NextEnergy Solar Fund Limited

(“NESF” or the “Company”)

Unaudited Quarterly Net Asset Value & Operational Update

NextEnergy Solar Fund, a leading specialist investor in solar energy and energy storage, announces its unaudited Q1 Net Asset Value (“NAV”) and operational update for the period ended 30 June 2024.

Key Highlights

Financial:

· Unaudited NAV per ordinary share of 101.3p (31 March 2024: 104.7p).

· Unaudited ordinary shareholders’ NAV of £598.6m (31 March 2024: £618.6m).

· Unaudited Gross Asset Value (“GAV”) of £1,124m (31 March 2024: £1,155m).

· Financial debt gearing (excluding preference shares) of 29.1% (31 March 2024: 29.3%).

· Total gearing (including preference shares) of 46.7% (31 March 2024: 46.4%).

· Weighted average cost of capital of 6.4% (31 March 2024: 6.4%).

· Weighted average cost of debt of 4.5% including preference shares (31 March 2024: 4.5%).

· Weighted average discount rate across the portfolio of 8.0% 1 (31 March 2024: 8.1% 1).

Dividend:

· Attractive high dividend yield of c.10%, as at closing share price on 9 August 2024.

· Total dividends declared of 2.10p per ordinary share for the Q1 period ended 30 June 2024 (30 June 2023: 2.08p).

· Target dividend of 8.43p per ordinary share for the year ending 31 March 2025 (31 March 2024: 8.35p).

· Forecasted target dividend cover of between 1.1x-1.3x for the year ending 31 March 2025.

· Total ordinary dividends declared since IPO of £357m.

Portfolio:

· Portfolio contains 102 1 operating assets following the planned capital recycling programme sale of Whitecross, a 36MW operating solar asset (31 March 2024: 103 1).

· 980MW 2,3 of installed capacity (31 December 2023: 1,015MW 2,3).

· Remaining weighted asset life of 25.9 4 years (31 March 2024: 26.6 years).:

· The Company has successfully delivered two phases of its Capital Recycling Programme at attractive premiums.

· As at 30 June 2024 the Capital Recycling Programme has delivered:

o Two asset sales totalling 95.22MW of installed capacity.

o Raised £42.2m total capital.

o Added 1.84pps to NAV.

o Paid down £38.8m of the Company’s short-term Revolving Credit Facilities.

· Following the successful completion of the second phase of its Capital Recycling Programme, subsequent phases

Share Buyback Programme:

· The Board announced an initial Share Buyback Programme of up to £20m on 18 June 2024.

· As of 13 August 2024, 2,208,090 shares have been purchased and are currently being held in the Company’s treasury account.

Helen Mahy, Chairwoman of NextEnergy Solar Fund Limited, commented:

“This has been a strong quarter for NESF as the Company continues to narrow its discount. This has been achieved through careful management of the portfolio, including the successful sale of assets as part of our Capital Recycling Programme, and the initiation of the Company’s Share Buyback Programme. We believe there are tailwinds which will continue to drive the growth of the UK solar market and that NESF is well-positioned to capitalise on these to deliver continued shareholder value.”

Michael Bonte-Friedheim, CEO of NextEnergy Group said:

“We are pleased with the progress that has been made during the quarter as NESF continues to represent an attractive investment opportunity for existing and new investors, especially with the successful completion of the second phase of our Capital Recycling Programme. NESF continues to offer one of the highest yields for shareholders in the FTSE 350 and we are confident that the UK solar and energy storage markets stand to gain from the election of a new Labour government, which has prioritised renewable energy as the UK looks to meet its Net Zero targets.”

The movement in the NAV over the period was driven primarily by the following factors:

· Increase due to time value, reflecting the change in the valuation as a result of changing the valuation date, prior to adjusting for any outflows of the Company. The increase in value is attributable to the unwinding of the discount applied to cash flows for the period when calculating the DCF.

