In an investment environment where many dividends are on shaky ground and bond yields are at rock bottom, solar funds provide a very attractive source of income.
NextEnergy Solar Fund Ltd (LON:NESF) says it is the lowest-risk solar fund on the market, has one of the highest dividend yields and is the only one to have successfully built subsidy-free UK solar plants in the UK.
The fund currently has a diverse portfolio of 763 megawatts (MW) of power from 91 assets, mostly in the UK but with eight in Italy.
NESF’s average remaining life for its solar assets is 27.1 years, as at the end of September.
Excluding rooftop assets, individual projects vary from 1.7MW up to 50 MW, and are mostly in the South-West and Midlands, where there is a more reasonable cost for the sort of low-grade agricultural or industrial land it needs.
NESF is differentiated by its access to NextEnergy Capital Group (NEC Group), its investment manager, which has a strong track record in sourcing, acquiring and managing operating solar assets. WiseEnergy, NEC Group's specialist operating asset management division, has since its founding provided operating asset management, monitoring, technical due diligence and other services to over 1,500 utility-scale solar power plants with an installed capacity in excess of 2.3GW.
How's it doing?
The portfolio of 91 operating solar assets was attributed a net asset value of £583.5mln at the end of September 2020, or 99.6p per share.
The share price, which along with the rest of the sector was trading at a fat premium in recent year, has dropped to just a few pennies above the NAV per share.
For the current year, NEC Group chief executive Michael Bonte-Friedheim and his team are targeting a total payout of 7.05p per share, payable quarterly. The shares are trading with a dividend yield of above 6.5%, based on the current year’s target dividend.
- Third UK subsidy-free plant energised in October 2020
- Fourth and other subsidy-free plants in the pipeline as NESF targets building out 150 MW of total subsidy-free capacity, up from 64 MW currently
- Shareholders have just approved a proposal for the 15% GAV limit on non-UK OECD assets to be lifted to 30%
- NESF currently has energy storage batteries co-located with two of its solar plants and the investment manager believes that in the future batteries will be able to generate incremental returns and/or risk mitigation for solar generators.