Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NextEnergy Solar Fund Ltd (LSE:NESF, Financial) announced a GBP20 million share buyback program to reduce the share price discount to its net asset value.
- The company completed the third phase of its capital recycling program, selling Staughton for GBP30.3 million, resulting in a 21.5% premium to the holding value.
- NESF offers an attractive dividend yield of approximately 11%, one of the largest in the UK equity market, with dividends comfortably cash covered 1.3 times.
- The company has a strong market-leading portfolio of solar energy assets, positioning it well to assist the UK government in its net zero ambitions.
- Shareholders showed strong support for the company's continuation, with 94% voting in favor at the annual meeting.
Negative Points
- The net asset value per ordinary share decreased from GBP618.6 million to GBP572.2 million over the six-month period.
- The dividend cover is expected to be towards the lower end of the 1.1 to 1.3 times range for the full year.
- The total gearing for the fund is relatively high at around 48%, which may pose risks in a volatile market.
- The company experienced a higher number of unplanned DNO outages, impacting operational performance.
- The M&A market for solar assets remains challenging, with sluggish activity affecting potential asset sales.
Q & A Highlights
Q: Can you provide more detail on the DNO outages during the period and whether there's any scope to reclaim losses?
A: Stephen Rosser, Investment Director & UK Legal Counsel, explained that there are planned and unplanned outages. Planned outages are coordinated with DNOs to minimize impact, while unplanned outages, often weather-related, are unpredictable. The distributed nature of NESF's portfolio helps mitigate widespread impact.
Q: What opportunities do you see in the corporate PPA market for NESF?
A: Ross Grier, COO, noted that the corporate PPA market is an evolving opportunity. NESF has historically secured such agreements and anticipates future growth, which will help extend long-term contracted revenue streams beyond current hedging plans.
Q: With GBP120 million drawn in the RCF, is there scope to sell further assets to deleverage?
A: Ross Grier stated that the focus remains on the current capital recycling program, with a strategic approach to asset sales. The team evaluates whether to maintain or sell assets based on ongoing assessments.
Q: How has NESF achieved premiums in asset sales during the capital recycling program?
A: Stephen Rosser explained that premiums were driven by strategic enhancements, such as securing CfDs, optimizing project designs, and effective negotiation. Each asset's value was maximized through tailored strategies.
Q: What differentiates NESF from its peers in managing investment company discounts?
A: Ross Grier highlighted NESF's proactive approach, including strategic asset disposals and share buybacks, which have helped narrow the discount relative to peers. NESF's strong dividend yield and growth positioning further set it apart.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
