High electricity prices, inflation rates and high irradiation continue to drive up asset values

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Rising electricity prices led to a £2.9m increase in DORE’s net asset value in the first three months of 2022. Image: DORE.

High electricity prices continue to drive up the value of solar assets in the UK, and this is expected to continue at least through 2022.

DORE Eyes Stock Rise as Net Asset Value Jumps on the Back of High Power Prices

Downing Renewables & Infrastructure Trust (DORE) announced this week that its net asset value (NAV) was £150.9 million or 110.1 pence per share (pps) for the first quarter of 2022. This represents an increase of 6 .4% compared to the fourth quarter of 2021, when it was 141.8 pounds sterling. million or 103.5pps.

The company’s total net asset value return for the period was 7.6% – taking into account a 1.25pp dividend paid in the quarter – mainly due to high electricity prices in the UK -United and beyond.

DORE saw its net asset value jump by £2.9 million on the back of expected future increases in electricity prices, or 2.1 percentage points.

Rising inflation has also contributed to the rise in the value of the company’s assets, with its retail price index for the quarter ending March 2022 in the UK reaching 1.8%. That’s significantly higher than its 2.75% annualized valuation assumption for the third consecutive quarter, the company noted.

In light of this, it raised its inflation forecast to 7.8% from 2.75% in the UK. In addition, the company raised its inflation forecast for its Swedish assets from 1.8% to 4%.

“Given the continued increases in power prices since the end of the quarter, we believe the company will continue to benefit from the pricing tailwinds,” said Hugh Little, president of DORE.

“As recently announced, the company has a strong asset pipeline and is considering issuing new shares to raise additional capital to take advantage of this pipeline, which should strengthen the diversity of DORE’s portfolio.”

The company’s NAV also benefited in the first quarter of 2022 from acquisitions, supporting two riverine hydro portfolios and an onshore wind project in Sweden.

Its operating portfolio exceeded expectations, contributing £0.5m (0.4pp) to the increase in net asset value. This was mainly due to its UK solar portfolio, with generation and operating profit about 14% above budget.

Downing LLP is looking to expand its solar portfolio in the UK, extending its £30m term loan facility with NatWest for a solar portfolio of around 48MWp in England and Northern Ireland in April 2022.

In 2021, the company established a new renewable energy project development business focused on building a pipeline of solar, wind and battery storage projects in the UK. DORE also acquired a 96 MWp portfolio of solar photovoltaic assets in the UK for £42 million.

DORE’s first quarter 2022 NAV update is a change from the same period in 2021, when the impact of low UK electricity prices was mitigated by its Swedish assets, the company highlighting the benefits of diversification at the time.

The company’s electricity price forecast for 2023 currently remains unchanged.

NextEnergy Solar Fund seeks to lock in higher-than-expected power prices

High electricity prices at the start of 2022 also boosted NextEnergy Solar Fund’s net asset value to £669 million from £615 million at December 31, 2021.

This 8.7% increase pushed the unaudited net asset value per common share to 113.5p, an increase of 9.1p. Increases in electricity price assumptions contributed +5.6p per ordinary share to this increase, with high prices expected in the short to medium term. Power purchase agreements contributed to an increase of +0.8p per ordinary share.

NAV was also boosted by increases in short-term inflation assumptions, which contributed +3.3 pence per common share. The company’s long-term inflation assumptions remain unchanged at 2.25% from 2030.

Kevin Lyon, President of NextEnergy Solar Fund, said: “The announced increase in the dividend target of 5% is a combination of the fund’s strong growth and a market characterized by ever higher electricity prices. students. We were also delighted to reveal the site selection for our first co-located battery storage site in Norfolk, UK, and to announce our co-investments in Spain and Portugal.

Currently, 40% of NextEnergy Solar Fund’s revenue comes from the sale of electricity in the short-term electricity market, and the remaining 60% comes from long-term government subsidies. It hedges a substantial portion of its portfolio, giving it “exceptional comfort” around future revenue projections, the company noted.

It continues to seek to opportunistically lock in higher-than-expected power prices as part of its power sales strategy. Thus, 80% of its revenues are set for 2022/23 at 71 MWh, 74% for 2023/24 at 73 MWh and 42% for 2024/25 at 86 MWh.

NextEnergy has already spoken to Solar energy portal about its focus on long-term power purchase agreements, given the strong corporate appetite and reliable cash flow they provide.

The company continues to expand its portfolio of solar and storage projects in the UK, which currently stands at a total installed capacity of 865MW across 99 fully operational solar assets.

Construction of its 36MW subsidy-free Whitecross solar farm in Lincolnshire began in April 2022, and work continues on grid connection and mobilizing construction at its 50MW Hatherden subsidy-free solar farm. These mark the completion of the company’s 150 MW subsidy-free solar allocation.

Its first 50MW battery asset is currently under construction and is expected to be energized in early 2023. NextEnergy Solar Fund now also has sufficient pipeline to meet its initial spending target of £100m through its joint venture with Eelpower, companies seeking to develop 250MW of assets.

The company also took its first steps into the Spanish market in the first quarter of 2022, as it seeks to further diversify its portfolio with a co-investment transaction for a 25% stake in a 50 MW project under construction in Cadiz. .

DORE and NextEnergy Solar Fund are the latest solar companies in the UK to see their net asset value boosted by the current high electricity prices. It follows similar updates from Bluefield Solar, Octopus Renewables Infrastructure Trust and Foresight Solar in recent weeks.

Electricity prices reached record highs in early 2022, mainly due to soaring gas prices. This trend started in 2021, but the market became even more volatile due to the Russian invasion of Ukraine.

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