Hardman & Co Insight: Higher interest rates overshadow IIC/REIF prospects

Hardman & Co Research’s focus is on the nine quoted infrastructure investment companies (IICs) and on the 22 renewable energy infrastructure funds (REIFs), most of which saw their share prices fall during 2022, while the FTSE 100 rose by just 0.9%. In our Quoted UK Infrastructure and Renewable Energy – Prospects for 2023 publication, we have addressed the three key issues of recent months: higher inflation, extremely volatile power prices and rising interest rates.

NextEnergy Solar Fund - The Opportunity In Storage

NextEnergy Solar Fund (NESF) is increasing its involvement in energy storage with an expansion of its mandate to allow investment in standalone energy storage of up to 25% of its GVA, up from 10% previously. We think this is a strong move for the fund, giving it exposure to a growing asset class essential for the decarbonisation of the UK power sector and also offering added diversity to the existing solar PV portfolio. We see room for c.30GW of storage capacity in the UK with pricing remaining

NextEnergy Solar Fund - NAV Reflects Current Market

NESF has seen its NAV drop as it increases its discount rate to reflect current market conditions. The dividend cover remains comfortable with a 5% annual increase continuing to be targeted for the full year. Storage remains a key area of opportunity and the fund is consulting authority to increase the limit in storage investment to 25% of GAV.

NextEnergy Solar Fund - Earnings visibility underpins dividend target

It has been a busy few months for NextEnergy Solar Fund (NESF) and the listed renewable energy sector. The share price may have come under pressure from the threat of rising discount rates and windfall taxes, but the picture on this is clearer, and – as the latest results show – NESF’s NAV is still making positive progress. Strong earnings cover and NESF’s forward sales of power give the board confidence to maintain its policy of at least matching dividend hikes with inflation. If shareholders

NextEnergy Solar Fund - Earnings visibility underpins dividend target

It has been a busy few months for NextEnergy Solar Fund (NESF) and the listed renewable energy sector. NESF’s share price may have come under pressure from the threat of rising discount rates (as interest rates rise, its NAV falls) and windfall taxes, but the picture on both fronts is clearer, and – as the latest results show – NESF’s NAV is still making positive progress. The board says that strong earnings cover and NESF’s forward sales of power give it confidence to maintain its policy of

NextEnergy Solar Fund - Strong NAV Growth Despite New Tax

NESF’s interim NAV has grown by 8.3% despite being calculated to take account of the potential impact of the windfall tax on UK renewables. This reflects stronger pricing, and it is important to remember that the fund still benefits from this even though some of the upside is now taken by the tax. Strong operational outperformance also contributed, and the fund continues to make progress on asset growth both in solar and in battery storage.

Cenkos: NextEnergy Solar Fund - Shining via pricing and inflation

NextEnergy Solar Fund's (NESF) interim results demonstrate a period of substantial expansion and NAV progression assisted by elevated pricing, inflation, asset growth and higher operating performance. As further support for the fund, we see the recently announced Electricity Generator Levy as having minimal impact. We also believe NESF's continued expansion into battery storage to be NAV accretive with revenue diversification benefits.

NextEnergy Solar Fund - Known Unknown Now A Known

The UK windfall tax on older renewable generation assets has been set at 45% of profit above a power price of £75/MWh. While slightly higher than some market expectations, we do not see the impact on the NESF dividend as critical and the removal of uncertainty over the extent of the taxation is beneficial in our view.

NextEnergy Solar Fund - Sustainability Report Published

NextEnergy’s first standalone sustainability report highlights that this is a fund which delivers across the ESG spectrum, going beyond the obvious standout performance on climate change mitigation.

NextEnergy Solar Fund - Major Battery Portfolio Acquired

NESF has made a leap forward in investment in standalone battery storage to complement its existing solar portfolio, taking its JV battery capacity with Eelpower to 300MW in a new deal. With growing renewable energy penetration, the GB power market is becoming more volatile, growing opportunities to take advantage of arbitrage opportunities. The acquired portfolio of two-hour battery projects will allow this opportunity to be fully exploited.

NextEnergy Solar Fund - Increase in Facilities Well-Timed

An increased in revolving credit facilities at NESF brings the total available to £205m with £115.5m currently drawn. We see this as well-timed as there is a lot of activity in the market for both PV and storage projects and the facility gives the fund the firepower to pursue the best opportunities in a timely fashion.

