT being a specialist in the sector. That is because we are able to look at how the energy ecosystem is evolving around our assets, and we're able to extract value from that world in which we operate in. So what you shouldn't anticipate from this platform is that we we sit and we just punch tickets for the next twenty, thirty, forty years from these assets. That is absolutely not what we do.

31:20 We do active management on the ground. You're already starting to see the team reinvest in that portfolio and repower them. In the moment... At the moment, repowerring, for example, talks to swapping out inverters that are becoming obsolete or becoming operational pain points. Over time, you can anticipate us looking at repowering. So we're swapping out old generation technology for new generation technology in the in the the the solar PV, the the panel component of the of the asset. In the ten years which we've been operating, you know, the same kind of, you know, table size footprint of module used to generate a 150 watts, it now generates five to 600 watts within that same that same that same space. So so they are significantly more power dense. That gives us options as we look towards the future. So what you can expect to see is us change the nature of these assets over time

32:09 to be fit for that energy ecosystem, and that's everything we've spoken about there. So repowering, introduction of energy storage, changing the shape of the portfolio to ensure that we're able to to deliver reliable returns and and and outstanding yield over the long term. Great. Thanks, Ross. Great segue into the next question as well. Could you expand on the options for battery storage and the medium term impact on earnings? Shall I take that one first and foremost?

32:37 As you say, Peter, that's a a very good segue. The... So I think there are lots of options for for battery storage within the portfolio, both from the proprietary pipeline that we have within NEXTENERGY SOLAR FUND, but also also more widely. Mixture of stand alone storage assets, but also the prospect of colocating storage with some of our existing assets as we work through that revamping and repowering methodology that Ross has touched on there. So we are actively looking at, you know, how we unlock those opportunities, you know, how we navigate securing import connections across the whole portfolio to the extent those those don't already exist.

33:23 We do have a number of them already identified. So so a a wealth of opportunities there. And in terms of that medium term impact on on earnings, you know, we will only bring those through where we see opportunities to do so in a value accretive way. So I would expect, you know, positive contributions from from that over that time horizon. Great. Thanks. Thanks, Steven. Next question. Do you believe that you can continue to grow the dividend payment per year?

33:56 Steven, probably a good one from from your side. Yeah. I think we've I think we've touched on that one already. I mean, that... As a... NESF has a progressive dividend policy, but that's ultimately... Obviously, the policy itself and an annual decisions on that are ultimately a matter for the board. We do have a high degree of visibility of our future cash flows and through the work that we do, you know, across the platform and including with energy sales, you know, maximizing visibility there as as much as possible to to support that continued progression of the dividend out into the future. Great. Thanks. And moving on to the next question. Is the capital recycling program taking longer than expected? It was initially announced as a free phrase process, and now it's moved out to four phases.

34:42 Is there a reason why the phases can't be run simultaneously as opposed to the the disposal at premiums to NAV? Good to see. So a nice comment at the end there. I think the I think the key component there is that our focus is... Ross touched touched on this earlier on. So it's never a fire sale. Our focus was always on finding the opportunities to drive the best value for NEXTENERGY shareholders. And so, you know, as we've worked through the, you know, the the different phases of the process and the different ways of extracting that value and and unlocking unlocking the opportunities. You know, it's come through in the way that it in the way that it has. As I say, we're we're interface for now.

35:30 It's been, as as probably most will know, a relatively soggy m and a market over the time horizon that we've been running the capital recycling program. We have had to navigate, you know, bidders coming in and out of phase, you know, with different funding funding sources and and what have you. So it has taken, I think, longer than certainly I would have wanted, but, realistically, it's taking taking about the amount of time that one would one would have expected. But I'm nothing, if not ambitious, as to how quickly we get these things done. Thanks. Thanks, Steven. Next question. Where are your preference shares listed? I'm happy to say this one, Steve, give you some time to breathe after all this next question. So the the the preference shares aren't listed.

36:19 They're also nonvoting. We do include in our accounts who the holders are. So the two holders which hold a 100,000,000 tranches each are USS and BAE Systems. There's a slide at the back of the presentation which talks to the benefits of those preference shares and the optionality of them. So, you know, that that... It's a really neat thing for NEXTENERGY SOLAR FUND, the preference shares. It's a differentiator from us against the peer group, and it also is very kind of defensive in terms of kind of the capital structure. So when, everyone talks about the debt to GAV, so, obviously, 48%. We've got 50% limit. We include the preference shares in there. If you remove the preference shares, the the finance to debt ratio is between, I think, 29 to 30%, so a lot lower. So those preference shares really do play a super attractive structure as part of NEXTENERGY SOLAR FUND.

37:11 Right. Next question. Please explain how your NAV is not trending to zero when the rocks fall off as the press would alert the ordinary shares to nothing. Steven, do you want to start on that one?

