NextEnergy Solar Fund H2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
June 16, 2025

Key Takeaways

  • Dividend maintained: Board approved FY26 dividend target of 8.43p (c.12% yield), marking eleven consecutive years of fully cash-covered distributions.
  • NAV decline: FY25 net asset value per share fell to 95.1p, driven by downward revisions to power price forecasts and 5.3% below-budget generation due to low irradiation and network outages.
  • Capital actions: Sold 145 MW of assets to raise £72.5 m, repurchased £11.2 m of shares, and repaid £59.5 m of debt, strengthening the balance sheet and lowering financing costs.
  • Persistent discount: Shares traded at an average ~27% discount to NAV over the year, prompting the board to pursue strategic initiatives and enhanced investor engagement to narrow the gap.
  • Portfolio strength: Expanded to 101 solar and battery storage assets (937 MW) and committed $50 m to a private solar fund, supporting long-term growth and diversification.
AI Generated. May Contain Errors.
Earnings Conference Call
NextEnergy Solar Fund H2 2025
00:00 / 00:00

Transcript Sections

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Operator

Good day, ladies and gentlemen, and welcome to NextEnergy Solar Fund full-year results presentation. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a Q&A session. If you wish to ask a question, you may do so either through the Zoom webinar link provided separately or by submitting written questions using the Ask a Question button on the Spark Live webcast page. If you have joined us via Zoom webinar, please note this call is being live-streamed to a webcast for a wider audience and will be recorded. During the Q&A element of this morning's call, if you wish to ask a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. If you already have a question, please do this now, ready for when the Q&A begins.

Operator

I would now like to hand the call over to Paul Le Page, Interim Chairman, NextEnergy Solar Fund, to start the presentation.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Good morning, ladies and gentlemen, and welcome to NextEnergy Solar Fund's full-year results presentation for the financial year ended 31 March 2025. My name is Paul Le Page, Chairman of NextEnergy Solar Fund, and I'm pleased to be able to present today's full-year results alongside Ross Grier, Chief Investment Officer, NextEnergy Capital, and Stephen Rosser, Investment Director, NextEnergy Capital, the company's Investment Advisor. Today's presentation will cover a number of key topics ranging from the board's priorities, discount management, full-year results, and, of course, the future for NESF. At the end of the presentation, there'll be an opportunity for both shareholders and analysts to participate in a live Q&A session. Before we start, I'd like to quickly thank Helen Nye, who stepped down as Chairwoman in May to pursue other interests.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

The board and I wish Helen all the best in the future with her new endeavours and thank her for her hard work and dedication. In line with the nomination committee's established succession plans, I was appointed as Interim Chairman while the company concludes a formal process to confirm a permanent successor. This process is ongoing. As Interim Chairman, I have over 12 years of solar industry sector experience and was the Audit Committee Chair for Bluefield Solar Income Fund Limited for 10 years before I joined NextEnergy Solar Fund in 2023. Your company remains in good hands under the careful stewardship of myself and the board, with a combined expertise of over 100 years, and the board remains well positioned to take advantage of the future opportunities that lie ahead to unlock value and growth for the company.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

On behalf of the board, I would like to reassure shareholders that your board is working tirelessly in assessing all options to narrow the discount, and the board remains open to all strategic initiatives that are in the best interest of all NextEnergy Solar Fund's shareholders. Since IPO, NextEnergy Solar Fund has delivered consistent growth, resilience, and a strategic evolution for its shareholders. Our portfolio now comprises 101 operating solar and battery storage assets, alongside a $50 million investment into a private solar infrastructure fund, which provides attractive returns and diversification. We've successfully expanded our footprint internationally and taken deliberate steps into the energy storage sector, a critical enabler of the energy transition. This diversification strengthens both our revenue base and our long-term growth trajectory. We are particularly proud of our 11 consecutive years of delivering a fully cash-covered dividend, a testament to our disciplined management and high-quality asset base.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

In total, we've returned $395 million in dividends to our ordinary shareholders, a significant achievement that reinforces our focus on delivering income returns. Crucially, the portfolio we built is having a real-world impact. Our assets now generate enough clean energy to power approximately 254,000 homes each year, directly contributing to decarbonisation. All of this underscores NESF's position as a well-stewarded, forward-looking company committed to creating enduring value for our shareholders and society alike. One of the most compelling aspects of NextEnergy Solar Fund's long-term performance is our consistent delivery of income to shareholders. I'm pleased to highlight that we've now achieved an 11-year track record of delivering a fully cash-covered dividend, a clear marker of the fund's income strength and disciplined capital management. The board has approved a maintained dividend target of 8.43 pence per ordinary share for the financial year ending 31 March 2026.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

