NextEnergy Solar Fund Limited (5NE.F) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to NextEnergy Solar Fund interim results presentation. [Operator Instructions] Please note, this call is being live streamed to a webcast for a wider audience and will be recorded. [Operator Instructions] I would now like to hand over to Paul Le Page, Interim Chairman, NextEnergy Solar Fund to start the presentation.

Good morning, ladies and gentlemen. Welcome to NextEnergy Solar Fund's interim results presentation for the financial period ended 30th of September 2025. Thank you for joining us today. My name is Paul Le Page, Interim Chair of NextEnergy Solar Fund. I'm pleased to introduce today's interim results where I'm joined by Ross Grier, Chief Investment Officer; and Stephen Rosser, Investment Director from the company's investment adviser, NextEnergy Capital. During today's presentation, I'll provide an update on Board priorities and run through key actions achieved over the 6-month period up to 30th September 2025. I'll then hand over to Ross and Stephen to provide an update on the day-to-day operations of the company, covering key highlights and the positive portfolio outperformance in the period, the drivers of NAV and how the company continues to explore and execute portfolio optimization to drive this outperformance. We'll also take a moment to look at the market outlook, which despite recent headwinds is still positive, and we'll break down the company's U.K. pipeline of solar and energy storage that could provide future growth opportunities. The presentation will be followed by a Q&A session at the end, providing both investors and analysts with the opportunity to ask questions to myself, Stephen and Ross. Our portfolio has outperformed during the period, generating an additional GBP 2.5 million in revenue. NESF has not been immune to the macroeconomic factors affecting the entire renewable sector as a whole, and we acknowledge that the recent share price performance has been disappointing. The main drivers of this have been external factors outside of the company's control, ranging from sticky inflation, slowed interest rate cuts by the Bank of England, falling long-term power price projections reducing the asset value of the portfolio and NESF dropping out of the FTSE 250 index at the last rebalance date in September. The sector has also not been helped by the recent government consultation on ROC and FiT indexation, which presented an unexpected additional headwind after the period end. Shareholders once again reaffirm their commitment and trust in NESF and its long-term mission at the Annual General Meeting in August, with 88% of votes cast choosing against the discontinuation of the company. We take this result as a strong endorsement of continued confidence in the Board and the investment adviser, each of whom remain focused and aligned on providing stability to the platform and driving long-term strategic growth for the company and our shareholders. Undeterred by the current backdrop and discount to NAV, the Board and the investment adviser remain optimistic and see material opportunities for the company to return to a growth footing over a medium term. The Board is pursuing all options to close the current discount against the company's NAV. In particular, we remain focused on these 5 key pillars: deliver the strategic review; optimize operational performance; maximum NAV growth; deliver attractive dividends; and unlock capital. Firstly, delivering the Board's strategic review. The Board remains fully committed to delivering value for shareholders and is exploring all strategic options with a clear focus on enhancing shareholder value. The Board is finalizing its strategic review and will release its findings in the new year. Secondly, optimizing operational performance. The company continues to optimize existing assets within the portfolio to drive operational performance and returns whilst repaying both long-term and short-term debt. Thirdly, maximizing growth. The Board continues to see strong potential to generate value from the further development of solar and storage assets in the U.K. NESF is well positioned to play a key role in the next phase of growth as outlined in the U.K. government's Clean Power 2030 plans and the recently published U.K. solar road map. Unlocking capital remains a crucial component to this growth. Fourthly, delivering attractive dividends. The company continues to provide reliable returns to shareholders through well-covered quarterly dividends underpinned by operational cash flows. And finally, unlocking capital. The Board and investment adviser are assessing market opportunities to enhance shareholder returns, including expanding the company's capital recycling program. Over the past 6 months, NESF has delivered multiple proactive initiatives to maintain a stable and resilient portfolio. The company has invested in asset health through repowering inverters and has already started to see benefits from this through its portfolio performance. We've made progress on the final phase of the capital recycling program in a difficult market, which is progressing with a third-party buyer for the remaining 100 megawatts. The company successfully negotiated reduced fees from its investment adviser, where the fee is now aligned to a 50% market cap and 50% NAV structure. And we successfully negotiated a reduction in operating asset management fee driven by secured lower-cost future asset management contracts that provide a 22.5% reduction, resulting in a GBP 7.4 million increase in NAV. From operational cash flows, the company continued to pay down its long-term debt by an additional GBP 3.5 million, and the company remains on track to fully amortize this in line with the remaining subsidy life of the portfolio. The Board launched a formal strategic review, exploring all strategic options with a clear focus on enhancing shareholder value. And as part of this established a robust assessment framework to support the Board in reaching objective and independent conclusions. You can expect to hear more from this review in the new year. And finally, the Board appointed Tony Quinlan as Chair following a competitive independent process run by the Chair of the Remuneration and Nomination Committee. Tony brings extensive leadership and governance experience to his new role as Chair, having previously been CFO of Drax Group plc during the transformation of the group from coal to sustainable biomass, bringing a significant knowledge of the U.K. electricity market and renewables. NESF benefits from a highly experienced independent Board of Directors where strong corporate governance remains at its core. Going forward, the Board is comprised of 5 independent directors, each bringing deep insight and strong oversight capability. We are fully committed to driving value for shareholders and exploring all strategic options with a disciplined framework, engaging independent counsel and drawing on our proven track record. NESF continues to benefit from strong, prudent and independent stewardship. The Board remains fully aligned with its responsibility to safeguard the long-term interest of all our investors. The Board continues to closely monitor the company's share price and strongly believes that the current discount remains unjustified given NESF's strong operating performance, previous asset disposal above NAV, well-structured attractive financing and a cash covered dividend. Before I hand over to Stephen and Ross, I'd like to express my sincere thanks again to our shareholders for your ongoing support and patience. I'd also like to formally welcome Tony Quinlan, who has joined the Board today as Chair. The Board and I look forward to working with Tony as we move the company forward. With that, I'll hand over to Ross Grier, who will walk us through the results.

