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    NESF   GG00BJ0JVY01

NEXTENERGY SOLAR FUND LIMITED

(NESF)
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NextEnergy Solar Fund : Battery Storage Strategic Paper

10/06/2021 | 05:56am EST

NextEnergy Solar Fund ("NESF") recently announced its first significant strategic step into UK energy storage, a highly complementary asset class to solar and the existing NESF portfolio. This document provides investors with the strategic rationale behind this recent transaction and NESF's next steps.

Background

NESF has operated two small-scale battery assets since 2017

  • NextEnergy Capital ("NEC") has been monitoring the UK battery storage sector since 2017, when NESF acquired two small scale battery assets as part of Salcey Farm power plant (5.5MW)
  • NESF shareholders voted for an expansion to the investment policy at the 2020 AGM, allowing the investment manager to invest up to 10% of the Gross Asset Value into standalone energy storage assets
  • Battery technology is now viable and value-accretive for inclusion in the NESF portfolio given recent advances in technology
  • NESF recently announced a 250MW joint venture partnership ("JVP") with Eelpower, a UK energy storage specialist, with NESF committing £100m of investment to the partnership's pipeline
  • NEC remains a specialist in the solar sector, with employees who are also experienced in the energy storage sector. The partnership with a specialist in energy storage helps to ensure minimum risk whilst constructing the assets and maximum performance once operational

Key Rationale

Diversification

Revenue

Growth

Technology

Portfolio

Enhance NESF's portfolio whilst adding multiple positive benefits

  • Adding energy storage assets to the portfolio provides NESF with multiple diversification benefits
  1. Revenue - multiple attractive revenue streams and opportunities that are non-correlated to

solar PV

  1. Geographical - regional diversification in the UK
    1. Asset Class - providing further diversification of asset type, which lowers risk to the portfolio
  • Energy storage offers a different set of revenue opportunities compared with solar
  1. Arbitrage Energy Trading, in effect buying low and selling high during periods of energy price volatility
  1. The Capacity Market, the UK policy mechanism from which storage assets derive revenues, based on the availability to dispatch electricity during periods of system volatility
    1. Ancillary Services (including Firm Frequency Response and Dynamic Containment) providing sub-second increases or decreases in power output from the battery to maintain stability of grid frequency
  • UK energy storage assets form a significant part of NESF's growth strategy
  • National grid will require substantial energy storage in the future to stabilise the grid
  • Energy storage assets are anticipated to be dividend accretive to NESF when fully operational, providing attractive returns
  • NESF has partnered with a specialist in the energy storage sector, ensuring high-quality assets are constructed
  • The JVP will use the latest, most viable forms of battery technology for its projects
  • Ensuring the highest level of technology will allow the JVP battery projects to maximise battery duration
  • NESF currently has 99 operational solar PV assets, providing an attractive opportunity to deploy co- located energy storage opportunities in the UK
  • Batteries are a highly complementary asset class to solar PV, and thus the NESF portfolio
  • Batteries act as a key enabler to the further market deployment of solar assets in the UK

Future Opportunity

Future standalone and co-located battery opportunities

  • NESF's mature portfolio of 99 assets provides a great foundation to build out further its 10% of GAV investment allocation into the energy storage sector
  • There are two key opportunities for UK energy storage assets within the NESF portfolio:
  1. Standalone battery storage projects - providing additional asset and geographical diversification
    1. Co-locatedbattery storage projects - utilising NESF's portfolio and grid connections to build battery assets on sites alongside its existing solar plants
  • The implementation of battery storage assets in the UK will further increase the penetration of renewable energy generation adding stability to the renewable energy component of the energy mix