This decision reflects our careful consideration of capital allocation, the long-term health of the business, and the interest of both shareholders and wider stakeholders. NESF continues to stand out in terms of yield. Our dividend target for this financial year currently equates to an attractive yield of approximately 12%, one of the highest in the FTSE 350 and notably fully covered by earnings. We forecast dividend cover in the range of 1.1-1.3 times post-debt amortization, supported by a high degree of revenue visibility from our contracted and regulated income streams. Since inception, we've declared over $395 million in ordinary share dividends, meeting our dividend target every year, a record we are extremely proud of. This announcement marks our 12th consecutive dividend target and reaffirms our commitment to sustainable income generation. Strong governance has always been a cornerstone of NESF's success.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Our shareholders entrust us not only to deliver returns, but to do so with integrity, transparency, and sound judgment. I'm pleased to reaffirm that the company benefits from our highly experienced and fully independent Board of Directors, bringing over 100 years of relevant industry expertise across investment management, accounting, law, valuation, and the energy sector. More details on our skill sets are available in the annual report. The Board comprises four independent directors, each bringing deep insight and strong oversight capability. I'd like to take this opportunity to acknowledge Josephine Bush, who serves as the company's new Senior Independent Director, offering further strength in governance and shareholder representation.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Our role as a board is to promote the long-term sustainable success of the company, delivering enduring value for shareholders while remaining mindful of the interests of our broader stakeholders, from communities where our assets are located to the regulatory bodies and the partners we work with. We are fully committed to maintaining the highest standards of corporate governance. We operate within the established framework for listed investment companies and report against the AIC Code of Corporate Governance, which is endorsed by both the Financial Reporting Council and the Guernsey Financial Services Commission. This framework provides the transparency and accountability our shareholders rightly expect. In short, NextEnergy Solar Fund continues to be under strong, prudent, and independent stewardship, and the board is fully aligned with its responsibility to safeguard the long-term interests of all our investors.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Turning to the share price and discount, NESF's ordinary shares have continued to trade at a discount to net asset value, averaging approximately 27% over the full-year period. While this mirrors the broader trend across the investment company sector, we recognize this is a critical area of focus for our shareholders. It's important to note that discount is not unique to NESF; rather, it reflects wider market dynamics that are currently impacting all investment companies. There are a few factors behind this environment. Rising interest rates have led many investors to shift towards fixed income assets such as gilts, which are now offering more competitive yields. At the same time, reduced institutional demand, the consolidation of wealth managers, and a trend of capital moving overseas have all contributed to diminished buying interest in listed investment companies.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Additionally, current and pending FCA cost disclosure rules are resulting in the double counting of costs, which inflates the perceived expense of investment companies. Crucially, these costs are already borne by the company itself, not passed on to individual shareholders, yet they still have an outsized impact on investor perception. Despite this challenging backdrop, NESF offers one of the highest dividend yields in the FTSE 350, making it an extremely attractive entry point for long-term investors. We are actively engaged in strategies to narrow the discount and ultimately return our share price to a premium to NAV, where we believe it quite rightly belongs, given the strength of our portfolio, our long-term income visibility, and our proven performance record. The Board and investment manager remain focused on transparency, investor engagement, and delivering the results that will help to close this gap over time.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

This past financial year has been one of deliberate action, disciplined execution, and proactive capital management, all focused on strengthening NESF's long-term value proposition. Under our capital recycling programme, we've sold 145 megawatts of assets, raising $72.5 million in total capital. This represents three out of four phases now delivered and has generated a net asset value uplift of 2.76 pence per ordinary share to date. The final phase, covering the remaining 100 megawatts, is currently progressing through a competitive third-party sales process, which we expect to complete in due course. The Board and I note that the speed of the capital recycling programme has been slower than anticipated due to the current M&A environment across the renewables market, and we're working hard alongside NESF's investment advisor to ensure the final phase of the initial capital recycling is completed and value accretive to NESF shareholders.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Alongside recycling capital, we've also been focused on returning capital to shareholders. In June 2024, we launched an up to $20 million share buyback program, under which over 15 million ordinary shares have been purchased to date at an average price of GBP 0.74, totaling $11.2 million. In addition, we paid $49.2 million in dividends in line with last year's dividend target of GBP 0.0843 per share, a clear signal of consistency and shareholder alignment. We've also made material progress on reducing debt. Over the year, NESF reduced debt by $59.5 million. This includes repaying $46.8 million in short-term revolving credit facilities, primarily using proceeds from the capital recycling program, as well as $12.7 million in long-term amortizing debt from operating cash flows. We've also simplified and consolidated our revolving credit arrangements into a more efficient structure, now benefiting from a highly competitive margin of 1.2% over SONIA.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Finally, we've continued to align interests across the platform. The NESF board collectively holds 190,000 NESF shares, and employees of NextEnergy Capital, our investment advisor, hold approximately 2 million shares, ensuring our teams remain fully aligned with shareholders' long-term interests. Together, these initiatives underscore our commitment to active management, capital discipline, and value delivery. We remain focused on protecting and enhancing shareholder returns while reinforcing the strong foundation on which NESF continues to grow. I want to reaffirm this core message. Your board is fully committed to driving value for shareholders and exploring all strategic options with a clear focus on enhancing shareholder value. When we assess potential strategic options, we assess whether the transactions have the right parameters. As an active board, we thoroughly assess whether a strategic initiative is of benefit to NESF shareholders, utilizing the thorough framework outlined below.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

