Investment Adviser’s Report
Michael Bonte-Friedheim
Chief Executive Officer and Founding Partner of the NextEnergy Group
Ten years of NESF success, a celebration from Chief Executive Officer and Founding Partner of the NextEnergy Group, Michael Bonte-Friedheim:
“The NextEnergy Group, established in 2007, is a leading solar specialist with over 300 employees globally. Since its inception, the NextEnergy Group has been active in the development, construction, and ownership of solar assets around the globe. The Group continues to grow its impressive track record with over $4bn of funds under management, having increased its development and operational capacity across multiple strategies to over 10GW.
NESF is the NextEnergy Group’s flagship listed strategy that launched on the London Stock Exchange in April 2014, having raised £85.6m of equity. Since 2014, NESF has grown substantially, with a total of £591.9m in equity raised and a Gross Asset Value of £1,155m as at 31 March 2024. NextEnergy Solar Fund has become a FTSE 250 constituent, increased its high-quality portfolio to 103 operating assets, achieved its first 1GW installed capacity milestone, and delivered a total shareholder return of 37% and a total Net Asset Value (“NAV”) return of 70% since launch, inclusive of dividends and the current share price discount to NAV. To celebrate NESF’s ten-year anniversary, I wanted to touch on some of the key drivers that have led to the Company’s successes over the last decade.
Since 2014, NESF has grown substantially, with a total of £591.9m in equity raised and a Gross Asset Value of £1,155m as at 31 March 2024.
1. Active Management Read More
NextEnergy Capital is an active Investment Adviser that continues to seek and deliver value for NESF shareholders. This is crucial in reassuring shareholders that the Investment Adviser will only pursue new opportunities that are positive for the Company’s investment objective and deliver a strong, reliable dividend, whilst ensuring that the dividend remains covered from the proactive and efficient management of the portfolio of assets.
2. Disciplined Balance Sheet Structuring Read More
NextEnergy Capital prides itself on its disciplined approach to capital management to ensure NESF maintains a solid foundation in any market environment. It is the only renewable investment company that benefits from non-voting, non-amortising preference shares, providing long term funding at an attractive fixed rate coupon in the current interest environment. This reduces financing risk relative to any similar platform carrying higher levels of traditional debt.
3. Secure Revenue Visibility Read More
NESF has an impressive 10-year track record of paying a well-covered dividend that has increased year on year. NextEnergy Capital carefully manages NESF’s revenue visibility, with c.50% of revenues coming from government backed subsidies, and the remaining c. 50% of revenues being carefully managed through an active energy sales strategy.
4. Attractive Proprietary Pipeline of Opportunities Read More
NESF has an exclusive pipeline of solar power and energy storage opportunities that provides potential for future accretive growth in the NAV and enhanced revenue returns. Furthermore, the Investment Adviser continues to monitor opportunities to reinvest capital into the Company’s existing portfolio of assets to optimise its performance and sustain long-term asset health. The Investment Adviser’s unique ability to deliver value across the full life-cycle of a project, from development to operation, through access to expertise across the NextEnergy Group, sets it apart and supports long-term returns for investors. These are key components of NESF’s evolution and vital for society’s drive towards a decarbonised grid.
It seems ironic that, in a year when NESF is celebrating multiple successes on a portfolio level and turning 10 years old, macroeconomic conditions have not been favourable, with sustained high interest rates and cost of living considerations having a material impact on the Company’s share price, a theme mirrored across the UK equity markets and, in particular, the listed investment company sector. Despite recent challenges, publicly listed investment companies remain pivotal in directing funds toward infrastructure projects and present investors with attractive investment opportunities.
NESF continues to trade at a discount which has been greater than 10% across a 12-month period and, in line with the Company’s Articles, this will trigger the presentation of a special resolution for discontinuation at the upcoming Annual General Meeting in August. Having delivered a successful 10 years of growth and returns for NESF shareholders to date, I would personally like to share how excited I am for the future growth of this Company over the next decade and would encourage all shareholders to vote against discontinuation at the upcoming AGM in due course.