Thank you, Paul, and good morning, everyone. Before we dive into the key highlights and portfolio update for the period, I would like to thank Paul for his careful and thoughtful stewardship as Interim Chair. He has helped provide stability to the platform in a difficult market, and the Board and NextEnergy Capital are grateful for his dedication to NESF during this transition. Starting with the key financial highlights for the 6-month interim period as at 30th of September 2025. NESF continues to generate stable income that supports the dividend, having serviced both the platform's debt and OpEx. The operating portfolio outperformed expectations in the period, having successfully generated GBP 48.3 million in cash which includes an additional GBP 2.5 million in revenue due to the portfolio's outperformance versus forecast. This is testament to the way in which the team have been laser-focused on running our high-quality assets whilst tactically investing in the asset's long-term health to continue to strengthen NESF's long-term track record of operational outperformance. NESF's gross asset value continues to stand firmly above GBP 1 billion. During the period, NESF's net asset value reduced to GBP 510.9 million, representing a net asset value per ordinary share of 88.8p. This NAV reduction was primarily driven by declining power price forecast from the company's third-party power curve consultants. That has also affected the entire peer group. We will cover this in more detail later in the presentation when Stephen will talk through the NAV bridge movements. Turning to dividends. The Board continues to maintain its dividend target guidance for the financial year '25/'26 at 8.43p per ordinary share. The company had healthy cash coverage of 1.7x in the period, reflecting the operational outperformance of the portfolio during the summer months. Dividend cover for full year continues to be in line with original forecast range of 1.1 to 1.3x, supported by robust contracted and regulated cash flows. And finally, on capital structure, total gearing, including preference shares, was 49.2% within the company's limit of 50% and consistent with the income-generating nature of the portfolio. We remain comfortable with the company's gearing, which is now close to the company's investment policy limit of 50%, which was deliberately set at a conservative level. And we continue to see across the industry, both projects and platforms that run much more highly geared structures. Proceeds from the remaining phase of the company's capital recycling program for 100 megawatts of solar assets will be prioritized to repay the company's short-term debt upon realization. It's also worth noting that excluding the preference shares, true financial debt gearing was 29.4%. As a reminder, 69% of the company's total debt, including preference shares, is fixed rate, providing good protection against interest rate volatility. The underlying portfolio remains solid, diversified and productive as it continues to generate the cash flows NESF was established to deliver. As at 30th of September 2025, NESF's portfolio comprised 101 operating assets that equates to a total installed capacity of 939 megawatts. This includes NESF's $50 million investment into the private fund, NextEnergy III and associated international co-investments. The average remaining asset life across the portfolio was 24.3 years, providing long-term foundation of income-generating assets. This does not include the additional optionality NESF has to repower assets or to further extend leases into the future. The portfolio remains predominantly U.K.-based with 84% of the portfolio in the U.K., 10% in Italy and the balance representing international exposure via NextEnergy III and co-investments in Spain and Portugal. From a technology standpoint, 97% of the portfolio is solar PV and 3% is battery storage, providing additional diversification and optionality. In terms of project status, 95.8% of the portfolio is operational with 4.2% in construction and development, ensuring the portfolio delivers strong near-term cash flows while retaining embedded growth potential. Turning to portfolio performance for the period. The portfolio experienced strong outperformance in all jurisdictions, delivering an additional GBP 2.5 million in revenue versus forecast. The portfolio generated 627 gigawatt hours in the period, with solar irradiance being ahead of forecast by 13% and portfolio generation being ahead by 7.6%. The portfolio's generation wasn't completely uninterrupted in the period and was slightly impacted by the impact of both weather variability and grid DNO outages. Stephen will provide more details on this later on in the presentation. The company continued to generate cash flows in line with its target range, providing a healthy dividend cash coverage of 1.7x for the period, demonstrating the solid performance and resilience of the company's portfolio. To bring the previous slides on generation to life, it's useful to show how NESF generated attractive returns and converted solar irradiation into shareholder value over the 6-month period. Cash flows from the portfolio of 665 gigawatt hours of generation alongside distributions from NextEnergy III and co-investments delivered GBP 48.3 million of cash income after the repayment of principal and interest on long-term debt in line with its amortization profile. After