Member Info for PaulCurtis

UKW entered this crisis with one of the lowest hedging positions of about 60%. This is now paying dividends with one broker note estimating that spot prices will yield an additional £90m this year. Elevated prices extend into 2027 but not yet reached 2028 . God help our economy if it does!

Re powering wth additional DC-coupled battery is an absolute no brainer IF there is sufficient export headroom. Fiskerton is NESF’s best asset in this respect with over 100% headroom

Battery viability is very site specific .

NESF has higher erosion rates than FSFL, hence needs greater reinvestment to maintain NAV. eg large dividend cut

NESF about 96% hedged 2026 whereas FSFL is nearer 70%. Critical difference in view of soaring spot energy prices

NESF has £200m 2036 Prefs at 4.5%. A mixed blessing, cheap unsecured debt but perhaps not of interest to a bidder.

Sadly 2030 prices are flat and one year out, 2027 up a bit, maybe 3-5%? Still a bonus from Friday and will allow a bit of hedging.

NAV erosion is the big concern for all the Renewables but TRIG claim that they can avoid this if dividend cover c. 1.1 to 1.2, freeing up cash for reinvestment whilst maintaining the dividend.

This is from their most recent statement

‘ The Board remains committed to the Company's progressive dividend policy, which is to at least maintain the level of dividends and increase them when it is prudent to do so. The 2026 dividend target is maintained at 7.55 pence per share1. In setting the dividend target for 2026, the Board has prioritised restoring net dividend cover to the range 1.1x - 1.2x and future growth of the NAV.’

Last year dividend cover was 1 but this was after repaying £192m of project debt.

This year they are implying 1.1 to 1.2 but imo the market is missing the fact that the lower the share price falls, the easier it is for TRIG to cut the dividend, offering say a very attractive 9% yield but enabling significant NAV growth. This would re-rate the shares.

I’m certain that all the Renewables want to take advantage of their low valuations to cut their dividends and boost investment in NAV growth and I suspect they are hoping to do this via the excuse of mergers. But they are all so lowly rated….

The only alternative is asset sales at close to par and TRIG say that they are progressing this….

Tim

The Solars are very geared to ROCs etc so short term fabulous cash engines but to reinvest enough to hold NAV’s. Merging with the likes of TRIG, UKW, FGEN and ORIT is clear way forward assuming Solars can’t get a better exit elsewhere

And yes, the Pref Holders get NESF shares but in 2036 and 4.75% is not attractive to holders who bought at par and expected an NAV over 100p. I think decent chance they would like an early exit

Doesn’t say anything new and arguably more than discounted in current share price discounts.

Dividends need to be cut to reinvest in growth assets but selling assets at a modest discount to NAV will be the optimal way forward. The likes of TRIG and UKW may be best placed to achieve this. Could then allow them to also cut dividends without a shareholder riot!

The Solars need to merge and NESF’s Pref debt both attractive and unattractive to a predator. Does potentially open the door to a deal with the Pref holders though. Would they accept equity now at a discount to par or wait till 2035 to exit and get paper anyway!

Appears November and December 2025 were ‘good’ windy months and overall better than 2024? Hence results should be okay

Check out Tony Roper’s statement from Monday as Chairman of SEIT. He makes clear that Shareholders come ahead of The Manager. I’d expect this sentiment to roll over to FSFL where he is also Chairman. Imo he’s highly reputable.

Regarding declines, we are in a bear market and the funds are struggling to sell assets at close to Nav as buyers are attempting to value off market cap. This further starves the funding of capital to boost NAV growth but in my opinion is a short term stand off. Without this source of CAPEX funds are being forced to think about cutting their dividends.

FGEN appear reasonably well placed with 15% development assets (not currently contributing to dividend cover) to add value and then sell to raise cash to reinvest. Plus they have a wide array of different type/location assets.

NAV has a low erosion rate to others so doesn’t need that much investment to keep evergreen. TRIG say 1.1-1.2 dividend cover at 10% IRR. Panmure said 1.2-1.3 at 9%

Check out page 24 of the Cap Markets seminar in May.

Sector was whacked yesterday by a very detailed Panmure Note which has dramatically sliced all price targets buy still rates all the Renewables as Buys

Trouble with their analysis is that there are so many moving parts that imo it’s all a bit nonsensical. However it could be the catalyst for the Renewables to cut dividends to help reduce NAV erosion or fund growth. This is ann obvious move.

They rate ORIT and GCP as their top picks but imo TRIG comes across very well since it has one of the lowest NAV erosion rates combined with less exposure to subsidies falling away. Long term hedging and a good spread of assets. NAV erosion appears to be the principle concern with the other funds. TRIG’s Capital Markets seminar at end of May claims that they can maintain NAV with 1.1-1.2 dividend cover, assuming a 10% IRR. Panmure estimated this at 1.2-1.3 cover and 9%. Equates to investing £45m pa

The Panmure note has clearly spooked investors by focussing on NAV erosion and whether compatible with current dividends. However this reinvestment hiatus can be greatly alleviated by selling assets at close to BV. Not possible at the moment thanks to Govt threatening to move the CPI/PPI goalposts but I’m expecting a market friendly solution and it’s possible buyers will return next year.

