Shareholders in NextEnergy Solar Fund (LON:NESF) are being urged to vote for the trust’s continuation at August’s AGM.
The upcoming continuation vote will be the solar energy and energy storage investor’s third in just three years. But the board is taking ‘decisive action’ to narrow the yawning 38% share price discount to net asset value (NAV) on the trust.
And chairman Tony Quinlan warned discontinuation would involve a forced sale of assets. He said this process would likely be ‘value-destructive in the current market and would not be in shareholders’ best interests’.
Price pressure and policy change
NextEnergy Solar’s NAV plunged 20% in FY26, from 95.1p to 76.1p. This reflected falling solar power price forecasts as well as government policy changes.
A ‘strategic reset’ to strengthen the balance sheet was announced in March. This saw NextEnergy Solar slash its dividend from 8.4p to between 4p and 4.6p and extend its asset disposal programme.
In today’s FY26 results, more colour was given on the next asset disposal. This is in the advanced stages and relates to 45 megawatt of capacity, which means it is likely to include more than one project. NextEnergy Solar is also in the advanced stages of divesting one of its development assets that was not part of its initial capital recycling programme.
Necessary reset
Quinlan conceded the past year has been ‘tough’ for shareholders. ‘The sector continues to suffer from share prices trading at persistent discounts to reported NAV. From a NESF perspective the strategic reset announced in March 2026 included a dividend policy change which was a difficult decision, but was necessary to put shareholder distributions on a more sustainable basis.’
We agree with the board that shareholders should vote for continuation. March’s strategic reset proved painful for income-hungry shareholders, but it was necessary. NextEnergy Solar’s progressive dividend policy had become difficult to sustain given the trust’s high gearing and a weak market for renewable infrastructure assets.
Positively, dividend guidance for FY27 has been raised to 4.5p to 5.1p, versus the 4p to 4.6p estimate at the time of the reset. The power price environment has been stronger than expected in the intervening months owing to the Middle East conflict.
In summary, NexEnergy Solar is now on a more sustainable footing. Furthermore, the recent Drax (LON:DRX) bid for Bluefield Solar (LON:BSIF) at a 9% discount to NAV is supportive for solar project valuations.
Read the press release here: https://www.londonstockexchange.com/news-article/NESF/final-results/17649505
