NextEnergy Solar Fund Ltd (LSE:NESF) shares offer a 7.0% dividend yield, covered by cash generated from the portfolio, which analysts at QuotedData said "represents an attractive entry point".
Over the 12 months ended 30 September 2021, the assets generated enough energy to power 299,000 UK homes for a year, with the power also avoiding the production of the equivalent of 229,000 tonnes of CO2 emissions.
With net asset value (NAV) rising to 103.1p at 30 September from 98.9p at 31 March 2021, as rising power prices and higher inflation drove an uplift in NESF’s (NAV) in the past period, QuotedData said "it might be reasonable to assume that there is more to come on that front".
The investment trust, which focused mainly on the UK solar power market, along with exposure to battery storage and solar assets in other OECD countries, had 99 operational solar assets as at end-September with a total power capacity of 895MW.
NESF has also made a US$50mln commitment to an limited partnership vehicle NextPower III ESG, which acquires solar power plants at the ready-to-build stage or in operations across high-growth OECD international markets.
The trust has delivered NAV total returns averaging at 6.8% per year and the QuotedData analysts said exposure to construction-phase assets achieved through NextPower III ESG "offers potential for further NAV growth as these assets are energised".
In common with peers, the analysts noted that NESF’s portfolio is valued on a discounted cash flow basis, with the most-recent weighted average discount rate being 6.3%.
At 30 September 2021, the calculation assumed long-term inflation of 2.5% and short-term (one-year) inflation of 4.8% (compared to actual CPI inflation of 5.4% and RPI of 7.5% in December); power prices up to 2025 were estimated at £71.1/MWh and longer-term power prices at £44.1/MWh; the UK corporation tax estimated to be 19% up to 2023 and 25% thereafter; the weighted average discount rate was 6.3%.