NESF doubles down on PPA strategy as its installed capacity increases by 10%

NextEnergy Solar Fund celebrates ‘milestone achievement’ as it reaches 150MWp subsidy-free target

NESF’s portfolio generated 539GWh during the period. Image: NESF.

NextEnergy Solar Fund’s (NESF) total installed capacity now stands at 895MW, with the company continuing to focus on long-term corporate power purchase agreements (PPAs).

Releasing its interim results for the period ended 30 September, NESF highlighted how the addition of five solar assets has increased its number of operating solar assets to 99, with its installed capacity having risen by 10% compared to 31 March.

It also stated that it is continuing to consolidate its leadership position in the UK long-term corporate PPA market. It pointed to the energisation of the 50MW South Lowfield site, which it said represents a “significant milestone” in it strategy of establishing a foothold in the long-term, high-credit UK corporate PPA market. The Camden portfolio, which includes South Lowfield and the 50MW The Grange, has a 15-year PPA in place covering c.75% of the electricity to be generated over the next 15 years, with the counterparty being brewer AB InBev. This portfolio demonstrates NESF’s ability to establish itself as a leader in this subsidy-free space, the company said.

Its remaining subsidy-free development assets, the 50MW Hatherden and 36MW Whitecross sites have been prepared for construction during the period, although starting construction of these sites will depend on the supply-chain environment. NESF is targeting a 150MW subsidy-free portfolio, which is set to be complete with the energisation of these assets.

In addition to the company’s subsidy-free strategy, NESF has agreed to finance, design, build, operate and own a portfolio of solar assets on sites operated by the Anglian Water Group, with the power generated from these assets to be sold directly to Anglian under a 25-year PPA.

“This emerging PPA market can provide long-term, reliable cashflows for the company, whilst supporting large corporates’ energy needs through their desire to consume renewable green energy and to help tackle climate change,” NESF said.

During the period, its portfolio generated +1.1% above budget, with 539GWh generated, although this is a drop on 2020, when the portfolio generated 551GWh; +11.1% above budget. NESF said that the portfolio would have generated c.2.6% above budget, but Distribution Network Operator Outages negatively impacted on portfolio generation.

It detailed how, as at 30 September 2021, 35 UK assets with a combined capacity of 337MW had secured five, 10 or 15 year lease extensions, with NESF continuing to work on extending the life of the remaining assets. It is targeting a further five assets for the remainder of the current financial year to 31 March 2022.

The period also saw NESF diversify into energy storage through a £100 million joint venture partnership with Eelpower, with the first 50MW acquisition now signed and being prepared for construction.

The company’s profit before tax was £45.5 million, a rise on £23.6 million for the same period in 2020. Earnings per ordinary share were 7.74p, while cash income was £28.7 million, a drop on the £32.5 million for 2020.

Of the company’s revenues during the period, 59% were derived from government subsidies, with the average weighted life of the subsidies being 13.5 years at the end of the period. The remaining 41% of the company’s revenues were derived from selling the electricity generated to counterparties in the open market.

Kevin Lyon, chairman of NextEnergy Solar Fund, lauded the period as both finacially and operationally successful for the company, with its battery diversification and commitment of US$50 million (£37 million) for its NextPower III fund being key milestones.

“The 2021 interim period has put UK energy at the forefront of minds and agendas driven by unprecedented high-power prices in the UK, global gas shortages, and the recent UN climate change conference, COP26, highlighting the immediate need to switch to renewable energy sources like solar,” he said.

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