The board appoints appropriate external advisors who are independent, sector-leading, and objective. We take all options seriously. We consider the potential value considerations as part of this framework, for example, looking at what is the value to shareholders, whether in cash terms, enhanced NAV, or reduced discount? What's the deliverability of the proposal? What are the potential net synergies/dyssynergies? What are the financial, operational, technical, and commercial risks? What will the cost to shareholders be through the transaction or investment? Will scale/size offer additional liquidity considerations per rerating? If sufficient positive synergies or compelling value accretion is identified, the board will, of course, explore this option further. The framework allows the board to evaluate strategic options with rigor, transparency, and accountability, where every option is tested against strict criteria to ensure it aligns with delivering shareholder value.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

The board also brings tangible experience of successful value creation through strategic delivery in a number of companies, most notably through Roundtable Music, Cazeneuve Absolute Equity Limited, Foresight Sustainable Forestry, UK Mortgages, TensorFlow Multi-Hedge, and Highbridge Tactical Credit. As a reminder, shareholders are central to any strategic moves. If a strategic option is identified that genuinely enhances value, we will involve you, our investors, through a formal consultation process. We will always seek your views before taking any significant step forward. In closing, the board remains unwavering in its commitment to unlocking value for shareholders. We operate with a disciplined framework, consider a spectrum of strategic options, engage independent counsel, draw on our proven track record, and above all, we will consult you before making any material decisions.

Ross Grier
CIO at NextEnergy Capital

Thank you, Paul, and good morning, everyone.

Ross Grier
CIO at NextEnergy Capital

Moving on to NESF's financial highlights for the year ended 31 March 2025, a period in which the company continued to generate stable income, support the company's dividend commitments, and further strengthen the capital structure of the fund. Starting with key financial highlights, NESF's gross asset value continues to stand above GBP 1 billion. Net asset value performance throughout the year reduced to GBP 547.4 million, representing a net asset value per ordinary share of 95.1 pence. This NAV reduction was primarily driven by the declining power price forecasts provided by the company's third-party PowerCurve consultants and below-budget generation, driven in part by unusually low U.K. solar irradiance, both of which impacted valuations across the renewables sector more broadly and were out of the company's immediate control. Despite this, the portfolio successfully generated GBP 73.2 million in cash income, which remains strong relative to historical performance and reflects resilient asset-level cash flows.

Ross Grier
CIO at NextEnergy Capital

The company had healthy cash coverage of 1.1 times, which supported its robust dividend paid to ordinary shareholders during the period, which also demonstrates the operational performance of the company's portfolio despite the adverse operating conditions. The company continues to provide an attractive return for its shareholders, where the NESF board maintained a dividend target of GBP 0.0843 per share for FY 2025-2026, consistent with the prior year. At today's share price, this translates into an attractive dividend yield of around 12%, placing NESF among the highest yielding funds in the FTSE 350. Finally, on capital structure, financial debt gearing, excluding preference shares, stood at 29.7%, broadly unchanged from last year. When including preference shares and looked through debt, total gearing was 48.4%. Crucially, 70% of the company's debt is fixed rate, which includes the company's GBP 200 million of preference shares at a fixed rate of 4.75%.

Ross Grier
CIO at NextEnergy Capital

The attractive fixed-rate coupon on the preference shares provides the company with long-term interest rate stability, which has proved particularly beneficial in the current volatile environment. The preference shares also provide additional benefits to shareholders and may only be redeemed by the company from April 2030, which helps to deliver long-term funding with reduced financial risk. Furthermore, the company is not required to use cash flow or raise funds to repay them at the end of their life. In summary, while NAV performance has reflected external conditions, NESF's underlying financial fundamentals remain robust, with strong income generation, fully covered dividends, and a disciplined, well-managed capital structure that positions the company for long-term resilience and value creation. Despite a challenging macroeconomic environment, NESF's underlying portfolio continues to perform as it should, delivering reliable long-term value. NESF currently has 101 operating assets totaling 937 MW of installed capacity.

Ross Grier
CIO at NextEnergy Capital

The portfolio continues to benefit from geographic diversification and now has 3% of its portfolio representing energy storage assets, which introduces further diversification from a revenue and technology perspective and helps to continue the future-proofing of the NESF portfolio as the energy landscape continues to evolve. In addition to standalone operating assets, NESF benefits from its ability to invest into private solar infrastructure funds that provide a higher return profile and opportunity for future cash exits. NESF has a $50 million commitment in NextPower3, an international OECD private fund that is targeting double-digit returns and provides access to diversified, high-quality international assets in a de-risked approach for NESF. NESF also continues to drive construction and development activity across the portfolio where appropriate, ensuring NESF maintains momentum for future NAV growth. Turning to asset longevity, the portfolio has a weighted average asset life of 24.8 years.