preference share payments of GBP 4.8 million and operating expenditure of GBP 3.4 million, NESF retained GBP 40.1 million of net cash income available for distribution. That GBP 40.1 million of net cash income was then allocated as follows: GBP 24.2 million was paid in ordinary dividends, GBP 339,000 was deployed into share buybacks and the remainder was used to repay short-term debt and reinvest into the health and development of the portfolio. In short, NESF continues to be managed with clear discipline, including its capital allocation decisions, reducing debt and reinvesting for future growth and performance. NESF's power price hedging strategy locks in power prices to derisk revenue volatility. This provides high visibility of the future cash flows of the company that underpin the dividend. This hedging strategy is comprised of 4 main components, which you can see broken down in the pie charts on this page across the 5 years ahead. Firstly, long-term contracted revenues from government subsidies can be seen in light green, with 50% of the company's revenues derived from these inflation-linked instruments, which remain long term in nature. Stephen will talk us through the recent U.K. government consultation on ROC and feed-in-tariff later in the presentation. Secondly, contracted revenues via power purchase agreements, also known as PPAs, these are shown in orange. These are fixed term hedges that the company puts in place over a rolling 36-month period to lock in contracted revenues for anticipated generation with robust counterparties. In the face of ever-changing power price forecasts, this approach provides us with price certainty for future anticipated power generation. Thirdly, in dark green, the remaining portion of power output is currently available for future PPAs and has not yet been contracted, representing an opportunity to lock in new value. And finally, in yellow, other revenues, which includes BESS revenues, embedded benefits and renewable energy guarantees of origin, also known as REGOs. The company has provided a 5-year forecasted total revenue source breakdown as of the 30th of September 2025, with a proportion of fixed revenues in the financial year ending 31st of March 2026, currently standing at 93%. As a reminder, the portfolio does not take any merchant power price exposure, so we'll always be looking to be near hedged between 90% and 100% in the current financial year. This hedging approach led alongside our long-term subsidy and PPA base allows the company to derisk future revenues, maintain cash flow stability and underpin NESF's ability to deliver its targeted dividend with confidence. In an environment where market pricing can shift quickly, this strategy provides NESF with the resilience and flexibility to optimize value without compromising on predictability, a critical foundation for sustainable income generation. NESF continues to structurally repay its long-term debt whilst additionally progressing targeted short-term debt repayment as a priority. The company remains focused on maintaining a disciplined and balanced capital structure over the long term with a strong emphasis on cost efficiency and long-term stability. Let's break down the company's current debt structure, which is comprised of 3 distinct layers. Firstly, long-term amortizing debt. Secondly, non-amortizing debt in the form of preference shares. And thirdly, short-term revolving credit facilities, also known as RCFs. As at 30th of September 2025, total gearing to GAV, including the GBP 200 million of preference shares, was 49.2%, with 69% of this being fixed rate debt. We had GBP 152 million of short-term revolving credit facilities drawn out of the GBP 205 million available. Long-term amortizing debt stood at a little under GBP 144 million. This results in a weighted average cost of debt of 4.9% or 5.1%, including the preference shares and a weighted average cost of capital of 6.6%, unchanged from the 31st of March 2025. As mentioned, NESF debt strategy includes structured and disciplined approach to implementation and management of its long-term debt, ensuring that it is fully amortized in line with the remaining life of its ROC and FiT subsidized solar assets. The graph on the right shows NESF's annual long-term debt repayment profile versus the outstanding long-term gearing of the company. The light blue section of the bar chart shows how much the company is repaying each year alongside the total interest payment, which is found in orange. As the company continues to amortize this debt, you can see that the long-term portfolio gearing shown by the green line drops significantly until the long-term debt is repaid. This sculpted amortization profile was carefully designed to align debt repayments with the subsidy income period to ensure conservatism. As at the 30th of September 2025, the company has repaid GBP 3.5 million of long-term amortizing debt in the period and remains on track to repay the remaining GBP 144 million of long-term debt in line with the weighted average remaining subsidy life of 9.9 years. In doing so, this repayment profile ensures that the bulk of the debt is repaid while subsidies are still being received, avoiding concentration risk into the revenue tail of assets beyond the subsidy life. On that note, I will now hand over to Stephen Rosser to discuss the company's NAV and active management in a little more detail.