37:26 Yes. Very happy to. I mean, so the so the net asset value considers the full life cycle of the assets that we that we have. So the asset life is much longer than the subsidies that exist. So, obviously, projecting cash flows, you know, far further beyond that. So I think that's that's part one. The second component to the answer is that long term debt that exists within our capital structure amortizes in line with the the life of the subsidies. So, you know, it's it's fully repaid once the once the subsidies are no longer in the platform. And then I think in relation to the the preference shares, I mean, the the basic economics of how those preference shares would convert or not convert at the relevant point in time is is actually the answer to that.

38:19 But, Pete, perhaps we can expand on that a little bit more more clearly in the presentation. There's a slide, I think, in the appendix to to to outline to outline that. But, yes, it wouldn't in... Wouldn't just on the life of the subsidies trend trend to zero. Ross, anything you'd add to that? No. It's about right. The key component is the is the amortization of the long term debt within the within the the subsidy period. Great. Thanks. Thanks, Ross and Steven. Next question. How many shares does management own, and have they been buying recently? I'm happy to pick this one up. So as NEXTENERGY Capital employees personally hold just over 2,100,000 shares in in their personal holdings.

39:08 Have they been buying recently? I think, obviously, we have... Go for a close period when we run up to results. So, no, not during the close period because, I mean, legally, we're not allowed to. But, yes, the employees do regularly buy shares in NEXTENER Solar Funds when they can. Also important to note that the board also holds shares in NEXTENER Solar Funds. So, you know, as a manager, we we see this still being a very attractive opportunity. As as the team had mentioned, yes, the share price is down versus the net asset value. But, you know, if we could buy buy more shares, we would because, you know, we see the inherent value of that. There's a there's a serious kind of mispricing in the market for what these assets are physically worth. We're selling assets at a premium from... Internally, we're seeing data points from other, kind of other so far that's selling assets, as well at premium. So, you know, the market's completely mispricing. So in short, we would be buy buy more shares if we if

39:59 we could for sure. Great. Next, next question. Where do you see NESF in five years' time, in terms of discount to NAV growth assets under management and share price performance given the UK government's net zero targets? Split one between Ross and Stephen, I think. Do want me to go first, Stephen, that you can add a bit? I I think the headline from our perspective is we we are supportive of the ambitious plans that the labor government has has set about. So we are positive about the opportunity set that it creates for platforms just like NESF. NESF has been a really relevant component of the 15 gigawatts that have been delivered to date in The UK of of solar, and we hope to continue to to trend relevantly through the rest of the journey out to net zero for NESF. So so we see plenty of opportunity in the future, albeit we need to work within the confines of how the fund is performing in the market and our ability to actually raise to support that growth, in in, in assets over time. You can continue to expect to see us actively managing the portfolio and and cycling, you know, some old assets out for new assets and also using the revolving credit facilities to continue to

41:17 add accretive assets at the right time to their portfolio as well. And we look at that both domestically and internationally as well. I've seen another question pop in pages to take that at the same time. So we consider, and when we look at the future for the the the fund, we are looking at, allocating capital in a really disciplined fashion. So recently, you've, of course, seen us applying capital towards a share buyback because economically that has been the right answer for the platform. Over time, you know, we will see opportunities that that mean that assets become the better answer for that long term sustained life of the fund, and and therefore, we'll be adding those on a... On an accretive basis, but but in a very disciplined fashion as well. And and, you know, our own investment committee pro... Process is extremely robust within NES, the manager, and and that puts us through our paces in terms of asset selection and how it is in line with the strategy and and accretive, but also our external board also puts us through those same paces in terms of how we are allocating that capital in a disciplined fashion as well. So lots of opportunity for growth in the future and, you know, continued focus from us in terms of ensuring they're the right outcomes for the fund.

42:25 Great. Thanks. Thanks, Ross. A couple more questions before we run out of time. Next one. Does the capital recycling program mean the fund is shrinking, not growing? Steven, do you want to take that one? I mean, in in in very simplistic terms, in the very short term, the short answer to that is is yes. It is. But part of our rationale there is that, you know, is that that we... You know, through that through that sort of shrinkage, what we create is the capacity to drive further value and drive further growth by creating headroom to do so to to unlock those those sort of value accretive opportunities. So the way we think about it is is more about

43:06 recycling capital out of investments into more accretive investments, you know, driving that positive growth and and value accretion over time. Thanks, Steven. Enough time for two more questions. What happens when the subsidies come to their term end? I I think think I think we've sort of covered that one a little bit earlier earlier on. I mean, from the perspective of... Oh, sorry. From the perspective of the assets, the assets can continue to operate and and perform at that point in time. But, you know, what we are what we are already and will will over time be continuing to focus on is the point in time at which it makes sense to, you know, perhaps replace or repower existing technology with newer technology to to drive, you know, longer life on on those assets out into the future.

44:08 So we have a a rolling program of making sure that we are optimizing and extending asset life wherever we are... You know, where we find those opportunities to do so. The nature of the grid connections is that those are effectively evergreen. So, you know, those those aren't taken away. And so we're always looking at, you know, where it makes sense to, as I say, put new technology on, potentially new technology from a generation perspective in combination with storage technology or or, you know, potentially out into the future, even, you know, demand side technology to to unlock those further opportunities.