· A decrease in project actuals showing the difference between actual outturn vs budgeted forecasts, driven by below expected irradiation levels throughout the quarter.

· Future near-term power price forecasts reflect recent higher gas prices (June 2024). Gas prices average 16% higher than the previous forecast, as stronger LNG demand from Asia over summer months and various supply outages tightened short-term market balance. Downward corrections in offshore wind and solar capacity in the short term also put upward pressure on prices.

· In the medium-term, the power price forecast is consistent with previous quarters, with electricity prices falling as the deployment of renewables, particularly offshore wind, increases to reach the Government’s target of 50GW of offshore wind, countervailing the upward pressure from higher commodity prices and electricity demand.

· The trend for wholesale electricity prices in the long-term remains the same as previous quarters, with a slow decline expected due to increasing wind and solar capacities, driven by decarbonisation targets and a gentle decline in assumed costs.

· BESS margins have declined in the short-term (2024-2028) in line with the decrease in wholesale power prices since Q3’23 (July – September 2023), largely due to declines in gas and carbon prices. This decline, driven by a well-supplied energy market following the initial shock from the Russian invasion of Ukraine, has reduced the size of energy trading opportunities available for battery storage projects.

· The valuation incorporates revisions to short-term inflation forecasts from external third parties.

· The sale of Whitecross as part of phase II of the Capital Recycling Programme.

· The revaluation of NextPower III ESG.

· The dividends declared and operating costs incurred during the year, this includes both ordinary and preference share dividend payments.

· Other movements in residual value include changes in FX rates, fund operating expenses, and other non-material movements. Included here is a one-off extraordinary cost associated with the refinancing of the RCF facilities.

Inflation Linkage and Updates

The Company continues to take a consistent approach to its inflation assumptions, using external third-party, independent inflation data from HM Treasury Forecasts and long-term implied rates from the Bank of England for its UK assets. For international assets, IMF forecasts are used. Long-term assumptions are aligned with market consensus including transition to CPI from 2030.

Discount Rate Assumptions

For the UK portfolio, the Company uses multiple sources for UK power price forecasts. Where power has been sold at a fixed price under a Power Purchase Agreement (“PPA”) (a hedge), these known prices are used. For periods where no PPA hedge is in place, short-term market forward prices are used. After two years, the Company integrates a rolling blended average of three leading independent energy market consultants’ long-term central case projections.

For the Italian portfolio, PPAs are used in the forecast where these have been secured. In the absence of hedges, a leading independent energy market consultant’s long-term projections are used to derive the power curve adopted in the valuation.

Power Purchase Agreement Strategy

NextEnergy Solar Fund continues to lock in PPAs over a rolling 36-month period. This proactive risk mitigation helps secure and underpin both dividend commitments and dividend cover, whilst reducing volatility and increasing the visibility of cash flows.

The Company sells REGOs bundled with power sales through existing PPAs as well as unbundled via bilateral arrangements. Where REGOs have been sold at a fixed price, these known prices are used in the calculation of NAV. 93% of REGOs generated for the 2024-25 compliance year have been sold at an average price of £3.9/MWh. 29% of expected REGOs for the 2025-26 compliance year have been sold at £6.9/MWh. Unbundled, unsold REGO volumes of up to c.645GWh/annum are reflected in the NAV in line with third-party advisor forecasts (£5/MWh until March 2028 and then £1.5/MWh for the remaining life of the asset).

Available Capital

Out of the total £205m immediate RCFs available to the Company, c.£61.2m remains undrawn and available for deployment as at 30 June 2024. The Company has c.£3.8m immediate cash balance available at Company level as at 30 June 2024 (this is separate from the cash currently held at Holdco/SPV level).

Future Pipeline

The Company owns the project rights for, or has exclusivity over, a pipeline of c.£500m domestic and international solar (>400MW), domestic energy storage assets (>250MW), and a right of first offer over qualifying projects developed or sourced by the Investment Manager and Investment Adviser.