Thank you, Ross, and good morning, everyone. As you've heard already, NESF's underlying portfolio remains solid. Factors outside NESF's control have resulted in NAV declining around 7% over the period, but the team has proactively taken important steps to enhance NAV, demonstrating active management and a continued focus on strong capital discipline. Over the period, NAV decreased from GBP 547.4 million to GBP 510.9 million. In terms of NAV per ordinary share, this represents a decrease from 95.1p to 88.8p. The main contributors to this overall movement were falling power price forecasts, cash dividends paid and other residual movements, which includes changes in OpEx assumptions, foreign exchange rates and movements in capital expenditure assumptions for reinvestments in asset health, such as replacing inverters and modules. Full details are provided in the interim report. NAV accretive movements shown in green, reflect generation outperformance against budget over the period, shown here as project actuals, upward revision of short-term inflation forecasts and reductions in expected asset management costs. As mentioned, power price forecasts drove the largest reduction in NAV over the period. For these forecasts, NESF utilizes a blended average of projections from 4 independent market-leading consultants. No management assumptions are incorporated. Power price forecasts decreased during the period, driven most materially by 1 consultant reducing its assumptions for energy demand across the forecast period. Downwards revision of short-term gas price forecasts, lower commodity price forecasts and an anticipated increase in solar capacity build-out have also influenced near-term projections. In the medium term, we see that price projections remain broadly consistent with previous forecasts. Looking longer term, projected prices have increased relative to earlier forecasts, driven by higher expected demand, for example, from data centers and reduced forecast renewables deployment. In figures, as at the 30th of September 2025, the projected short-term average capture price for the U.K. sits at GBP 60.7 per megawatt hour for 2025 to 2029 and GBP 55.5 longer term, a few pounds below the previous March projections of GBP 64.5 short term and GBP 58.8 longer term. Turning then to discount rates and inflation assumptions. As at 30 September 2025, discount rates remain unchanged from 31 March, and the weighted average discount rate across the portfolio is 8%. We continue to monitor the discount rate in light of the softening power curves, which has reduced inherent risk in cash flows and in the context of recent movements in the Bank of England base rate and U.K. gilt yields. NESF's inflation assumptions are derived from independent third-party sources without overlaying management assumptions. For short-term U.K. inflation, we use HM Treasury forecasts. For long-term inflation, we use the implied long-term rates from Bank of England estimates. For the Italian assets, we use IMF forecasts. These assumptions are kept under review and their effects on NAV can be seen on the next slide. The impact of key sensitivities on the company's assets held at fair value as at 30 September 2025 can be seen on this slide. These sensitivities provide investors with information to support their own analysis of a range of different scenarios, showing the impact in both percentage terms and on a NAV per ordinary share basis. To ensure a robust and verified NAV, NESF works closely with a leading independent third-party financial modeling company to carry out the fair market valuation of the company's underlying investment portfolio, in line with the company's accounting policies. This valuation is carried out and reported on a quarterly basis. The NAV is audited annually by the company's auditors. In line with our efforts to enhance transparency, NAV sensitivities are published every 6 months at both the interim and full year results. I'd now like to take a moment to focus on the U.K. government's consultation around potential changes to the ROC and feed-in-tariff schemes. As many of you will be aware, on 31st of October 2025, the U.K.'s Department for Energy Security and Net Zero published a consultation on potential retrospective changes to the indexation of renewable obligation certificates and feed-in tariffs. Two potential options have been proposed. The first envisages an immediate switch from RPI to CPI indexation from April 2026. The second contemplates an immediate temporary freeze to ROC and FiT prices. Under this option, prices would remain static at current levels until a shadow inflationary index based on CPI catches up to current ROC and FiT prices. Around half of NESF's total revenues are derived from the ROC and FiT schemes, so retrospective changes would have an impact if implemented. If the first option is implemented, the estimated impact, if applied to NESF's NAV as at 30th of September would be a reduction of approximately 2p per ordinary share or a roughly 2% reduction in NAV. If the second option is implemented, the estimated reduction would be larger at around 9p per ordinary share or approximately 10% of NAV. Investors should note that these are proposals around which the U.K. government is currently consulting, and there is no certainty that either proposal will be implemented. It is not clear whether or how government has taken these proposals into consideration in the autumn statement published on the 26th of November. NESF and NextEnergy Capital have responded directly to the consultation, urging government not to change legacy schemes and to protect investor confidence, market certainty and consumer bills. This response is available to view on the NESF website. We'll provide a further update once the government has confirmed its final approach. Moving on now to the dividend, our long-term track record and how operational cash flows support our current dividend commitments. NESF has an impressive 11-year track record of delivering a dividend that is cash covered from operational cash flows. Since IPO, the company has declared GBP 419 million of ordinary dividends to shareholders. As you can see in the chart, the Board has maintained its dividend target for this financial year at 8.43p per ordinary share, where the dividend was cash covered 1.7x for the period, and the forecast cover for the full year remains between 1.1 and 1.3x. This record reflects the quality of the carefully curated portfolio, the strength of our cash flows and our disciplined approach to capital allocation. We continue to enhance our reporting and transparency. For this reporting cycle, we've introduced a more detailed breakdown of our cash flow analysis, demonstrating how operational cash flows cover the dividend. The table on the screen illustrates how the flow of revenue from the company's SPVs covered operating expenses, the preference share dividends and the dividends declared to ordinary shareholders in respect of the period ended 