I think the greatest sector headwind at the moment is the current Consultation. Although impact on TRIG is marginal, the indirect impact via investor appetite/ability to sell assets has been significant

Panmure’ a of yesterday views Option 2 as the Govt shooting itself in both feet (highly unlikely) and Option 1 is a counterproductive flesh wound! IMO Renewables were already in the doldrums and this moving the goal posts has tipped them into a full on Bear market, greatly eroding their ability to raise capex from reasonably priced asset sales.

Hence I think there's a decent chance the Govt will realise that they've ****** up and will now try to rebuild investor trust.

Panmure point out that as the ROCs fall away so will supply. It makes sense to me that the Govt tries to agree a post subsidy road map which could particularly benefit NESF and UKW (with the largest ROC exposure)- read UKW's latest update on this.

The Prefs would be turkeys voting for Xmas if they force NESF to sell assets at (hopefully!) the bottom of the market! And its breach is based on EV!

‘Everything is priced into the NAV & NAV is 140p’

I agree to some extent but this is based on multiple long term assumptions which may not come to pass. It’s a best guess. There is zero chance that a bidder will pay 140p for UKW so this is not a proper valuation but a discounted sum of future cashflows.

I still think this is highly attractive and I’m very heavily invested in all the Renewables. The share prices indicate distress but all of them have very significant hedged cash flow income over the next few years. They have optionality, worse case cut the enormous dividend and free up more cash to reinvest at knock down prices.

I think you are referring to RCF debt. I think other Renewables are amortising all fixed debt pre subsidies expiring. Hence their current dividend cover factors this in and easy for simple investors like me to understand.

But UKW have about £1.5bn of fixed debt that needs to be repaid or rolled over by 2031. They say that they anticipate £1bn of free cash flow over the next 5 years, presumably post dividends but before CAPEX to boost NAV growth.

It’s not obvious to me what happens now and what the comparable dividend cover is to say TRIG.

And I’m going cross eyed again but does UKW have an additional £500-600m secured against Hornsea, due in 2036? I’m sure I read this somewhere.

Apologies, I’ve made clear in all my previous posts that I’m referring to fixed debt. This is generally amortising ahead of expiring subsidies.

I’m sorry but it is not true to claim that high debt does not increase risk.

At the moment UKW generates substantial income from the subsidies and hedges, way above what they would achieve at current and forecast energy prices. Do you agree with this?

When the subsidies fall away and current hedges expire they will face a dramatic drop in revenues?

Maybe, by then, energy prices will have rocketed and interest rates plunged but it’s possible the opposite will happen. Then UKW looks high risk.

And a Reform Govt? UKW very exposed

Pls name me one other Renewable that is not amortising debt ahead of subsidy fall off?

UKW will be more exposed to interest rates and future energy prices than other Renewables which don’t have such a high debt burden/interest payments.

But I agree it frees up capital to invest in asset growth but must increase the risk profile?

Bunsen

But they are still left with the debt or most of it? Free cash flow of £1bn over next 5 years has to pay off getting on for £2bn of debt and provide the capital to reinvest to grow NAV.

They obviously think they can do this but I’m wondering how. It’s a lot of debt to pay off…

Thanks everyone, some great posts.

Re-reading the accounts today

Most of their debt is due for repayment by 2031 which coincides with start of roll off of the subsidies. I’m not sure whether this is good or bad! On balance I think +ve because UKW say that they can grow dividends (and presumably NAV0 without seeking fresh capital.

Future energy prices look soft but their NAV must factor in all of this.

I said yesterday that the ability to keep the NAV ‘evergreen’ is top of my wish list and UKW appears to be saying that they can achieve this from surplus dividend cover.

TRIG have said they can do this if dividend cover 1.2-1.3 which is after amortising all the fixed debt by 2035.

I’d love to see how UKW are modelling their debt repayments and what their net revenues will be after subsidies fall away and after payment of interest on outstanding debt. What’s left over to keep growing dividend/NAV?

I assume they are intending to pay off most of the debt by 2031…. Clearly they have a plan!

Thanks but this looks too good to be true! TRIG is 8.8% and other Renewables are circa 8-9%.

Is the difference that UKW’s 11% discount rate is leveraged? I’m confused and need to do a lot more research into this. UKW say unleveraged is lower but I can’t see this disclosed? See Note 9 of the 2024 AR. They say the levered assumes 35% gearing but I can’t see any other Renewable referring to gearing