NextEnergy Solar Fund secures extension of £70m revolving credit facility with improved terms
NextEnergy Solar Fund, a leading investor in solar energy and energy storage, has successfully extended its £70 million short-term Revolving Credit Facility (RCF) with Santander, originally set to expire in June 2024. This extension now prolongs the facility’s availability until June 2025, featuring improved financial terms, indicating a robust confidence from financial partners in the fund’s operational and strategic management.
The newly revised terms of the RCF include a reduced margin of 150 basis points (bps) over the Sterling Overnight Index Average (SONIA), an improvement from the previous 160bps. As of May 7, 2024, the total interest cost for any amount drawn under this facility stands at 6.7%, reflecting the current SONIA rate of 5.2%.
This extension is part of NextEnergy Solar Fund’s broader strategy to stabilize its financial base amidst fluctuating market conditions. It follows closely on the heels of another significant financial maneuver — the extension of a larger £135 million RCF to June 2026, which includes two additional 12-month extensions at the company’s discretion.
Strategic Financial Management and Market Positioning
Ross Grier, COO and Head of UK Investments at NextEnergy Capital, expressed satisfaction with the extension, noting it as a testament to the fund’s “large portfolio of high-quality assets and the availability of debt financing for leading market participants.” He emphasized the ongoing strong relationship with Santander, which remains the sole counterparty to this facility.
Revolving Credit Facilities are critical to NextEnergy Solar Fund’s capital structure, providing them the flexibility to make value-accretive investments or to repay the RCFs from operating and other cash flows. The fund continues to prioritize its Capital Recycling Programme, expecting to utilize the proceeds to reduce existing borrowings under the company’s RCFs.
As of December 31, 2023, NextEnergy Solar Fund had drawn £163 million from its £205 million short-term Revolving Credit Facilities. The company reported an unaudited Gross Asset Value (GAV) of £1,173 million, with financial debt gearing at 28.8% and total gearing, including fixed coupon preference shares, at 45.7%. These figures reflect a healthy leverage position, well within the company’s investment policy limit of up to 50% of GAV.
Investment Objective and Shareholder Value
NextEnergy Solar Fund aims to deliver attractive risk-adjusted returns to its shareholders, primarily through regular dividends. The fund invests in a diversified portfolio of utility-scale solar energy and energy storage infrastructure assets. A significant portion of the fund’s long-term cash flows are secured and inflation-linked via UK government subsidies, providing a stable financial outlook for investors.