Member Info for StarBright

To help investors the company should only include revenue-generating assets in what it terms “Operational Capacity”.

It seems that “energised” happens before “operational”, and that “operational” happens before “pre-commercial” which in turn happens before “revenue generation”…

- In the January factsheet “Operational Capacity” was reported as 372MW

- In February as 421MW with a footnote stating “Includes 50 MW newly energised capacity at Ferrymuir.”

- By May the footnote read “Includes 50 MW energised, pre-commercial capacity at Ferrymuir.”

- Only in June do all of the footnotes disappear, and we are told in commentary that “The Company’s Ferrymuir asset entered into commercial operations following commencement of revenue generation in June.”

As I’ve said previously, GSF is guilty of being too cute at times with definitions. I think this reflects poorly upon them, and they should change their approach.

Https://www.gsenergystoragefund.com/docs/librariesprovider22/archive/gsf_factsheet_june_2024.pdf

“The 49.9 MW Ferrymuir asset in Great Britain (GB) began generating revenue, joining the Company’s fleet of commercially operational assets.”

They’ve been fudging the definition of operational on this for a while, so good to see it is finally generating revenue - surely the only meaningful definition!

Analyst (RBC) report out today is behind the move, I think.

https://www.proactiveinvestors.co.uk/companies/news/1051240/ibstock-and-forterra-tipped-for-post-election-housing-boost-1051240.html

The jet speculation posts are surely the very definition of desperate but baseless ramping...

Long-term holders should stay calm and hold the line…

The Hurstbot is a perfect example of postmodern irony.

Eric Voegelin said: “…there is a serious problem with the postmodern use of irony. While the aim of the classical ironist is merely to unearth the truth, the aim of the postmodern ironist is to ironically stand above everything and therefore protect himself from somehow being the butt-end of a joke. No one dares to be really sincere about anything, because to be sincere means that someone can find something ironic about your position and ridicule you. The problem with this ideological position—to borrow the language of the environmentalists—is that is not sustainable.”

Another positive today for holders and/or potential investors….

Two directors have purchased about 56k shares at just under 78pps.

The Board has approved a fourth dividend of 1.5 pence per share, bringing the total dividend for the period ending 31 March 2024 to 7.5 pence per share as per the dividend target of 7% of average NAV over the reported period. Based on the 31 March 2024 share price, this dividend was equal to a 11.6% yield.

The ex-dividend date will be 27 June 2024, and the record date is 28 June 2024. The dividend will be paid on or around 15 July 2024.

Much of the “research” posted here - and even more so in the personal playpen - is nothing more than desperate speculation on the thinnest of grounds.

‘Twas ever thus. Just ignore it!

My observation is simply that the LT forecasts NESF is using for power prices are essentially unchanged from those they were using back in 2019 pre Covid/Ukraine/CoL, at around £50/MWh. There’s been a transient spike between 2021 and 2023 that is in the process of being unwound. For a fundamental-driven long-term investor, revenue expectations per MWh are essentially unchanged from those extant when the sp was closer to 125p. If inflation and rates return toward (if not all the way) to LT levels then there’s every reason for holders to be optimistic for price appreciation from the current level. Buy now and collect the divis whilst waiting on inflation and rates is my strategy.

If and when inflation and rates fall we’ll see the return of demand for yieldy assets. Expect price appreciation for NESF and the other renewable income funds at this point.

LT holders who bought at £1+ are in pain now, but the range of likely outcomes is tilted favourably toward those prepared to hold and wait for macro (inflation and rates) normalisation.

@Actuary63 - 100% agreed re forward curves. But there’s an element of “base effect” in these, an unwinding of the spike caused by the Ukraine war. This is being revealed in the -ve NAV adjustments. If the charts on pg53 showed (say) 10 years history as well as 20 years projected the transient impact of this spike would be more readily apparent. If you had looked at the pg53 chart back in 2019, would it have shown a materially different long-term outlook? Essentially the NAV(s)became over-inflated for a variety of reasons and the air is being let-out more gradually. I think investors able to access the current yield can look past this. Just my view..!

Sorry for multi-posts….