Ross Grier
CIO at NextEnergy Capital

This figure reflects only the life of the assets themselves. It does not account for opportunities such as lease extensions, repowering, or continued access to grid connections, all of which could meaningfully enhance long-term value. NESF continues to reinvest in its assets to maintain and enhance performance across the portfolio. While the current share price may not reflect it, NESF's operating portfolio remains resilient, productive, and well-positioned for the long term. I'll now hand over to Stephen Rosser, Investment Director, to run you through more details.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Thank you, Ross, and good morning, everyone. Let's walk through the NAV bridge for the year ending 31 March 2025. NESF's net asset value decreased from GBP 618.6 million in March 2024 to GBP 547.4 million in March 2025. This reduction was driven primarily by falling power price forecasts and lower-than-expected generation across the portfolio.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

However, it's important to note that this decline was partially offset by positive actions, including our share buyback program and the sale of selected assets. Looking at the key drivers in more detail, after payment of cash dividends, the main influence was downward revision of power price forecasts produced by independent consultants, followed by the cumulative effect of non-material movements in residual value. This includes movements from changes to assumptions around items like planned outages, investments in asset health, asset performance ratios and OpEx assumptions, as well as foreign exchange and one-off transaction fees. These were partially offset by several NAV accretive factors during the year, including a favorable change in short-term inflation assumptions, the sale of White Cross and Staunton, which were realized at attractive values, and the ongoing share buyback program, which continues to enhance value on a NAV per ordinary share basis.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Overall, while the NAV has declined over the period, many of the drivers are macro-related and outside of NESF's control. Importantly, the team has taken proactive steps to offset some of these impacts, demonstrating active management, strong capital discipline, and a continued focus on delivering shareholder value. NESF maintains a disciplined and balanced capital structure with a strong focus on cost efficiency and long-term financial stability. The company continues to make it a priority to pay down both short-term and long-term debt in a controlled and proactive manner. Let's break down the company's current debt structure, which is comprised of three distinct layers. Firstly, long-term amortizing debt. Secondly, non-amortizing debt in the form of preference shares. And thirdly, short-term revolving credit facilities, or RCFs. As of 31 March 2025, total gearing stood at 48.4%.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

The company remains comfortable with this level given the stable and income-generating nature of the underlying portfolio. Looking at the key debt components, as at the year end 2025, the company had GBP 147.2 million of long-term amortizing debt. The balance of the newly consolidated revolving credit facility stood at GBP 144.9 million under a facility secured at market-leading margin of 120 basis points over SONIA. NESF also has GBP 200 million of preference shares at a fixed coupon, providing long-term interest rate stability, a valuable position in today's volatile environment. The company's approach to capital structuring has helped us maintain a low weighted average cost of debt at 4.9% and a weighted average cost of capital at 6.6%. Importantly, only 30% of our total debt is floating rate, with 70% at fixed rate, adding a further layer of stability to our financing position.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

In summary, NESF's capital structure is robust, efficiently managed, and positioned for resilience, supporting both our short-term operations and long-term strategic goals. NESF has taken a strategic and disciplined approach to managing its long-term debt, ensuring that it amortizes in line with the remaining life of its Rock & Fit subsidized solar assets. This sculpted amortization profile was carefully designed to align debt repayments with the subsidy income period. In doing so, ensuring the bulk of the debt is repaid while subsidies are still being received, avoiding unnecessary financial pressure once the subsidies expire. As at 31 March 2025, the weighted average remaining life of our subsidy-backed assets stood at 9.9 years. Significant progress has been made to date, paying down GBP 62.2 million in long-term amortizing debt, with GBP 147.2 million remaining.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

This remaining balance is fully on track to amortize alongside the remaining subsidy life, which is also inflation-linked, providing an additional layer of predictability and financial resilience. In short, this approach gives NESF a clear, risk-managed path to long-term debt reduction, ensuring stability and sustainability well into the future. NESF's portfolio remained resilient and operationally robust in the financial year 2025, despite some external challenges. Starting with generation performance, the portfolio generated 830 gigawatt-hours of energy over the year, slightly down from 852 gigawatt-hours in the financial year ending 2024. Irradiation came in just 0.1% above budget, compared to 2.6% above budget in the previous year. Generation this year was 5.3% below budget. The two main drivers behind this shortfall were adverse weather conditions and unplanned outages on the electricity networks. Despite these headwinds, the team remained focused on performance optimization across the portfolio, such as asset repowering.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

We completed inverter replacements at three sites, with two additional sites scheduled for upgrades in April 2025. Targeted performance improvements, a total of 21 technical upgrades were completed during the period, aimed at improving reliability and long-term output, taking advantage of network downtime. Spare parts strategy. We continue to enhance the company's strategic spare parts management and logistics, helping to reduce operational downtime and accelerate maintenance response. These initiatives reflect NESF's active and disciplined approach to asset optimization, ensuring that even under less-than-ideal external conditions, the portfolio remains highly efficient and well-managed. NESF maintains high visibility of future cash flows, particularly in a power market that remains dynamic. NESF benefits from a diversified and structured revenue profile, illustrated here across four distinct streams. In navy, you see our subsidy-backed revenues, which remain stable and long-term in nature. In orange, the contracted PPA revenues.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

These are power purchase agreements we've secured with credible counterparties, providing fixed income streams and reducing exposure to volatility. In green, the portion of power output that is currently available for future PPAs, representing an opportunity to lock in new value. In yellow, other revenues, including the performance of our storage asset, Camilla, embedded benefits, and renewable energy guarantees of origin. NESF benefits from the in-house power sales team at NextEnergy Capital, who are highly experienced and execute a proactive hedging strategy. This includes rolling short-term PPAs structured over a 36-month horizon, allowing us to capitalize on favorable market conditions while maintaining revenue predictability and securing contracts above the market consultant power curve, which enhances NAV and supports shareholder returns.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