Joint Venture Partnership

Framework for the acquisition of up to 250MW energy storage assets

  • The Joint Venture Partnership ("JVP") is owned 70% by NESF and 30% by Eelpower with NESF receiving a preferential return (in line with its target returns) for the money it commits to the partnership and profits above this then split in line with the shareholding
  • The JVP includes a framework for the acquisition of up to 250MW of energy storage asset projects
  • Eelpower is a specialist in the UK energy storage market with extensive experience in the delivery, management, and optimisation of battery assets in the UK having
  • NESF partnered with Eelpower due to its strong track record, having been active in the UK storage market since 2015, crafting a specialism in the energy storage sector
  • Eelpower will provide EPC and ongoing specialist asset management services to NESF's JVP storage assets and will source further acquisition opportunities for the JVP

Maiden 50MW project

Providing vital services to the local grid in Scotland

  • The Joint Venture's first signed energy storage project was announced in September 2021
  • Once constructed, the energy storage asset will have a 50MW installed capacity
  • The asset is strategically located in Fife, Scotland, providing vital services to the local grid
  • The asset target energisation date is 2022

Strategic focus 2021/22

NESF strategic focus going forward

1

2

3

Unlock value-accretive growth

Expand portfolio into international solar assets, energy storage and solar PE structures

Asset performance

Focus on delivering technical, operational and financial performance across the portfolio

Manage risk

Reduce revenue volatility and increase dividend certainty

For further information please contact:

NextEnergy Capital

Michael Bonte-Friedheim

Ross Grier

Peter Hamid

Founding Partner & Group CEO

UK Managing Director

NESF Investor Relations

M: +44 7802 217028

M: +44 7793 712980

M: +44 7592 141536

michael.bontefriedheim@nextenergycapital.com

ross.grier@nextenergycapital.com

peter.hamid@nextenergycapital.com

Disclaimer - Important Information

This document is issued by Next Energy Capital Limited ("NEC"), which is authorised and regulated by the UK Financial Conduct Authority ("FCA") with registered number 471192. The contents of this document are strictly private and confidential and accordingly may not be published, reproduced, copied ,transmitted or disclosed to any third party.

This document is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this document except on the basis of information in the prospectus dated 10 November 2014 (and any supplement thereto) (the "Prospectus") published by NextEnergy Solar Fund Limited (the "Fund") in connection with its placing programme to issue up to 250,000,000 ordinary shares ("Ordinary Shares") and/or C shares, which will be admitted to the premium segment of the Official List of the Financial Conduct Authority (the "Official List") and to trading on London Stock Exchange plc's main market for listed securities (the "London Stock Exchange"), (together, "Admission"). A copy of the Prospectus is available from the Fund's website. This document is not an offer to sell, or a solicitation of an offer to acquire, securities in the United States or in any other jurisdiction. Neither this document nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

The information contained in this document has been prepared in good faith but it is subject to updating, amendment, verification and completion. This document and any terms used herein are a broad outline of the Fund only and are furnished on a confidential basis for the purpose of evaluating a potential investment in the Fund. This document is designed solely to assist exploratory discussions with a limited number of potential investors. Recipients of this document who intend to purchase or subscribe for shares in the Fund are reminded that any purchase or subscription must be made solely on the basis of the information contained in the Prospectus.

None of the Fund, NEC, Cenkos Securities, Shore Capital and Corporate Limited or Shore Capital Stockbrokers Limited or any of their respective directors, officers, employees, agents or advisers or any other person makes any representation, warranty or undertaking express or implied, as to the accuracy of completeness of the contents of this document, which has been prepared for background purposes. In particular, but without prejudice to the generality of the foregoing, past performance is no guarantee of and may not be indicative for future results and no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any assumptions, targets, forecasts, projections, estimates or prospects with regard to the anticipated future performance of the Fund or any other information herein. No responsibility or liability is accepted by any such person for the occurring or completeness of the contents of the document or for any errors, misstatements or omissions herein. The exclusion set out in this paragraph do not extent to an exclusion of liability for, or remedy in respect of, fraudulent misrepresentation.

