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  • Writer's pictureMark Watson-Mitchell

NextEnergy Solar Fund - too steep a discount to asset value


Key facts



NextEnergy Solar Fund (LON:NESF)

Market capitalisation




52-week high/low

109p / 71p

F’cst dividend per share


Net Asset Value per share


Average Analyst Target Price



Next is Now

The FTSE-250 listed NextEnergy Solar Fund is a specialist solar energy and energy storage investment company.

The Guernsey-based Fund’s Mission Statement is to create a more sustainable future by leading the transition to clean energy.

Primarily it invests in unity scale solar assets, alongside complementary ancillary technologies, like energy storage.

The NextEnergy Solar Fund’s investment objective is to provide ordinary shareholders with attractive risk-adjusted returns, principally in the form of regular dividends, by investing in a diversified portfolio of utility-scale solar energy and energy storage infrastructure assets.  

The Fund believes that it makes a material difference in helping to tackle climate change and increasing energy security in the countries in which its assets operate.

It derives more than 50% of its revenues from services that are contributing to environmental objectives such as climate change mitigation and adaptation, waste and pollution reduction and the circular economy.

The majority of its long-term cash flows are inflation-linked via UK government subsidies.

At the end of its last trading year in December 2023, the Fund had a gross asset value of £1.173bn of assets under management, while its net asset value stood at £636.4m, giving a net asset value of 107.7p per share.

In the last 10 years the Fund has shown a 4.75% compound annual dividend growth rate, since its IPO in 2014 it has declared total dividends of £333m.

The Fund’s Assets

The Fund, as at the 15th March this year, held 102 operating solar assets across 9 geographies, with an installed capacity of 979MW, generating enough renewable energy to power the equivalent of c.254,000 average UK home electricity needs for an entire year. 

A megawatt is a unit of power that measures the rate of energy conversion or energy transfer per second, it is equivalent to one million watts, and it is a common unit used to describe the power output of large power plants or energy-generating facilities.

NextEnergy Solar Fund as at 15th March 2024 held 2 operating solar co-investments, while it had £50m in private solar infrastructure investment.

The Fund may invest up to 30% of its gross asset value in non-UK OECD countries, 15% in solar-focused private infrastructure funds, and 10% in energy storage assets. 

Investment Objective

Its investment objective is to provide shareholders with attractive risk‑adjusted returns, principally in the form of regular dividends, through a diversified portfolio of solar energy infrastructure assets and complementary technologies, such as energy storage.

The Fund is currently advancing a pipeline of UK solar, international solar, battery storage and co-investment opportunities to complement the portfolio and diversify asset specific and market risks.

Its Investment Adviser continues to consult investors in support of an increase to the company’s investment policy energy storage limit, from 10% of Gross Asset Value, up to 25%.

Investment Manager and Adviser

NextEnergy Capital IM Limited and NextEnergy Capital Limited, both members of the NextEnergy Group, act as Investment Manager to the Company and Investment Adviser to the Investment Manager, respectively.

The NextEnergy Group is a leading specialist solar and energy storage investment manager and asset manager focussed on the renewable energy sector.

Since it was founded, the NextEnergy Group has provided asset management, technical due diligence and other services to over 2,855 solar power and energy storage assets, totalling an installed capacity in excess of 4.3GW.

Its asset management clients include solar funds (in addition to the company),

banks, private equity funds and other specialist investors.

260MW International Solar Co-Investments Energised

On Friday 15th March 2024 the Fund announced the energisation of its first two international solar co-investments alongside NextPower III ESG, bringing an additional 260MW online in Europe and increasing NESF's total installed net capacity to 979MW.

Its first two co-investments with the NextPower III ESG fund are two solar photovoltaic projects - the larger 210MW Santarém project in Portugal, and the 50MW Agenor project in Cadiz, Spain.

NESF directly holds 13.6% of Santarém and 24.5% of Agenor as well as indirect exposure through its 6.21% holding in NPIII ESG.

Both of these projects represent direct project investments by NESF which sit alongside a US$50m commitment in the NextPower III ESG fund itself.

The arrangement allows NESF to gain accelerated access to solar projects in a wide range of countries bringing useful geographic diversity to the fund.

The ability to co-invest allows NESF an attractive route to project returns on a no-fee, no-carry basis.

Upon the announcement the Fund’s Chair, Helen Mahy, stated that:

"Energisation of 50MW at Agenor in Spain and 210MW at Santarém in Portugal marks a significant milestone in NESF's expansion and international diversification of our operational solar asset base.  

These projects will generate electricity for the equivalent of more than 126,700 homes and demonstrate our commitment to providing reliable, renewable energy solutions.  

Both projects also benefit from a 100% PPA with Statkraft which ensures long-term contracted revenue and visibility of cash flow."


With some 591m shares in issue, its ten largest holders include Artemis Investment Management (10.6%), M&G Investments (9.6%), Hargreaves Lansdown (6.8%), Gravis Capital (6.4%), Legal & General (4.7%), Investec Wealth (3.9%), Privium Fund (3.8%), Interactive Investor (3.7%), Handelsbanken Wealth & Asset Management (3.3%) and AJ Bell (2.7%).

Analyst’s View – A Re-Rating Is Due

Adam Forsyth at Longspur Research considers that the energisation of two co-investments in Europe by the Fund brings exposure to 260MW of capacity in Europe, highlighting the successful geographic diversity brought to NESF from its co-investment agreement with NPIII ESG.

The agreement offers NESF an additional route to further asset growth in PV at a time when projects are benefiting from low module prices across Europe.

Analyst AdamForsyth at QuotedData reckons that the Fund is on track to pay 8.35p in dividends, with forecast dividend cover of about 1.3x, stating that a -re-rating is overdue, while the shares of NESF offer investors a High- and Growing-Income opportunity.

They find it hard to comprehend why any stock with a nine-year track record of growing covered dividends in line with inflation, would not trade on a much lower dividend yield.

“The recent price weakness has afflicted the whole sector means that dividend translates to a dividend yield of 11.1%, one of the highest in its sector, and the share price on a near 30% discount to net asset value, provides the prospect of attractive capital appreciation when sentiment towards the sector recovers.”

Discount to net asset value is too steep

The Fund’s shares stand at a significant discount to net asset value, which could tempt its Management to consider a Share BuyBack Programme to reduce that gap, bringing its share price closer to a Premium, thereby enabling the raising of further funds by way of the issue of new shares.




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