This hedging approach, layered alongside our long-term subsidy and PPA base, allows us to de-risk future revenues, maintain cash flow stability, and underpin NESF's ability to deliver its targeted dividends with confidence. In an environment where market pricing can shift quickly, this strategy provides NESF with the resilience and flexibility to optimise value without compromising on predictability, a critical foundation for sustainable income generation. NESF delivers measurable value from its core operations, converting sunlight into returns, not only in energy terms but in financial outcomes for shareholders. Over the 12-month period to 31 March 2025, the portfolio delivered 830 gigawatt-hours of clean electricity, a performance that reflects both operational resilience and the quality of NESF's assets.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Our $50 million investment in NextPower3, NESF's private solar infrastructure fund exposure, also made a meaningful contribution this year, with GBP 5.4 million received in distributions, showcasing the benefit of international diversification and access to private market returns. Through the capital recycling programme, NESF successfully realised GBP 57.3 million via asset sales this year. These proceeds were used efficiently, primarily to repay short-term revolving credit facilities and to support the buyback of GBP 11.2 million worth of NESF shares. After deducting GBP 12.7 million for the scheduled repayment of long-term amortizing debt, NESF generated GBP 73.2 million in cash income during this year. This resulted in a net cash income available for distribution of GBP 56.4 million, once preference share coupon and company operating costs had been subtracted.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

This GBP 56 million in net cash income was used to deliver shareholder value through paying GBP 49.2 million in ordinary dividends, continuing NESF's outstanding dividend track record, executing a net repayment of GBP 20.7 million in short-term debt, improving balance sheet strength, reinvesting into the health, development, and construction of the portfolio, maintaining and growing long-term net asset value, and delivering GBP 11.2 million in share buybacks, enhancing NAV per share. I'll now hand over to Ross Grier to look at the future and pipeline in more detail.

Ross Grier
CIO at NextEnergy Capital

We remain highly optimistic about the long-term growth potential of the U.K. solar and energy storage markets, even as we continue to navigate a shifting macroeconomic environment. Today, the U.K. has deployed around 17.8 gigawatts of solar PV and around 4-5 gigawatts of battery storage.

Ross Grier
CIO at NextEnergy Capital

The government's Clean Power 2030 action plan calls for a tripling of solar capacity to around 50 gigawatts and a five-fold increase in battery storage to 23-27 gigawatts by the end of this decade. These are ambitious but achievable goals, and NESF is exceptionally well positioned to help deliver them. We're already seeing softening inflation trends, which are expected to translate into lower interest rates over the medium term and a tailwind for infrastructure valuations and financing flexibility. Recent regulatory reforms around cost disclosures for investment companies are a welcome step. We believe these will help address the confusion caused by prior methodologies that inadvertently distorted perceived costs, particularly for retail platforms and wealth managers. Importantly, policy support remains strong and stable. The U.K. government continues to back domestically produced renewable energy as a pillar of energy security and economic resilience.

Ross Grier
CIO at NextEnergy Capital

With institutions like the National Wealth Fund and GB Energy now aligned with Clean Power 2030 and Net Zero 2050 objectives, the momentum is only accelerating. The U.K. remains one of the most mature and competitive solar markets globally, and solar is now the cheapest form of renewable energy to deploy at both speed and scale. When combined with flexible storage assets, we see solar playing an increasingly vital role in balancing the grid, reducing reliance on imported fossil fuels, and delivering stable, long-term returns for investors. In short, we see a positive structural backdrop for NESF's investment strategy, with strong policy alignment, declining cost of capital, and growing long-term demand for renewable infrastructure solutions. Our responsibility is to ensure that NESF is well positioned for sustainable long-term growth, both in terms of asset value and shareholder returns.

Ross Grier
CIO at NextEnergy Capital

The foundation of future growth lies in three interconnected pillars: capital inflows, disciplined capital deployment, and proactive asset management. First, capital inflows to enable future growth. The initial capital recycling programme, now in its final phase, has already returned significant capital from a portfolio of carefully selected assets, freeing up cash to provide optionality for the future strategic initiatives of the fund. Looking ahead, the exit from our private solar fund, NextPower3 and co-investments from 2028 onwards represents an opportunity for a major liquidity event with potential upside for the platform. The company is also pursuing ongoing strategic initiatives to attract new capital injections, whether through asset-level transactions, co-investments, or future market opportunities. Second, deploying capital to build long-term NAV.

Ross Grier
CIO at NextEnergy Capital

To date, NESF has deployed GBP 12 million into the share buyback program, acquiring more than 15 million shares, a direct and tangible way to enhance NAV per share and support the share price. The company continues to deploy capital across a diverse portfolio of growth-oriented investments, including solar and battery storage developments. These investments are carefully selected to deliver long-term accretive value to the portfolio. Finally, actively managing the portfolio to maximize returns, reinvesting into NESF's operational portfolio, targeting improvements in asset health, efficiency, and performance, maintaining the disciplined, proactive approach to debt management, ensuring the capital structure remains resilient and well-aligned with future cash flows, investing in NESF's proprietary pipeline, which offers access to well-vetted, high-quality renewable energy opportunities that few listed peers can match.