44:46 So, you know, it's really about, you know, continuing to maintain the relevance of the fund and the platform out long beyond the the subsidies, which have... You know, they've performed, know, an important function in the ecosystem to to drive the first phases, but, you know, really are... You know, I think it's it's up to us now to drive the value out longer beyond that, and we're actively very actively doing that. Give you an example, you know, we had a... Had an asset which was damaged in a storm, for example, which has been fully rebuilt. And, actually, the footprint of that asset now using the new technology for the same capacity is about half the half the size, so it uses a lot less land.

45:32 So that creates other opportunities to do other things with that land, whether that be from a storage perspective or even out into the, you know, the world of, you know, unlocking the natural capital and biodiversity opportunities as that market evolves, you know, because we will maintain that land, you know, very carefully and very thoughtful about the fund's impact on nature. And I'm sure most of our audience will have seen the the nature strategy that we launched this morning as a as a really important part of the way we think about the fund and its role in in the system. Great. Thanks. Thanks, Steven. And then the last question, then we will will close-up is I've seen my investment in battery storage plummet. Why would NESF invest in this area now?

46:19 Russ, do you want to do want to start on this one? Yeah. Happy to to lead on that. So so NESF's actually owned batteries since 2018, we have been using that as the opportunity to really understand the technology, really understand the markets that it operates in. And and I'm sure in in this forum and and similar, you've heard me say batteries are an important part of the energy ecosystem. Right? We are transitioning to a world with distributed energy sources that are volatile because of the way they generate energy. So wind doesn't blow sometimes, sun doesn't shine as much as we expect sometimes. You have outages. You therefore have intermittency volatility that batteries do a good job. In fact, they are the best technology set to manage that volatility. And therefore, we see plenty of opportunity to monetize that as a fund, albeit we anticipate managed exposure to battery storage. What we've never believed is that concentrated battery storage in a single investment product is the right answer, especially in the listed space.

47:18 So from our perspective, we've kept it as a small component of our overall GAV. We've currently got a limitation of 10% of GAV, which for us gives us the opportunity to bring about the upside that that can be generated from that technology set alongside the existing robust in generation infrastructure that we have within the platform. So, you know, over time, you can anticipate us looking to bring more of it online as that ecosystem evolves around us as we continue to grow the generation side of the business as well, but we're not pivoting to become a battery only fund and and fundamentally changing the risk profile of the fund. Instead,

47:52 we're looking to the future and how we can future proof those revenue streams and monetize that deep rich market of of volatility as well. Technology choice also really important in that space as well. So the duration that we look to is in advance of of one hour. So generally, kind of two hours and beyond it from from our perspective is a rich market with plenty of growth opportunity over the next decade ahead. So, yeah, picking the right time, right technology set is is super important in that perspective, and then you can expect the same level of operational focus from the expertise we have in the platform to extract value and to ensure asset health over the long term as well. So don't be too negative on battery. It's an important part of the... Of that future net zero world in which we're all shooting to to live in. I think I would I would just add that, you know, part of the reason that duration is important is is really how one imagines or or how how a battery makes its money or, you know, these different components of its revenue stack.

48:48 So the longer duration, certainly the two hour duration, you know, better better able to access the sort of wholesale market and the arbitrage opportunities that Ross has touched on there in terms of sort of managing that intermittency alongside a degree of providing services to the grid. Some of the earlier batteries installed and some of the some of the other technology that exists out there is less able to access those arbitrage opportunities, and the business case was very much built around particular markets, which were always going to saturate, and that's exactly what's happened. And the extent to which that's what's driven, you know, some of the the movements in, you know, the the prices of different investments.

49:34 You know, I guess, you can draw your own conclusions there, but, you it's definitely a feature and a really important part of how we have been valuing storage assets and and really focused on, let's say, the wholesale market opportunity rather than the the... That those sort of particular ancillary services markets which have which have saturated.

49:57 Great. Thank you. Thank you, Steve. And just a reminder to connect everyone who's written questions, questions, we will also reply via the investor meets channel so you've got the the written answers as as well. But I'll hand back to Alex to draw us to a conclusion. Perfect. Thank you very much, Peter. Just to... Before concluding, Ross, if I could just ask you for a few closing comments. Yeah. Thank you. As we've said, a robust set of results for the interim period. Thank you for all the detailed q and a. I hope we have robustly answered your questions there as well. We are excited about where NESF is in terms of its current yield. We're excited about where we intend to take the platform over the years coming years ahead of us and as we look towards a more politically stable environment and better economic outlook as we start to see interest rates hopefully creep in through 2025 as well. So look forward to updating you in due course with more progress in terms of how we're driving this platform forward.

50:52 Fantastic, Ross, Steven, Peter. Thank you once again for updating investors today. Could I please ask investors

50:58 not to close this session as you will now be automatically redirected to provide your feedback and order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of NEXTENERGY SOLAR FUND LIMITED, we'd like to thank you for attending today's presentation, and good afternoon to you all.