The Fund is incorporated in Guernsey, Channel Islands and is a registered closed-ended investment scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, and the Registered Collective Investment Scheme Rules 2008. The Fund is not an Authorised Person under the UK Financial Services and Markets Act 2000 ("FSMA") and, accordingly, will not be registered with the FCA. The Fund will therefore only be suitable for professional or experienced investors, or those who have taken financial advice. Regulatory requirements which may be deemed necessary for the protection of retail or inexperienced investors do not apply to listed funds. By investing in the Fund you will be deemed to be acknowledging that you are a professional or experienced investor or have taken appropriate professional advice and accept the reduced requirements accordingly. You are wholly responsible for ensuring that all aspects of the Fund are acceptable to you. Investment in listed funds may involve special risks that could lead to a loss of all or a substantial portion of such investment. Unless you fully understand and accept the nature of the Fund and the potential risks associated with investing in it, you should not invest in the Fund.

An investment in the Fund will be suitable only for sophisticated investors who fully understand and are willing to accept high risks and lack of liquidity involved in the Fund's investment strategy. The Fund's investment practices, by their nature, may be considered to involve a high degree of risk.

No information contained herein constitutes an offer, a solicitation or invitation to make an offer or recommendation, to acquire or dispose of interests in the Fund or other investment instruments, nor to effect any transaction, or to conclude any legal act of any kind whatsoever. Nothing contained herein constitutes financial, legal, tax, investment or other advice, nor should any investment or any other decisions be made solely based on the information set out herein.

The interests in and documents constituting the Fund are not the subject of any filing with, nor have the interests been approved or disapproved by, any governmental agency, regulatory authority or any national securities exchange. Accordingly, such interests in and documents constituting the Fund shall not be registered under the securities laws of any jurisdiction, other than as required to qualify for exemptions from supervision, registration, prospectus and reporting requirements of such laws . The Fund and its management entity shall not be supervised, regulated or passed upon by any securities or investments regulatory body.

The information provided is confidential, for personal use and for informational purposes only, subject to changes without notice. It is not to be reproduced, duplicated, distributed, transmitted or used in whole or in part for any other purpose by any recipient hereof. Any recipient acting in the capacity of a discretionary investment manager must not distribute or transmit the whole or any part of this document to any of its clients or other third parties. Accordingly, no person has been authorised to give any information or to make any statement regarding the Fund other than which is contained herein and, if given or made, such information or statement must not be relied upon as having been authorised.

The Fund has limited investment and trading history. Results can be positively or negatively affected by market conditions beyond the control of the Fund or any other person. The returns set out in this document are targets only. There is no guarantee that any returns set out in this document can be achieved or can be continued if achieved, nor that the Fund will make any distributions. There may be other additional risks, uncertainties and factors that could cause the returns generated by the Fund to be materially lower than the returns set out in this document.

This document may include "forward-looking statements". All statements other than statements of historical facts included in this document, including, without limitation, those regarding the Fund's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Fund's investments) are forward-looking statements. Forward-looking statements are subject to risks and uncertainties and accordingly the Fund's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These factors include but are not limited to those described in the Prospectus. These forward-looking statements speak only as at the date of this document. The Fund and NEC expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by FSMA, the Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.

Disclaimer

NextEnergy Solar Fund Ltd. published this content on 06 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 October 2021 09:55:00 UTC.


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Sales 2021 56,6 M 75,1 M 75,1 M
Net income 2021 40,2 M 53,4 M 53,4 M
Net Debt 2021 187 M 248 M 248 M
P/E ratio 2021 15,8x
Yield 2021 7,08%
Capitalization 582 M 776 M 773 M
EV / Sales 2020 -52,7x
EV / Sales 2021 13,6x
Nbr of Employees -
Free-Float 99,9%
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Managers and Directors
Kevin John Lyon Chairman
Patrick Anthony Seymour Firth Independent Non-Executive Director
Victor Holmes Senior Independent Non-Executive Director
Joanne Peacegood Non-Executive Director