Ross Grier
CIO at NextEnergy Capital

Crucially, the NEC team continues to drive value through hands-on active asset management across the operating portfolio, fine-tuning each asset to deliver the best risk-adjusted returns. Together, these building blocks form a powerful platform to support NESF's long-term growth trajectory while maintaining resilience, liquidity, and value creation for shareholders in the years ahead. Our focus is on maximizing shareholder value through a disciplined and transparent approach. The board and NEC continue to actively work to narrow the share price discount through stable performance, communication, and strategic levers.

Ross Grier
CIO at NextEnergy Capital

Exploring new avenues for NAV growth, including high-quality reinvestment and further optimisation, continuing to deliver a fully covered attractive dividend, further reducing overall gearing, ensuring flexibility in changing market conditions, optimising the performance of NESF's large operational portfolio to extract incremental value, completing the capital recycling programme, reinforcing liquidity and balance sheet strength, and finally, maintaining a disciplined capital structure that supports resilience and consistent long-term returns. We remain deeply committed to NESF's success and to supporting the board and shareholders as we enter the next phase of growth. On that note, and on behalf of Paul, Stephen, and myself, thank you for joining today's full-year results presentation for the NextEnergy Solar Fund, and we'll now move into the Q&A section.

Operator

We will now start the Q&A.

Operator

If you are dialed into the call and wish to ask a question, please use the raised hand function at the bottom of your Zoom screen. Participants can also submit written questions by using the Ask a Question button on the Spark Live webcast page. We'll pause for a moment to allow the queue to form. We will take our first question from Joe Pepper from RBC Capital Markets. Please go ahead.

Joe Pepper
Joe Pepper
Equity Research Analyst at RBC Capital Markets

Morning, both. Thanks a lot for the presentation. Just two questions for me, please, both around generation, actually. Firstly, just looking at irradiation, as we're slightly ahead of budget in FY25, we appreciate a strong March 2025 was helpful, but given the solar irradiation was the worst in at least a decade last year, slightly surprised to see this figure so strong.

Joe Pepper
Joe Pepper
Equity Research Analyst at RBC Capital Markets

Just wondering if you could please remind us how the irradiation budget is derived, and then also perhaps so we can reconcile this outperformance with the weak data we've seen from both the ONS and peers. Secondly, on the 5.3% below budget performance due to asset performance, is this mostly related to DNA outages or were there any assets with particular site issues? On that note, have you seen any improvement year to date for FY26? Thanks.

Ross Grier
CIO at NextEnergy Capital

Stephen, are you happy to lead off with that one?

Stephen Rosser
Investment Director at NextEnergy Capital

Yes, very happy to. Thanks, Joe. Irradiation budgets are derived from energy yield assessments set at the outset, but then also updated annually in line with the sort of technical specifications of the project.

Stephen Rosser
Investment Director at NextEnergy Capital

I think you're right to pick up on March, particularly

Stephen Rosser
Investment Director at NextEnergy Capital

being a very strong month for irradiation, which did recover a lot of the gap that we saw over the year. Just picking up on asset performance, other generation performance there. Yes, as you touched on, network outages, particularly across the network, were a feature during the year. As I think it was we touched on at the half year, particularly over the summer, warm but wet conditions creating humidity did give us some challenges with asset-level componentry, which needed to be fixed in the portfolio. Both of those things contributed to the final generation performance. Fundamentally, over the course of the year, what the portfolio was able to deliver was a 1.1 times cash covered dividend in line with the range that we set out at the beginning of the year.

Operator

Our next question is from Adam Forsyth from Longspur Capital. Please go ahead.

Adam Forsyth
Head at Longspur Capital

Hi. Hi. Can you hear me? I think I was muted. Hello? We can hear you. You can hear me, great. Thanks. Morning. A couple of questions. Just actually just going back to the unplanned grid outages. Do you think we're going to see more spending on the grid from CP30 and Ofgem, obviously driving that direction? Do you think that will have any impact on unplanned outages going forward? I mean, could it reduce it? And I'm guessing you have an assumption built into the NAV that there will be a certain number of unplanned outages every year. Does that spend factor get taken into account?

Adam Forsyth
Head at Longspur Capital

And then just looking at other policy issues, given the impact of price curves, I'm wondering if are your providers already working on an analysis of the potential impact of zonal pricing if we see that? Would there be an impact on your PPA portfolio if we got that in terms of time and potential cost of reconfiguring the PPAs? Finally, is there anything else in REMA you think might be positive or negative? Thanks.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Right. Yeah, thanks, Adam. I think on the first one, obviously spending the grid is good news for the renewables sector. We do anticipate that leading to more stability over time, but it is a long-term investment program, as we all know. It will be a positive and negative across different bits of the network over the coming years before that long-term stability is achieved.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Obviously, the distributed nature of the assets that we have in NESF across those 100 operating assets in the U.K. and beyond does give us good stability in the face of localized power issues. We do anticipate it continuing to be a feature, but it is not a particular kind of broader challenge than we are used to dealing with as a platform. We do build in some expectation of curtailment of yield because of this type of outage issue within our asset-level forecasts. Stephen, I might hand over to you on the REMA side if that one is okay.

Stephen Rosser
Investment Director at NextEnergy Capital

Of course. Obviously, we are waiting for the government to update us on its next steps and thoughts on REMA.

