NAV & Valuation Assumptions

Net Asset Value (as at 31 March 2025)

Net Asset Value

 

The Company’s NAV is calculated quarterly and based on the valuation of the investment portfolio provided by the Investment Adviser and the other assets and liabilities of the Company calculated by the Administrator. The NAV is reviewed and approved by the Investment Manager and the Board. All variables relating to the performance of the underlying assets are reviewed and incorporated in the process of identifying relevant drivers of the discounted cash flow valuation.

 

Updates to Net Asset Value (“NAV”) assumptions

 

The Company has made the following updates to its valuation assumptions for the 31 March 2025 NAV calculation:

  • Updated inflation assumptions to reflect the latest available third-party 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.
  • Updated power price forecasts capturing the latest available third-party advisor long-term power curves.

 The updated NAV assumptions are disclosed in the relevant sections below.

 

 

NAV Bridge

  NAV p/share NAV
At 31 December 2024 97.4p £565.7m
Time value 0.9p £5.1m
Project actuals (0.1p) (£0.4m)
Power price forecasts (1.8p) (£10.7m)
Changes in short-term inflation 0.2p £0.9m
Revaluation of NextPower III LP investment 0.4p £2.1m
Cash dividends paid (2.5p) (£14.6m)
Share buyback 0.2p (£3.4m)
Capital movements (no net NAV impact)    
–          New assets at cost 0.8p £4.5m
–          RCF drawdown (1.8p) (£10.5m)
–          Proceeds from RCF net of cash used 1.0p £6.0m
Other movements in residual value 0.4p £2.7m
At 31 March 2025 95.1p £547.4m

 

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

  • NAV accretive movements:
    • Time Value: The time value reflects 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 discounted cash flow.
    • Share Buyback Programme: Shares purchased in the period as part of the Company’s Share Buyback Programme of up to £20m. The Programme used £3.4m of cash on hand to purchase 5,035,939 Ordinary Shares in the period, resulting in an increase in the NAV per Ordinary Share of 0.2p.
    • Inflation Forecasts: A slight increase in short-term inflation assumptions from 2025 to 2026 – now assuming 3.8% UK RPI for calendar year 2025-26. 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.  See breakdown of UK inflation assumptions below.
    • NextPower III LP Revaluation: Movements in the fair value of the holding in NextPower III LP and the two co-investments reflecting operational and macroeconomic updates.
    • Other Residual Value Movements: Includes changes in FX rates, fund operating expenses, capital expenditure provisions for asset health, such as repowering inverters and module replacements, and other non-material movements.

     

    NAV deductive movements:

    • Cash Dividends Paid: The dividends paid during the period, including both Ordinary and Preference Share dividend payments.
    • Power Price Forecasts: A decrease in short-term (2026-2030) UK power price forecasts provided by third-party consultants. This is due to a downwards revision of gas price forecasts, driven by an expected increase to the global gas supply from new liquefaction capacity, particularly in the US and Qatar.  Medium and long-term prices have increased due to increased power demand forecasts compared to the December 2024 update.  See power curve assumptions graph below.
    • Project Actuals: The project actuals figure was driven by generation performance, which was impacted by lower-than-expected irradiance levels in January and February that was offset by higher-than-expected irradiance levels in March, network outages and higher operating expenses.  NESF reports individual generation figures twice a year in its interim and full-year results.

Discount Rate (as at 31 March 2025)

Discount Rate Assumptions

The Company has not made any changes to its discount rate assumptions during the latest quarter.  The Company’s weighted average discount rate at 31 March 2025 was 8.0% (31 December 2024: 8.0%).  The below table reflects the discount rate assumptions breakdown used for 30 September 2024 NAV calculation:

 

  31 March 2025 31 December 2024
Solar UK unlevered unchanged 7.50%
UK levered unchanged 8.20% – 8.50%
Italy unlevered 4 unchanged 9.00%
Subsidy-free (uncontracted) 5 unchanged 8.50%
Life extensions 6 unchanged 8.50% – 9.50%
Energy Storage Uncontracted unchanged 10.00%
Contracted unchanged 7.00%

 

 

Footnotes:

  1. Unlevered discount rate for Italian operating assets implying 1.50% country risk premium to 7.50%.
  2. Unlevered discount rate for subsidy-free uncontracted operating assets implying 1.0% risk premium to 7.50%.
  3. 1.0% risk premium to 7.50% for cash flows after 30 years where leases have been extended.

Inflation (as at 31 March 2025)

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.

Inflation Rate (UK RPI) Assumptions

 

Calendar Year 31 March 2025 31 December 2024
2025/26 3.80% 3.40%
2026/27 3.10% 3.20%
2027/28 3.30% 3.40%
2028/29 3.40% 3.50%
2029/30 unchanged 3.00%
2030/31 onwards unchanged 2.25%