 Big Tech and Green Energy (US)Big businesses are stepping in to buy power from new wind and solar farms. They're filling a gap left by governments that pulled the plug on subsidies for renewables.There was a 35 per cent jump in the amount of renewable power sold under these long-term agreements last year. And the total amount of renewable power like cumulatively sold under these agreements is now somewhere around 270GW, which is the equivalent of all of the power in Germany.Increase is basically being entirely driven by tech companies. Amazon is the biggest. And then all of the others are in there Google, Meta, Apple, and so on. And the reason they're doing this is because they promise that their data centres that they're using to train AI and all those other things are going to be powered by green energy. So they are looking for the power as they build out those data centres. these are long term deals directly between the people who are building the wind farms or the solar farms and the companies themselves. And it just stretches over a set period of time. So you'll say, I'll take this percentage and I'll pay this much for this many years. And for banks, that's a really big deal these days. They want to be able to see or have some certainty over the long term future of these projects. Banks are willing to fund green energy if demand is also seen to be coming from companies. |
This is my biggest, non fixed income holding. Breakeven is very close. Will reduce holding on rally into div payment on 31/3. |
The sunny weather giving this a boost |
thanks wally thats really useful |
httPs://www.proactiveinvestors.co.uk/companies/news/1066597/nextenergy-solar-hails-stable-quarterly-performance-maintains-dividend-target-1066597.htmlInteresting interview, FYI. Hold a fair few of these at an average around this level. Quite happy to hold. A solid investment in isa / sipp accounts imo. The tax implications of such a high dividend make it much less attractive otherwise. |
All way above my head.
Simple question - is this a buy atm, or not?
(I hold)
peter |
Some very interesting / informative posts - thanks! |
ROC price reset to 67.06 from 1/4/25 so thats c 93.88/MWh for the ROC assets. |
@ilef thats just on the ROC assets they do have FiT assets as well as Italian sites. I believe all the unsubsidised sites have been sold but need to double check. |
Nickrl, thanks for the info.
So if right now Nesf are receiving £90/Mwh in subsidies, and subsidies comprise 57% of revenue, then NESF are effectively receiving (or charging end users) £150 per Mwh.
That's not helping utility bills! |
@ilef as they have two amortising debt facilities which have an annual increase in what has to be paid back each year reaching its peak in 2035 coincidentally with expiry of the ROCs. The other advantage here is that subsidies are indexed linked so they've benefited hugely from the spike up in inflation and they will continue well unless Reform somehow get a majority! That said current ROC buyout price is 64.75 and the ROC portfolio is an average of 1.4/ROC so thats worth nominally 90.87/MWh. So it will represent a big loss of income but that debt will be gone but also the solar panels will have continued to deteriorate although replacement costs maybe a lot lower by then. |
Skinnypope, thanks for that information.
So on my rough calcs, that means that the subsidies expire in 2034/35.
At which point income will drop considerably, though debt interest payments will also fall a lot by that point too.
Assuming no changes to the portfolio in the intervening period, how much value will be left in NESF portfolio in 2035? |
@skinnyhope good luck with that exercise! I see main issue is the accounts being filed are so far out of date compared the trusts reported accounts as to be of limited use but at least you will be establish what the true position is even if over 12mths stale.
@WC solar isn't dispatchable power and you don't need ne tot ell you it only works during the day. Thus its all producing simultaneously at the same point and already drives the day ahead price negative. The more thats connected the worse that is and whilst it displaces gas fired power stations its now getting to the level that they can't turn anymore off to keep the system stable. This will drive ppa prices down and the smart producers will agree to prices now which might be low but at least they will generate income. |
It's exposed to power prices more so than some other trusts, but I'm happy with that as part of a portfolio Wouldn't worry too much about new supply reducing prices given that a lot of it is replacing what we already have |
In 28/29, 61% of estimated income is expected to come from subsidies.
When do these subsidies expire?