Stephen Rosser
Investment Director at NextEnergy Capital

You will appreciate that we have done a variety of sort of different analysis based on the information that has been available for 18 months or two years across the portfolio. The key thing for NextEnergy Solar Fund is the distributed nature of the portfolio, as Ross has talked about, in a grid context, but that is also relevant and we think helpful in an environment where if we were to move to a zonal pricing model, the location of the assets ought to see some benefit from that. There are a handful of unknowns, though, related to REMA that are important, particularly in terms of that sort of interzonal operability and how that will work. We are sort of thoughtful about that.

Stephen Rosser
Investment Director at NextEnergy Capital

I think on balance, we'd expect it to be neutral to positive across the portfolio, but need to understand where government's current thinking is, which we're expecting to see something over the summer.

Adam Forsyth
Head at Longspur Capital

Great. Anything else in REMA outside? Everyone's focusing on zonal, I think, because it's quite polarised the debate, but there are obviously other things in REMA that could be good or bad.

Stephen Rosser
Investment Director at NextEnergy Capital

Yeah, overall, as I say, the overall assessment is sort of neutral to positive, albeit in an investment context. What we are and have been saying to government is that the less disruption and uncertainty that can be created for investors, the better, given the investment hiatus that it can precipitate.

Stephen Rosser
Investment Director at NextEnergy Capital

As I say, across all of the different dimensions of REMA, we see neutral to positive, but the devil will be in the detail, and we look forward to working with government through that when they are able to update us on their current thinking.

Adam Forsyth
Head at Longspur Capital

That's great. Thanks.

Operator

Our next question is from Ian Schouler. Please unmute yourself and ask your question.

Operator

Good morning. I was just wondering about the revaluation of NextPower3 and the co-investments. That was done by $3.1 million. I mean, what were the key drivers of that?

Ross Grier
CIO at NextEnergy Capital

Stephen, you happy to lead on that?

Stephen Rosser
Investment Director at NextEnergy Capital

Yeah. Sorry, just coming off mute. NextPower3 obviously runs its own valuation, which is updated every quarter, which we then review and factor into the net asset value of the fund.

Stephen Rosser
Investment Director at NextEnergy Capital

In the period, particularly the portfolio in NextPower3 was revaluing one of the assets in particular, reflecting updates to its power sales strategy. We did see some impact from that over the course of the year, which is what you see there in that movement in the bridge.

Stephen Rosser
Investment Director at NextEnergy Capital

Okay. Thanks very much.

Operator

There are no further questions on the webinar. I will now hand over to Ross Grier to address the written questions submitted by the webcast page.

Ross Grier
CIO at NextEnergy Capital

Great. Thank you. We've had quite a few written questions. If we do not manage to make it through all of them, we'll aim to pick up these directly on a one-to-one basis in due course. Bear with me while I work through. First one, I think to you, Paul, please, is one from multiple investors, which I'll conflate into one question.

Ross Grier
CIO at NextEnergy Capital

Can you comment on the recent Foresight rumors and will the board consider strategic options now, or will any process of review of options be postponed until a full-time chair is appointed?

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Thank you, Ross. As you'd expect, we can't comment on market rumors or stories. However, what I can say to shareholders is the board is continuing to look at all avenues to increase shareholder value through corporate transactions, restructurings, anything that would be appropriate within the context of the company to deliver value. We're also acutely aware of our regulatory obligations, and if we were ever in a position where we had an executable proposal that we thought was in shareholders' interest, we would announce it accordingly and consult with shareholders.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

The other thing I will say in terms of the strategic options, I've made it really clear in my presentation to shareholders that the board is looking at anything and everything at this point in time, and we've engaged external advisors to help us model scenarios for the future for the company. It is very important that we don't take everything that NEC says to us at face value, and we take an independent, reasoned view of all future options for the company.

Ross Grier
CIO at NextEnergy Capital

Thanks, Paul. Moving on to the next question. NextEnergy Capital are successfully raising capital on their private funds. Why doesn't NESF go private? I think the private solar funds run by NEC all have different strategies, different types of return profiles in relative terms to the NextEnergy Solar Fund.

Ross Grier
CIO at NextEnergy Capital

Investors in the private fund side today have really been looking for additionality, so they're looking for that new build project and are generally held in something more like a 10-year closed-ended structure. The operating solar assets have been less attractive than new build portfolios. We obviously have an investment in NextPower3 from NESF itself. We are benefiting as NESF from that private fund work that we're doing. Also, as a platform at NEC, the additional funds that we manage allow us to continue to bulk out the team again, which NESF benefits from. NESF is benefiting from that private market activity that we're doing, and we continue to be live to market opportunities, as Paul has mentioned. Next question. You've covered some of this already, Paul, but I'll give you a second run at it.

Ross Grier
CIO at NextEnergy Capital

What type of strategic initiatives are on the table currently?

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

The board is looking at, as I say, all options. We've looked at everything ranging from new business models for the company through to acquisitions, being acquired ourselves, options to return capital to shareholders. We are modeling every possible scenario for the future and doing that in conjunction with appropriate external advice.

