NextEnergy Solar Fund has completed a “strategic reset” of its investment strategy, which will see it focus on energy storage assets and increase project sales.
As part of the reset, NextEnergy said it will increase its energy storage exposure to 30% of its gross asset value, a significant increase from the current rate of 10%. The company said the shift would “enhance the company’s existing stable revenues generated by its operating solar assets and support future revenues.”
It identified energy storage projects with a duration of two hours, which it said would deliver an internal rate of return of between 10% and 13%, which it said was at the higher end of the target range.
NextEnergy also said it would sell an additional 120 MW of solar power as part of its expanded capital recycling activity, reinvesting the funds in better-performing projects. It also said it would seek to increase its net asset value by augmenting existing solar assets “with the latest technology to increase power production, in addition to the addition of co-located energy storage”.
In addition to these technology plans, the company said it would cut its annual dividend for shareholders, from the current target of 8.43p per share to between 4p and 4.6p per share. This is part of a shift toward greater sharing of operating cash flows, which NextEnergy said would free up about $40 million over the next five years.
“A central part of this plan is to address the current equity discount by realigning dividend policy to a 75% payout ratio, freeing up capital to strengthen the balance sheet, improve asset health, re-strengthen locations and invest in higher return capabilities such as energy storage, which can grow intrinsic value over the long term,” said Tony Quinlan, chairman of the NextEnergy Solar Fund.
“The strategic reset represents a pivotal moment for the company, allowing NESF to take full advantage of developments within the sector,” he continued.
In its announcement to the London Stock Exchange, NextEnergy Solar Fund said the difference between the value of its assets and the “sustained discount” to its net asset value was “neither sustainable nor acceptable and reflects investors’ view that more fundamental strategic changes are needed for companies to adapt to the current market environment.”
In a February article on NAV discounts, the Association of Investment Companies wrote that renewable energy investment companies in general were experiencing problems with asset valuations. It wrote: “While the deep discounts reveal the poor investor sentiment towards renewables at the moment, they pose a bigger problem: discounts make it impossible for trusts to raise money to invest, grow and improve their portfolios.”
In December NextEnergy Solar Fund reported a decline in net asset value for the second and third quarters of 2025, which the company attributed, among other things, to “macroeconomic uncertainty…increased interest rates…political instability and falling energy prices.”
To address this, NextEnergy Solar Fund said it would focus more on capital recycling. Yesterday the company announced the completion of a Capital Recycling Program, selling 245 MW of UK solar assets for a total of £119 million.