NextEnergy Solar Fund - New Storage JV

NESF has entered into a second energy storage JV this time with a 75% share of a £200m partnership. With demand for energy storage likely to grow as intermittent renewable energy penetration rises increasing exposure here makes sense in our view.

UK Energy Package - Energy Package Impacts on Clean Energy

UK Prime Minster Liz Truss has outlined a package to offset the impact of high gas prices on the UK electorate. While a lot of the initiatives focus on household bills, a number have a direct impact on clean energy companies. We see the amendment of the Renewables Obligation with a CfD mechanism as potentially de-risking for clean energy companies. Commitment to energy export is positive for hydrogen and e-fuel producers and the confirmation of no windfall tax is a relief for larger clean energy

NextEnergy Solar Fund - NAV Up With Power and Inflation

NESF’s quarterly NAV shows another upward revision with the impact of higher power prices and inflation the key drivers although the fund has also benefited from improved operating performance. In a volatile market the fund is benefiting from locking in power prices through the in-house power sales team at its management company with hedges out to 2025/26.

NextEnergy Solar Fund - Fund Secures CfD Wins

NESF has boosted its effective electricity price hedging with the winning of 86W under the UK’s CfD renewable support scheme. This provides an index-linked 15-year income stream providing a strong underpinning to the fund’s earnings.

Uncertain outlook comes as no surprise

We take a positive view of Legal & General’s FY 22 results. Despite the tough environment, the Group managed to outperform expectations – something which was hardly a given for such a large asset manager. With L&G being widely exposed to the UK economy, it might be a call one does not want to make but the firm’s business remains one of spreads – as long as a default does not occur. We remain positive but concede that L&G embeds more risk than we had assumed.

Very strong CY22 - CY23 upgraded 10%

LIBERUM: Alpha Group International* - Highly attractive global growth opportunity

Hybridan Small Cap Feast - 06 Mar 23

6 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objective

LIBERUM: Real Estate Investors* - Profitable sales drive valuation increase and NTA outperformance

Equals Group (EQLS LN) - Platform for growth

Revenue rose 59% to £69.7m (consensus: £66.2m; Zeus forecast £65.0m); revenue per day rose 60% to £279k Equals Group’s 2022 results and 1Q trading update reaffirm our view on Equals’ valuation. It has made two bolt-on acquisitions, subject to regulatory approval, which add clear value. Organic growth remains strong: “revenues per working day so far in 2023 were £342k” up 52% yoy and up 13% on 4Q 2022.

Belvoir Group - Debt free, entrepreneurial and diverse

2022 followed on from the strongest year for property in recent history, but Belvoir has, nevertheless, reported a robust set of full-year results further evidencing the power of its franchised model and strategy. FY 2022 revenue was up +14% (+2% like-for-like), gross profit up +6% and adj. PBT down -1% as the resilient Lettings income and expanding Financial Services business continued to grow (both +4% LFL), while housing Sales fell (-15% LFL) as market conditions weakened and administrative c

Morning Note – 27 March 2023

LIBERUM: Aquis Exchange* - Delivering on growth

Encouraging CY22 result

Hybridan Small Cap Feast - 14 Mar 23

14 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

LIBERUM: Pollen Street * - Clear fundraising momentum

Cenkos: Personal Group Holdings Plc -- Momentum building

Personal Group's FY22 results show good underlying growth in both API and ARR, with significant HoH EBITDA expansion also delivered in H2. The growth in its insurance book and increased levels of ARR provides high levels of visibility into 2023. Retention rates are high, the group has added 101 new clients and its expansion into the SME market is growing rapidly. Today's results demonstrate the clear benefits of the diversification of the model since 2019 and the ongoing relevance of its offerin

Hybridan Small Cap Feast - 27 Mar 23

27 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

NAHL Group - Finals

NAHL generated growth in both its Personal Injury (PI) and Critical Care divisions, the former despite a continuation of subdued market conditions – hence market share gains. Results were in line with our forecasts but with a significant reduction in net debt which is especially welcome in the current high interest rate environment. Group strategy remains intact and in PI that means building the embedded value of future cash flows in NAL while flexing enquiry placements to maximise cash generati