Nextenergy Solar Share Discussion Threads

[a0002577] 02/5/2023 12:16

Remember, CC2014, that as the project moves through each stage there will have been expenditure on the project so it deserves a higher value.

[cc2014] 02/5/2023 07:50

"Remember that if they buy an asset in the development phase that each time it passes through a major step towards completion, the completion risk becomes smaller and therefore the asset value rises."

This is true but I've been struggling with this for a long time because what's it's saying is that assets aren't valued at cost but at someting in excess of cost based on some derisking and DCF model.

Anyways I suspect this is far more about the NESF manager making more out of churning the portfolio than the running fee. I will have to investigate.

[a0002577] 30/4/2023 11:34

Remember that if they buy an asset in the development phase that each time it passes through a major step towards completion, the completion risk becomes smaller and therefore the asset value rises.

By taking on early stage battery projects they hope to capture these mark ups. However only when they are fully operational do they contribute to actual cash flow.

I think they have enough cash to continue to pay the divided until this happens. BUT I would be unhappy if they concentrated too much on batteries - except those linked to their existing sites. I invested for the solar assets and in Gore for batteries.

Certainly interesting times - not helped by half hearted gov't action or inaction moving towards net zero. However, I think the true value of these assets will be reflected in the share price before the end of the year,

[smidge21] 28/4/2023 14:17

while buying equally good assets at a cheaper price?Management are determined (desparate?) to issue new equity

[wallywoo] 28/4/2023 14:12

Yes, but the plan is worth nothing unless they can sell these assets for NAV or higher. And valuations of many assets are under pressure with high interest rates.

[smidge21] 28/4/2023 14:07

the challenge here is to grow the business by shrinking it, by selling (good?) assets at a full price while expecting to buy fresh assets on the cheap eg AEET?

[wallywoo] 28/4/2023 13:51

Interesting development, as you all say. They wouldn't of put these assets up for sale unless they were confident of getting a good price. However, nothing is proven until someone shows up with the money!!

[masurenguy] 28/4/2023 07:56

NextEnergy Solar puts assets up for sale to raise capital, buy back shares
Renewables fund hopes sale of five solar assets will generate enough money to cut its debts, provide funds for investment and buy back shares currently on a 12% discount.

NextEnergy Solar (NESF) is selling a big slug of its portfolio in a bid to tackle its share price discount, cut debts and re-invest in battery storage. In what analysts see as a test case for renewables funds, whose share price de-ratings have prevented them from raising money through equity issues, NESF has put five unsubsidised UK solar assets up for sale. Although the investment company did not say how much it was looking to raise, it said it aimed to ‘capture significant value’ from the sale of the 236MW portfolio. This represents 28% of the 865MW total capacity NESF had last September. With a current net asset value (NAV) of £717m that could imply a price tag of up to £179m. Alternatively, excluding two assets under development, the generating capacity reduces to a sixth of the current portfolio which gives a lower sum of £119m.

Underlining the size of the transaction, NESF said it would use the proceeds to ‘materially reduce’ its £166m of borrowings and provide funds for its £500m investment pipeline and launch a share buyback programme to narrow its 12% discount to NAV. Numis Securites analyst Colette Ord said the assets would have to sell for £0.7m per MW to clear NESF’s credit facilities with NatWest, AIB Group and Santander. ‘Any outcome will also be interesting for the broader renewables peer group, where shares have been trading at notable discounts to NAV. Something we feel undervalues the return potential of many of the funds in the sector, including yields of 6-7%,’ the analyst said. Ord added: ‘The market will watch the valuation multiples with interest and if they continue to support or exceed current NAV levels we would expect this to be a rerating catalyst to close many of the prevailing discounts which persist across the various infrastructure strategies.’

Winterflood’s Emma Bird said: ‘At face value, we consider today’s announcement a prudent step to strengthen NESF’s balance sheet. Asset disposals will serve as an important barometer for current valuations of solar assets in the wider sector.’ Bird said the divestment had the additional benefit of reducing NESF’s tax liability with respect to the UK’s Electricity Generator Levy, and tilted the portfolio more towards capital growth which in aggregate is NAV accretive. She described NESF’s the 12% discount as a ‘compelling entry point’.

Stifel’s Iain Scouller retained his ‘positive’ recommendation, noting NESF’s ‘self-help measure’ could be a catalyst for narrowing the discount to the mid-single digit level. ‘We also think that other funds in the sector may follow-suit, and start reducing leverage through asset sales,’ he said. Liberum’s Shonil Chande retained a ‘buy’ recommendation for the FTSE 250-listed company with a target price of 125p. He highlighted the ‘above average’ 7% dividend yield, ‘solid cover, lower risk revenue model through high levels of hedging as well as the opportunity for accretive NAV growth as battery assets are acquired and developed as an attractive investment thesis.’

