NAV & Valuation Assumptions

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 30 June 2024 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 March 2024	104.7p	£618.6m
Time value	2.5p	£14.7m
Project actuals	(1.7p)	(£9.4m)
Power price forecasts	(1.2p)	(£7.0m)
Changes in short-term inflation	0.4p	£2.5m
Sale of Whitecross	0.6p	£3.3m
Revaluation of NextPower III ESG	0.1p	£0.3m
Cash dividends paid	(2.5p)	(£14.7m)
Capital movements (no net NAV impact):
–          New assets at cost	0.1p	£0.9m
–          Repayment of RCF using cash on hand	3.7p	£21.8m
–          Cash used to fund investments and repayment of RCF	(3.8p)	(£22.7m)
Other movements in residual value	(1.6p)	(£9.7m)
At 30 June 2024	101.3p	£598.6m

 

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.