30 September 2025. For the 6 months to the end of September, total revenue from the operational portfolio was GBP 98.6 million, with an additional GBP 1.4 million of distributions from NextEnergy III, resulting in total income for the period of GBP 99.9 million. Group EBITDA was GBP 82.5 million. After tax, working capital movements and interest on both long and short-term debt, total cash income for the period was GBP 48.3 million. Taking account of administration expenses, director fees and investment management fees leaves GBP 44.9 million available for distribution. Following the GBP 4.8 million preference share distribution, GBP 40.1 million was available for ordinary shareholders. Ordinary shareholder dividends for the period totaled GBP 24.2 million, resulting in a dividend cash cover from operational cash flows of 1.7x in the period. In this section, I'll focus on how we actively manage the portfolio to enhance performance, reduce costs and protect long-term value. NESF continues to explore and implement portfolio optimization initiatives across the platform. The 3 key pillars of our portfolio optimization are asset repowering, cost optimization and strategic spare parts management. Starting with asset repowering. We have now replaced inverters at 8 sites, improving their performance and reliability. We've also fully repowered 1 asset with repowering works almost complete at a second. In early 2025, we initiated inverter replacements at a further 2 sites totaling 22 megawatts with works completed in July and August. Looking ahead, we anticipate replacing inverters for up to 6 assets with a combined capacity of up to 65 megawatts over the next 2 years. On cost optimization, we have secured reductions in NESF's operating asset management fee with WiseEnergy, reducing future fee assumptions by 22.5% for a GBP 7.4 million increase in NAV. We also completed a major O&M tender, renewing 67 contracts covering 576 megawatts of capacity. This has delivered an overall cost saving of 10.4%, equivalent to over GBP 400,000 per year and over GBP 2.3 million over the 5-year contract terms. On strategic spare parts management, we're minimizing the impact of component failures by actively managing our stock of key spare parts, particularly those with extended lead times or declining availability. These initiatives demonstrate NESF's hands-on disciplined approach to asset optimization and asset management, ensuring that the portfolio remains resilient, efficient and well positioned for long-term value creation. Let's now turn to the future, the market backdrop, NESF's building blocks for growth and our U.K. pipeline. The U.K. remains one of the most mature and competitive solar markets globally, and solar is now the cheapest form of renewable energy to deploy at both speed and scale. We remain highly optimistic about the long-term growth potential of the U.K. solar and energy storage markets, even as we continue to navigate a shifting macroeconomic environment. Today, the U.K. has deployed 20 gigawatts of solar PV and 4 to 5 gigawatts of battery storage. The government's Clean Power 2030 action plan calls for a tripling of solar capacity to 50 gigawatts and a fivefold increase in battery storage to 23 to 27 gigawatts by the end of this decade. These are ambitious but achievable goals, and NESF is well positioned to help deliver them, albeit currently capital constrained. Importantly, policy support remains strong and stable. The U.K. government continues to back domestically produced renewable energy as a pillar of energy security and economic resilience. With institutions like the National Wealth Fund and GB Energy now aligned with Clean Power 2030 and Net Zero 2050 objectives, the momentum is only accelerating. The government reiterated this commitment in its autumn statement on the 26th of November. When combined with flexible storage assets, we see solar playing an increasingly vital role in balancing the grid, reducing reliance on imported fossil fuels and delivering stable long-term returns for investors. In short, we see a positive structural backdrop for NESF's investment strategy with strong policy alignment, a gradually declining cost of capital and growing long-term demand for renewable infrastructure solutions. In combination with the tailwinds discussed above, discount management, future cash liquidity events and ongoing portfolio excellence remain a key foundation for our future growth. Our focus is to ensure that NESF is set up for sustainable long-term growth in both NAV and shareholder returns. To deliver this, we see 3 key building blocks. Firstly, capital inflows, shown in orange on the graph. Completion of Phase 4 of the capital recycling program, the sale of NextPower III and co-investments from 2028 onwards and ongoing strategic initiatives could unlock further capital for growth. Secondly, capital deployment to build NAV, shown in blue. We plan to deploy capital into a diverse range of portfolio investments, including development stage solar, battery energy storage systems and potentially international private solar funds. Thirdly, active management as a continuing lever, shown in green. We will continue to reinvest in the health and performance of the existing portfolio, maintain considered management of debt in line with the long-term amortization profile, and we will pursue ongoing active asset management across the operational portfolio to maximize returns. Combined, these elements, discount management, future liquidity events and ongoing portfolio excellence form the foundation for NESF's future growth. To add some further color to the capital deployment I've already mentioned, I'll briefly cover NESF's exciting U.K. pipeline of solar and battery storage opportunities. This includes the option to augment NESF's battery Camilla from 1 hour to 2-hour duration, a 250-megawatt 2-hour duration battery project called Project Lion, which is at a ready-to-build stage with connection projected for 2029, a 60-megawatt solar PV project in development in Wales with a possible ready-to-build horizon in 2026 and a 350-megawatt solar PV project in development in Wales with a possible ready-to-build horizon in 2028. NESF also has access to additional pipeline opportunities via NextEnergy Group's in-house development company called Starlight. NESF benefits from a right of first offer on assets which fit its investment mandate. The Starlight pipeline currently stands at 12 gigawatts. This optionality gives NESF flexibility, but importantly, is not an obligation. Additionally, the company can draw on the highly experienced NextEnergy Capital investment teams with global reach, which can access pipeline in its key target markets to add additional growth and diversification. NESF will evaluate future investments into the pipeline relative to the returns available from all alternative capital uses, including paying down debt and additional share buybacks. I'll now hand back over to Ross for his closing remarks.