The shares added 1.6p to 108.4p. Over five years, including dividends, they have provided a total return of 34%, among the lowest in the sector.

[qvg] 27/4/2023 15:23

marktime, I hold this IT because of the dividend and have the same concerns as you. I have sent a message using their website. No answer yet!

[marktime1231] 27/4/2023 14:47

Via PI ...

"NextEnergy Solar Fund Ltd's (LSE:NESF) proposed measures to reduce leverage and validate its portfolio valuations have been praised by broker Stifel, which suggested other funds in the sector may follow suit.

"At this stage there is no indication given on the potential valuation of the five projects which will be sold," the analyst said, noting that NESF is confident that it will be above their latest valuation.

As the trust intends to invest in battery storage projects but cannot issue equity while it trades on a discount, Stifel analyst Iain Scouller said he thinks these sales "should make a significant difference to the funding position".

The last published NAV was 120.9p at the end of December, putting the shares on around a 12% discount.

NESF's discount is similar to others in the solar sub-sector and far from the biggest or the smallest in the wider renewable energy infrastructure sector.

"We think this may be a catalyst for some narrowing of the discount to the mid-single digit level," Scouller said in a note to clients, reiterating a 'positive' recommendation.

He added: "We also think that other funds in the sector may follow-suit, and start reducing leverage through asset sales.""

[marktime1231] 27/4/2023 14:36

Yes it could neatly solve one problem, eg where to get funds for future programmes.

But what about the consequence? Selling off producing assets today in order to invest in development assets, what does that do to income and dividend prospects?

This policy might be good in the short term for NAV / share price traders and for lenders feeling exposed to too much debt. But what does it mean for long term income investors?

Might it be worth looking at the others, Foresight and ??, better capitalised and producing surplus cash? I know some guys here also have FSFL. Looks similarly discounted and a similar slightly lower yield. And yet no headline gearing. So ... as Woodhawk says there is a general undervalue problem, it is not (just) a credit issue. As you say it is more about the asset manager worrying how to raise funds for expansion and less to do with debt reduction or closing the discount.

[a0002577] 27/4/2023 14:11

Hmmm...

They're between a rock and a hard place. They have commitments to buy stuff but no prospect of issuing shares to raise the money while their shares trade at a discount to NAV.

The sale of those assets (At a profit) makes sense inasmuch as generating assets are highly sought after a\ the moment. But that can change rapidly.

I am quite impressed that they came up with this solution and am a happy holder. Mostly bought when they were cheaper than they are today.

[woodhawk] 27/4/2023 14:06

Under-valuation is hardly unique at the moment is it? Just look at most of the shares on the market. In view of yields currently available, this seems like a rare opportunity to buy quality companies cheap.

[tuftymatt] 27/4/2023 12:22

Yeah me too.
Good luck all 👍🏻

[woodhawk] 27/4/2023 11:14

I'm much encouraged by today's statement and glad I've been increasing my stake during the recent lows.

[a0002577] 27/4/2023 11:11

Interesting statement issued today - all designed to increase NAV, reduce discount and free up se cash to meet commitments and take advantage of opportunities.

Moved the share price a little

I have always thought that NESF is a very similar share to FSFL and worthy of a slight premium as its yield is higher. FSFL still has a higher share price but they are now getting more closely aligned with difference narrowing over the past week.

[woodhawk] 18/4/2023 14:11

wallywoo,

No stamp duty payable on companies registered offshore (Isle of Man, Malta, Gibraltar, etc)or listed on AIM.

[tuftymatt] 18/4/2023 13:50

I keep adding here too for all of the reasons mentioned above.

Good luck all 👍🏻

[wallywoo] 18/4/2023 13:42

No stamp duty either, which always makes a share more attractive to me. Never really understand why some funds have stamp other's don't. Also note that some brokers have stamp duty while others don't. Iag for example (no stamp duty with IG, but you pay with most of the others). Anyway, just my little comment for the day!!

[woodhawk] 18/4/2023 13:26

As you say, discount to NAV and great quarterly divi too. I've done very well with NESF thus far.

[wallywoo] 18/4/2023 13:22

Bgt in here at 104.82 for the first time. Have had on my watch list for a while. Don't own any energy generation companies. This looks like a decent entry point, with a good yield and attractive discount to NAV.

[woodhawk] 17/4/2023 11:13

Added 100% of my original investment. Previously sold at more than 10% higher than current share price

[gonsan] 17/4/2023 10:52

Added. 50% of my original investment.

[cruelladeville] 06/4/2023 18:23

I agree. I may well own SSE again in the future, but I don't want them using money that should have been my dividends paying for Dogger Bank instead! LOL!