NextEnergy Solar Fund – Recycling champion
From an operational standpoint, NextEnergy Solar Fund (NESF) seems to be doing well. As is discussed on page 4 of this note, the board, encouraged by a high proportion of predictable revenue, has felt comfortable in declaring an inflation-matching 11% increase in NESF’s dividend, and is confident that this will be well-covered by earnings.In the face of a difficult market for fundraising, NESF’s managers propose recycling capital from its portfolio of subsidy-free solar assets. In the short term, the proceeds would be used to reduce gearing, and fund a potential share buyback. Longer term, NESF expects the proceeds to be used to secure new solar and energy storage opportunities that present a suitable return profile. After a good 2022/23 financial year, new investments could boost the NAV and cashflows further. Buybacks could turn the tide on its share price discount to NAV and lower leverage could calm investors’ nerves.
NextEnergy Solar Fund is a closed-ended investment company. Co.'s investment objectives are to provide investors with a dividend that increases in line with Retail Price Index over the long term. Co. invests in solar Photovoltaic plants located in the U.K. Co. is managed by NextEnergy Capital IM Limited. As of Mar 31 2017, Co. had total investments at fair value of £415.9 million.
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