(The Trading updated says that a large portion of the debt amortises in line with the maturities of the subsidies, but it doesn't give any details).
IMO, if on average it's 2031, then the timing of the ending of the subsidies is very important, if its 2041 then less so |
SpectoAcc I think they have done us pensioners a great deal of good ,as now I only have to have 30% of my Sipp in these high yielders at 10% to 12% yield to provide the same income I require for a very nice retirement .
We seem to go from famine to feast very quickly on the income front not that I am complaining well done to the wealth managers for looking after us.Wish our own government would do the same to us pensioners. |
But how much of it is in the price? Every co talks up their prospects.
If the money keeps rolling in, annuity-style, I like the renewables. Tho I don't expect a lot to be left over at the end.
They didn't work at 6-8%, but NESF 12.5% last I looked.
I accept it's possible the entire sector's a giant accounting trick, & the energy market can certainly be dysfunctional, but I'd place a high probability on current s/p's being wealth manager selling/idiocy, & an opportunity. |
Uncovered in the sense they say expect to hear an annual report of 1.1-1.3x cover averaged cross the year, not over the quarter in question where I suspect actual performance was 0.7-0.9x even on their own gross measures. And that claimed coverage is I think before deducting things like central finance, pref share payments and management costs which are all significant. Who cares what the gross coverage is, it is net performance which matters.
The NAV roll forward model, behind which they are hiding so as to not reveal operating and financial performance, allowed 2.4p for the quarter vs 2.5p paid in dividends. And a big negative impact in the cash movement row.
But as nickrl points out it is almost impossible to know what is actually going on because they don't want to tell us, not in the "trading" update and not even in the formal half-yearly reports. As we found last time they obscured true net trading performance by shuffling large numbers on paper between the various group, hold co and subsidiary entities. So massaged we had a testy unresolved debate on here about what was really going on, even the brainy guys couldn't agree. My small brain concluded that management and the board are snowing us with falsely positive-sounding headlines. But as you say, we can't know for sure. |
More solar capacity, yes, but a lot more forecast demand. I suspect the inverted nature of the power curve will be a permanent feature and that the average PPA strike will be somewhat in excess of the current forward projections. (even after accounting for inflation).
The concerns over future dividend coverage are entirely valid, but it is by no means a negative tale. Making any firm statements about any market 10 years hence is foolhardy, but this lack of certainty justifies a sometimes deep discount whenever the centre of gravity for risk taking moves to the left. Far too much to the left on occasions. |
@WC104 do we really ever know what the aggregated cash cover is in these entities. Of course we can guestimate from power production and average cost but unhelpfully they deign not to provide either at the NAV update. What they do say is irradiance is below forecast and lets be clear the subsidies are only received for energy produced. Then they don't tell us what the average income the portfolio is forecast to generate each year. They do have this info in final & interim reports and the last update was showing it falling away later in the decade. So whilst the short term power curve is far better than even 3mths ago the long term curve remains pretty unchanged. I'd also wager with the amount of solar coming on stream across the UK over the next few years we will see power prices becoming quite depressed in the day ahead market and this will begin to influence forward markets as well as why lock in at higher price when you can get leccy far cheaper in the day ahead mkt.
In the round i want to like NESF but there lack of transparency about the operating entities leaves me weary. |
Appreciate cash cover can be misleading but how do you define true net basisI work on both cash cover and market Discount rate covered Eg if the discount rate is 8 then you take of management costs and adjust for leverage to get the NAV return Then you adjust that for the share price discount to NAV So long as that rate > divi yld then you're covered - but - only so long as the cashflow assumptions behind the NAV are sensible |
At least management fee structure is in discussion. |
Where is the operational update? Nothing about energy generated or trading and prices or income achieved vs budget. They continue to say the dividend is covered when it really isn't anywhere near on a true net basis. Looks like they are burning through borrowed cash to make up the shortfall. |
61% subsidy for 28/29, up from 52%. Nice! |
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