Thank you, Stephen. To round up today's update, let's quickly recap on the key priorities for NESF. The board and investment adviser remain fully aligned and deeply committed to delivering value for shareholders and improving the share price. NESF remains disciplined in its approach to gearing through the structural planned repayment of its long-term debt and the repayment of its short-term debt through proceeds from disposals. NESF is focused on robust asset management that continues to deliver operational performance to drive above forecast outcomes even amid sector headwinds. NESF continues to maintain an attractive fully covered dividend, supported by operational cash flows from the portfolio. NESF is exploring options to unlock capital and maximize NAV growth. This includes assessing strategic market opportunities to enhance shareholder returns and evaluating the potential for expansion of the company's capital recycling program. The NESF Board are conducting a review to explore all strategic options with a clear focus on enhancing shareholder value. The Board will release the findings from its strategic review in the new year. And finally, NESF continues to maintain a disciplined approach to capital allocation. Thank you for your attention during today's presentation. I will now hand over to the operator to start the Q&A.

[Operator Instructions] The first question is from Adam Forsyth at Longspur Capital.

It's actually 3 questions, if I may. Just firstly, on the price forecast and consultants. Are you seeing material divergence between these forecasts? There's a few things out there which are quite sort of macro and could have material impacts like the EU phaseout of Russian gas and even potential chances of the [ steel ] in Ukraine, however, possible, unlikely or likely. So I'm wondering if -- is there quite a range within that average. And would there be any merit in moving away from the average and perhaps using the most cautious? Then on the pipeline, just wondering where the 4 identified projects that you put in the presentation stand with regard to the gate 2 connection process. I think we're due an announcement on Friday, and I wonder if you see any either positive or negative surprises coming out of that, not just for those assets, but also anything in the Starlight pipeline? And then finally, just on the 2 BESS projects, Camilla and the Project Lion, do you think you might, at some point, go beyond 2 hours and even actually maybe think about doing that now. And are you looking at more than 1 cycle per day for these assets moving to sort of 2 cycles, which seems to be more standard for these days?

