NextEnergy Solar Regulatory News (NESF)

8 April 2020

NextEnergy Solar Fund Limited

("NESF" or "Company")

Operating Update

NextEnergy Solar Fund, the solar power renewable energy investment company, is pleased to provide the following operational update.

Highlights

· Generation (unaudited) in the financial year ended 31 March 2020 was 4.7% above budget (2019: 9.1%)

· Financial debt* of 21% as at 31 March 2020 (2019: 27%)

· Full-year dividend target of 6.87p reaffirmed for financial year ended 31 March 2020 (2019: 6.65p)

· For market revenues, fixed price electricity sales contracts in place for 95% of generation for summer 2020 and 50% for winter 2020/21

· Energisation of subsidy-free new-build asset High Garrett (8.5MW) is expected in Q3 2020

· COVID-19 pandemic has not had any significant impact on the Company or its underlying portfolio

* Excludes preference shares (see Balance Sheet Strength below)

2019/20 Portfolio Performance (Unaudited)

During the year ended 31 March 2020, solar irradiation across the portfolio was 4.0% above budget (2019: 9.0%), generation was 4.7% above budget (2019: 9.1%) and Asset Management Alpha was 0.7% (2019: 0.1%). Asset Management Alpha would have been 1.5% (2019: 1.1%) if distribution network outages were excluded.

The UK portfolio performed above expectations with generation outperformance of 4.6% (2019: 9.4%) and an Asset Management Alpha of 0.7% (2019: -0.1%).

The Italian portfolio also performed above expectations during the year with 6.4% (2019: 5.4%) extra generation over budget and an Asset Management Alpha of 1.3% (2019: 2.5%).

2020/21 Electricity Sales

For the current financial year ending 31 March 2021, NESF estimates approximately 61% of revenues in the UK will be derived from regulated revenues (renewable obligation certificates and others), and approximately 39% of revenues will be derived from the sale of its electricity generation under short-term and medium-term contracts. Of the market revenues derived from the sale of electricity generation, the Company has secured fixed price agreements covering 95% of its electricity generation for the summer of 2020 and fixed price agreements covering 50% of its electricity generation for the 2020/21 winter. These agreements were concluded during calendar year 2019 and at prices well above the current market prices.

In Italy, approximately 83% of revenues will be derived from regulated revenues (principally feed-in-tariffs) and approximately 17% of revenues will result from the sale of electricity generated under short-term contracts, of which the Company has secured fixed price agreements covering 100% of its electricity generation until the end of the calendar year. These fixed price agreements were entered into during calendar year 2019 and at prices well above the current market prices. The majority of the expected cash flows from the Italian portfolio are covered by a currency hedge for the period up to 2032, which includes all hedging costs.

The power purchase agreement counterparties both in the UK and Italy are all of investment grade quality.

Balance Sheet Strength

As at 31 March 2020, the Company's subsidiaries had consolidated financial debt outstanding of £214m on a look-through basis, including project-level debt. Of the financial debt, £195m comprises two long-term fully amortising debt facilities and £19m was drawn under a short-term credit facility. 

At the financial year-end, NESF had £51.5m undrawn from two short-term credit facilities and significant year-end cash holdings. One short-term credit facility of £20m has been extended to February 2022 and the other of £70m is currently under negotiation for an extension from July 2020 to July 2022.

The total financial debt represented 21% of gross asset value as at 31 March 2020. As at 31 March 2020, the aggregate gearing comprising the total financial debt and the Company's preference shares represented 40% of gross asset value (2019: 39%). The preference shares are irredeemable save for in the event of a change in control or delisting of the Company and then only at the option of the holders.

Dividend

NESF confirms its target of a full-year dividend of 6.87p per Ordinary Share for the financial year ended 31 March 2020, with the fourth interim dividend due to be declared in May 2020 for payment in June 2020. The forecast full-year dividend represents a yield of 5.9% based on yesterday's closing share price of 115.6p. The Company intends to offer the scrip dividend alternative again for the next dividend payable in June 2020.

Subsidy-free Construction Update

NESF has completed initial site entry works on its subsidy-free plant High Garrett, an 8.5MWp extension to an existing 5MWp ROC asset acquired in 2016. Subject to current COVID-19 impacts, major construction works are planned to commence shortly and energisation is expected to take place towards the end of Q3 2020.

COVID-19 Contingency Planning

The Company would like to reassure investors that NESF and the NextEnergy Capital Group, as Investment Manager, continue to monitor the COVID-19 pandemic and have taken actions where necessary to protect employees and maintain the Company's operations.

The Company built up a stock of spare parts during H2/2019 and is currently not expecting any significant complications along its spare parts supply chain. The Company's key service providers have continued to provide contracted services. The Investment Manager remains in close contact with them and continuously monitors and reviews their ability to perform in light of the COVID-19 pandemic developments.

Workers in the electricity sector are considered key workers and, to date, NESF has not experienced any significant technical, operational or financial impacts on its portfolio resulting from effects of the COVID-19 pandemic, and will continue to work with its Investment Manager, partners and suppliers to anticipate and mitigate, where possible, arising risks.

For further information:

Notes to Editors[i]:

A constituent of the FTSE 250 Index, NextEnergy Solar Fund ("NESF") is a renewable energy infrastructure investment company that invests primarily in operating solar power plants in the UK (it may invest up to 15% of its gross assets in other OECD countries). The Company is committed to ESG principles and responsible investment and makes a meaningful contribution to reducing CO2 emissions through the generation of clean solar power. NESF has been designated a Guernsey Green Fund by the Guernsey Financial Services Commission and has been awarded the London Stock Exchange's Green Economy Mark.

NESF has a diversified portfolio comprising 90 operating solar assets, primarily on agricultural, industrial and commercial sites, with a combined installed power capacity in excess of 755MW. As at 31 December 2019, the Company has gross assets of £1,032 million, of which 89% is invested in the UK, and net assets of £620 million. The majority of long-term cash flows from its investments are inflation-linked.

NESF's investment objective is to provide ordinary shareholders with a sustainable and attractive dividend that increases in line with RPI over the long term, while delivering an element of capital growth through reinvesting net cash generated in excess of the target dividend. The dividend is payable quarterly and the Company is targeting a total dividend for the year to 31 March 2020 of 6.87p per ordinary share. 

NESF is differentiated by its access to NextEnergy Capital Group ("NEC Group"), its Investment Manager, which has a strong track record in sourcing, acquiring and managing operating solar assets. WiseEnergy is NEC Group's specialist operating asset management division, which currently provides operating asset management, monitoring, technical due diligence and other services to over 1,300 utility-scale solar power plants with an installed capacity in excess of 1.9 GW.

Further information on NESF, NEC Group and WiseEnergy is available at www.nextenergysolarfund.com, www.nextenergycapital.com and www.wise-energy.eu.