It’s also worth noting that the shareholder base of NESF has more representation from genuine Insto investors (Artemis, L&G, Valu-Trac, ABRDN etc) than many of the other renewables funds which have problematic %holdings by DFM’s who are essentially spivved-up retail. It’s these insto investors who will call the shots on the discontinuation vote. They are already making their presence felt - for example through the pausing of new storage investments. Their continued presence on the register is a positive for holders, or for potential holders attracted by the 11%+ yield.

Enough from me on this now.

Management are fixated on the NAV - because that is how they are paid! - and the consequent “discount” that arises.

But institutional holders will always remind them that “The Company’s principal purpose is to provide ordinary shareholders with attractive risk-adjusted returns,

principally in the form of dividends with a progressive annual dividend policy in place.”

In the end it’s the dividend stream that matters.

My view is that new investors in NESF (and the other renewables funds) should largely ignore the NAV, and its consequent “discount”. What these funds/companies refer to as NAV is VERY different to the NAVs fund investors are used to from the likes of CTY etc. It is in reality nothing more than the directors best estimate of the value of the funds investments. There is very little M2M, other perhaps than the odd transaction such as the Whitecross disposal, which lends some support but is fact from conclusive.

Better - I think - to ignore the NAV and focus on the sustainability of the dividend. In its results pres today management stated that £80m of cashflow was generated in the year, against which were set £17m of costs. This leaves £63m, of which £48m is paid out via the divi. Taking this at face value - alongside their comments on asset durability - the divi is well covered (1.3x) by current cashflow generation. A frustrating situation no doubt for management, who enjoy raising capital and initiating projects, but not necessarily so bad for yield-seeking investors who’d just like to keep collecting the divis…

On this basis I am content to hold, accepting some event-risk related to the continuation vote in August.

Holders - particularly those here for the divi - can relax…

Key Highlights:

Financial:

· NAV per ordinary share of 104.7p (31 March 2023: 114.3p).

· Ordinary shareholders' NAV of £618.6m (31 March 2023: £674.4m).

· Income generated of c.£80m (31 March 2023: c.£79m)

· Financial debt gearing (excluding preference shares) of 29.3% (31 March 2023: 28.4%).

· Total gearing (including preference shares) of 46.4% (31 March 2023: 44.6%).

· Weighted average cost of capital of 6.4% (31 March 2023: 5.7%).

· Weighted average cost of debt of 4.5% including preference shares (31 March 2023: 3.9%).

· Weighted average discount rate across the portfolio of 8.1% 1 (31 March 2023: 7.3%).

Dividend:

· 11% increase in total dividends paid of 8.35p per ordinary share for the twelve months ended 31 March 2024 (31 March 2023: 7.52p).

· Dividend cover for the twelve months ended 31 March 2024 was 1.3x (31 March 2023: 1.4x).

· Increased target dividend to 8.43p per ordinary share for the year ending 31 March 2025.

· Attractive high dividend yield of c.11%, as at closing share price on 17 June 2024.

· Forecasted target dividend cover of 1.1x - 1.3x for the year ending 31 March 2025.

· Total ordinary dividends paid since IPO of £345m or 67.8p per share.

Interesting announcement(s) today.

- NESF has sold “Whitecross” for £27m (reportedly a 14% premium to its holding value) via a competitive sales process. An open-market transaction that supports directors’ recent assertions re NAV etc.

- A £20m share buyback programme has been initiated.

These are positive developments for holders….

Sounds like we are all on the same page - projects moving from development to operational status will be a small net positive for the NAV. It will be important for GSF to manage newsflow around this topic effectively.

Well.... that's not quite true. The NAV won't double as you say @Krustysmegma, but I'd expect some uplift as the discount rates used for those assets should reflect the greater certainty achieved by moving from development to operational status. And "proper" coverage for the dividend - ie fund level free cashflow > cash cost of divi - will be a notable milestone. I don't think the fund yield will be 11%+ when coverage is reached.

All to play for with significant upside possible if development projects are commercialised into a lower interest rate / lower inflation environment.

Very much so. The update contains some quite detailed info on GSF’s revenue models across the markets in which it operates. This is a very welcome development. It will be interesting to see how analysts and the market react.

Dividend commitment is unequivocally reaffirmed also.