Great. Thank you, Adam, for the question. So from the top, in terms of power price consultants, we use an average of a number of consultants deliberately. What we've seen in the past is advisers changing their position over time. So there is not one single adviser who has been consistently the most conservative. So what the average allows us to do is to ensure that we bring maximum stability to the NAV from those long-term power price assumptions. Clearly, as we've said before, we have, as an industry, a kind of love-hate relationship with these long-term forecasts. They are inevitably wrong, but we think they do give a good consistent picture of that long-term power price expectation. We think they do under forecast some of the challenges in the energy transition that we'll experience through 2030 onwards. So things like how quickly we'll realize new generation assets offshore, how quickly nuclear will come on and also things like how rapidly we see adoption of electric vehicles. So that's the kind of 2030 picture onwards. We see reasons to be positive relative to that current average curve that we have over that midterm. At the front end, we actually use the [ ice ] curves for the first couple of years before we move on to the external power market advisers. And that's really to help us capture market sentiment around what's happening for things like the EU Russia situation at the moment and how that's going to impact outturned power pricing for the front end of the curve. So I guess long story short is we think the approach that we currently take is the most sensible for pricing the NAV of the vehicle. Moving on to your next question around the project in the pipeline. So obviously, the consultation is ongoing around Gate 2 at the moment, the NISO-led process. We are anticipating news in the short run, but it is a NISO-led process. So it could be subject to quite a degree of change in terms of time line. We're not anticipating any impact from Gate 2 any surprises. But obviously, we need to await that announcement before we've got absolute certainty. Final question in relation to BESS. So all of our projects, we have ensured are prepared for at least 2 hour duration. So globally, we look at ensuring we have at least a 2-hour duration project, but we look beyond that in duration as well across the portfolio. As we continue to see increased power density of the containerized solutions themselves, we are able to think kind of longer duration terms for those projects as well as we get to strategic repowering points.

Great. And on cycling, 1 cycle a day or move to 2?

For now, we continue to look at 1 cycle per day. But again, we continue to look at how markets evolve over time and how batteries are adopted market by market.

The next question is from Joe Pepper at RBC Capital Markets.

Three from me as well, please. Just firstly, on DNO outages. So obviously, some issues DNO outages are being witnessed across the sale of a peer group and continuing to persist. I was just wondering when you think that you'd start to look at long-term budget generation and whether this needs to be adjusted kind of similar to what some of the wind peers have done with persistently low wind speeds or whether you perhaps see some near-term catalysts for these outages starting to improve? And the second one, just on contracted pricing. So the average fixed price for PPAs improved across the forecast period versus when we look at NextEnergy's position back in March. This is despite forward curves moving consistently downwards. And I know NextEnergy and also peers have flagged reduced liquidity and being able to hedge out on a 3 year view here. So just curious to hear your thoughts on how you managed to achieve that improvement and anything we can look into that going forward? And then perhaps finally, on debt covenants. So beyond the current restrictions that was noted today on the preference shares, are there any other covenants or impacts beyond the formal investment limit that is in your investment mandate that would come into act if gearing did increase beyond 50% of GAV?

Thank you for those questions. So again, taking them in order. DNO outages, so both the NextEnergy team and also our asset management team at WiseEnergy monitor DNO outages very closely across all assets in the portfolio. And what we're really doing there is seeking that everything lines up with our annual budgets and forecasts, taking into account both historical data and anything that we understand in terms of future planned outages from the grid at the specific locations. Obviously, the distributed nature of the portfolio continues to provide resilience to any localized DNO outages that we experience. So it's something we keep a watching brief on. We do anticipate though over the medium term to see lower DNO outages in line with upgrades that are being planned as part of CP30 rollouts. So in terms of a long-term assumption set, we think we have the right already kind of haircuts around availability to give that kind of stable long-term picture over the next couple of years as we understand more around CP30 and the gating, we will continue to look closely at the assumption set that we've got. Moving on into the contracted price question. So I think liquidity has not massively improved beyond the kind of 3-year horizon. So I think that picture remains largely as it was. I think there's still a perception around those kind of multiple market and political uncertainties that I've already spoken about in answer to Adam's question, which really do influence volatility over that liquid horizon. So kind of the ongoing deal between Russia and Ukraine creates a level of uncertainty and the market is currently seeing developments as positive, which is weighing on sentiment, but obviously, that can change at the drop of a hat as well. So we continue to deploy the same rolling hedging strategy where the team are active in the market to ensure we are capturing any upside from that volatility, but mitigating that downside risk as well. So again, trading strategy for our power remains as it should for the current operations of the portfolio to deliver the value we're seeking. Finally, in relation to covenants, so there are no other covenants or impacts regarding NESF's gearing. Our 3 debt facilities within the NESF portfolio are ring-fenced specifically to their kind of respective set of assets. The wider NESF gearing ratio would not impact those sub-portfolios. Therefore, we're not expecting any additional restrictions coming from the lenders at this time.

The next question is from Colette Ord at DB.