Ross Grier
CIO at NextEnergy Capital

Great. Thank you. Next question. Why has the share buyback program paused, and is the IM fee being reduced? Stephen, do you fancy taking the buyback one? I'll take the fee one.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Yeah, of course. The share buyback program was announced in June 2024, and we allocated, or the board allocated, GBP 20 million to the purchase of own shares through that. During the year, NESF bought back GBP 15.1 million, or just over that, in ordinary shares.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Average price was GBP 0.74 per share there, and total amount spent so far is just over GBP 11 million. That means we have GBP 15.1 million treasury shares at the end of the year. In conjunction with the board, what we're doing constantly is reviewing and assessing the appropriate sort of allocation of capital between the different potential uses of that capital. We took a decision based on where the current share price has been and the recent strengthening there and other factors driving that capital allocation to pause momentarily that buyback program, particularly because we've seen others in the sector spending significantly more on their programs and not moving the needle. Hopefully that gives a sense of where we are with that one. Ross, if you want to take the question on fees.

Ross Grier
CIO at NextEnergy Capital

Yeah, thanks.

Ross Grier
CIO at NextEnergy Capital

As a manager, we are in active discussions with the board on multiple fronts, including fees. What we are looking at is ensuring we have the appropriate fee structure in place that aligns with investors' outcomes over the coming years. Yeah, we continue that active discussion with Paul and the board as part of those strategic reviews that Paul has mentioned already. Next question for Paul. Why did Helen Nye decide to leave her role as Chair?

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Helen announced her intention to leave the board at a meeting back in May and to pursue other interests. She leaves the board, leaves the company in a very, very strong position with our good wishes. We wish Helen all the best for the future.

Ross Grier
CIO at NextEnergy Capital

Thank you, Paul. Next question.

Ross Grier
CIO at NextEnergy Capital

You have fixed price PPA falling 30% next year to GBP 56,000 per megawatt hour with dividends only 1.1 times covered. Are you signalling that dividend is not sustainable and will be cut after the current financial year, or are these offsetting positives somewhere? It is worth remembering that around 50% of the revenues that we generate come from those long-term government incentives, your ROCs and your feed-in tariffs. That remains the case. Those are inflation-linked, so continue to drive in the right direction. We obviously run an active management process around how we forward-sell power. Stephen talked to that in the presentation. We therefore opportunistically increase those hedges as we see prices that allow us to drive additional revenues and additional dividend cover into the platform.

Ross Grier
CIO at NextEnergy Capital

We remain comfortable with how we are currently driving the forward hedging program forward at the moment to maximize that kind of revenue and reward side, but also balancing risk to any downside environment that might exist as well. Next question. Stephen, maybe talk to—I'm just trying to conflate a few questions here—maybe talk to the capital recycling program, independence of purchasers, and speed of transactions as well.

Stephen Rosser
Investment Director at NextEnergy Capital

Yeah, sure. We have completed the first three phases of the capital recycling program, two of which within the year. Thinking about independence, one of those buyers was a third party. The other was independent to NESF, but managed by NEC Vehicle.

Stephen Rosser
Investment Director at NextEnergy Capital

In relation to transactions where we do have a buyer that is managed by NextEnergy Capital, obviously there is a significant amount of enhanced governance around that sort of transaction to ensure that the appropriate steps are being taken and that we are driving value for shareholders in the right way. We obviously work very closely in collaboration with the board of NESF to make sure that is overseen appropriately. The fourth stage of the capital recycling program continues. It is taking longer than we all hoped it would, but remains in a competitive third-party process. Unfortunately, the M&A market has been a bit soggy over the course of the year, but we will continue to push that forward in collaboration with the parties we are talking to and obviously update in due course.

Ross Grier
CIO at NextEnergy Capital

Right. Thank you, Stephen. A bit tight on time. I think last two questions.

Ross Grier
CIO at NextEnergy Capital

Can the manager confirm the way the long-term power price assumptions are calculated in the model beyond the end of the subsidies? Stephen, do you want to take that?

Stephen Rosser
Investment Director at NextEnergy Capital

Yeah. We use a blend of advisory curves from market-leading independent advisors. The detail for that is all in the annual report and also in the NAV announcements that go out quarterly. You will be able to see that already out there.

Ross Grier
CIO at NextEnergy Capital

Great. Thank you. Final question, one for you, Paul. Did you consider a tiny increase in the dividend in order to move towards that dividend hero status?

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

Ultimately, the board's dividend strategy is really driven around the most appropriate way of balancing the needs to pay income to our shareholders whilst looking at our long-term strategy to maintain the portfolio and deal with growth options for the future.

Paul Le Page
Paul Le Page
Chairman at NextEnergy Solar Fund

In practice, dividend hero status is not something that would drive the board's dividend strategy. Great. Thank you, Paul. We will draw things to a close there. Thank you all for joining this morning. I hope you found the presentation useful, and we look forward to being in touch in due course with further developments. Thank you for joining today's call. We are no longer live. Have a nice day.

Executives
    • Paul Le Page
      Paul Le Page
      Chairman
Analysts
    • Analyst
    • Adam Forsyth
      Head at Longspur Capital
    • Joe Pepper
      Equity Research Analyst at RBC Capital Markets
    • Stephen Rosser
      Investment Director at NextEnergy Capital
    • Ross Grier
      CIO at NextEnergy Capital
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