A few from me. A follow-up just on the covenants. Good clarification that you don't have any sort of on the sub portfolios related to the total gearing level. But are you able to give some color in terms of how you stand in terms of headroom on those individual facilities, whether it's a DSCR type headroom. If you can give some color on that. Second question is on dividend cover. Obviously, you outperformed at the half year 1.7x, but your guidance for the full year is unchanged at 1.1 to 1.3, maybe this ties into some of the DNO outage expectations. I just wanted to get some color on that as to why that hasn't maybe been improved. Is there something in the assumptions that has changed to keep that absorbs that extra cash you've generated? And also in the context of the portfolio and I guess, how you're allocating over time in -- to your pipeline and other bits, is there a sort of a dividend cover level that you need to be at in order to be confident and comfortable you can replenish and maintain the asset base as you expect to. If you can give some guidance on that. And then the final one really on the strategic review, how that plays out with the appointment of the new chair. I think you say in the results that you had the Strategy Day for the Board in September, obviously, the appointment of the Chair post the period end. And is it a case of you presenting what you've reached to the new Chair for approval? Or how is that going to work? And then again, in the context of the current restrictions that are now there triggered by the sort of terms of the 0 -- of the pref share. To what extent will that influence the outcome of the strategic review or your options thereof? Is there anything that you need to sort of bring USS into the discussion? And also just on the timing of maybe achieving waivers, et cetera, from USS. Can you give us a sense for how you perceive that to work? Sorry, that was quite a lot.

No worries. I will try and work back through those briefly, and I'll pass around the team as well to try and give you a comprehensive answer. So to start off on the strategic review component. So I'll take the USS piece, Paul, I'll then hand over to you in terms of Tony's appointment and the overall Board process that we're going through there. So the USS dialogue remains positive, amicable and active, which I think is key for continuing to manage the outcomes of the portfolio over the long term. As you know, in terms of allocation of capital, our priority is in down paying debt, and that's irrespective of what's happening in the USS relationship. So I think that remains unchanged. There aren't restrictions on us doing anything that we are currently highly focused on as a platform. But Paul, maybe if I can hand over to you on the balance of the answer around that strategic review and Tony's appointment.

Yes, sure. So I think it's fair to say, Colette, that the chair appointment process was operating independently in parallel with the strategic review process. And -- so the 2 processes have broadly converged around the time of our last Board meeting. And Tony has been fully briefed on the work conducted to date, and the process is still very much on track. And the intention is to announce the results of that strategic review process in the new year. And Tony will be -- he has a very strong background in managing shareholder comms and shareholder relations. So he'll be involved in the required sort of shareholder consultations and presentations in due course.

Thanks, Paul. Moving to the next question, which was around allocation and dividend cover in relation to asset health. So we have a long kind of 5-year asset health programs in place across the portfolio that allows us good visibility of what we need to do to maintain the health of the assets is a discipline we implemented very early in the portfolio's life to ensure we're extending and maintaining the core of the portfolio and its ability to generate maximum outcomes. That is a discipline we will continue into the future, that varies kind of year-on-year as assets come to the end of kind of natural cycle. So we think of inverters having a 10-year operational life before they need replenished. Obviously, that doesn't happen absolutely on the 10th year, but it happens at some point over that period. So it's difficult to say kind of year-on-year as a forecast what is necessary to sweep before we then think about free divvy cover. Obviously, the dividend target is set on an annual basis by the Board, but it considers that 5-year projection in terms of all of the underpinning generation prospects of the portfolio and any ongoing health in reinvestments that need to be made as well. So it is considered in the round as part of the dividend target setting and the cover expectations that we've got as a platform. The next one was around the 1.7 dividend cover guidance and how that impacts the guidance of 1.1 to 1.3x across the year. So obviously, the 1.7 is for the interim period. There's a degree of seasonality in those cash flows that's swept up the summer months. And pleasingly, that still brings us comfortably within that 1.1 to 1.3x range through the end of the year as well. So in line with expectations, albeit a positive bump in generation through this period, but we do anticipate some headwinds in terms of the operations of the portfolio for things like DNO outages and obviously, the winter season as well being a lower generating period for us as well. We still have to ride that through to the end of the year. So positive that we are in that 1.1 to 1.3x cover comfortably at the moment. Final question was on headroom on the underlying debt facilities. All facilities have been conservatively sized, and this is from the outset. I think the key from our perspective is the amortization profiles reflect the life of the subsidies and we've shaped them into the subsidies being the vast component of how we are servicing and repaying that debt over time. So we don't have any concerns about the DSCR as a result.

The next question is from Iain Scouller from Stifel. There are no further questions on the webinar. I'll now hand over to Ross Grier to address the written questions submitted via the webcast page.

Great. Thank you. We have had a lot of written questions in, and we have limited time left. So I suggest we revert directly to investors for the vast majority of the questions that have been submitted in the interest of letting everyone get on with their day. We've had a lot of repeat questions around a number of the items that I've answered already on the call. So hopefully, a good degree of those have been answered already. But otherwise, we will follow up directly with investors after the call. So thank you for your time today. I appreciate, as always, the ongoing commitment to the NESF platform and for your attention this morning. I wish everybody a pleasant remainder of the week, and I will hand back to you, Olivier, to close out the session.

Thank you for joining the call. You may now disconnect.