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This time last year I had 50K shares at an average of 98p since 8% yield seemed pretty good to me at the time and I'd moved away from the oil sector .... as of today and bailing a load on the friday/moday spikes .. I have 100K shares at an average of 52p ... including dividends.
Nat Gas futures are collapsing so I'm expecting a re-trace.... not bothered either way but was over exposed here two weeks ago back to comfortable now.
GLA.
Correction, they made me 20% !!
I bought a load early in the year for 71.7p for some unknown reason. With today's div they have made me 15% in half a year and still they are cheap IMO.
There it was …. Dividend payday friday to boit.
GLA
Yes, good stuff, we discussed this a few weeks ago on this board I think. I wonder if more director buys will arrive now, each a decent stamp of approval.
Good to know directors are reading this thread.
I got 78.5p on the spike a few days ago for 10% of holding … I reckon it’s Barclay Boys shorting this with their 87p target …. Still waiting for a bear raid before buying back …
GLA
Another positive today for holders and/or potential investors….
Two directors have purchased about 56k shares at just under 78pps.
My observation is simply that the LT forecasts NESF is using for power prices are essentially unchanged from those they were using back in 2019 pre Covid/Ukraine/CoL, at around £50/MWh. There’s been a transient spike between 2021 and 2023 that is in the process of being unwound. For a fundamental-driven long-term investor, revenue expectations per MWh are essentially unchanged from those extant when the sp was closer to 125p. If inflation and rates return toward (if not all the way) to LT levels then there’s every reason for holders to be optimistic for price appreciation from the current level. Buy now and collect the divis whilst waiting on inflation and rates is my strategy.
If and when inflation and rates fall we’ll see the return of demand for yieldy assets. Expect price appreciation for NESF and the other renewable income funds at this point.
LT holders who bought at £1+ are in pain now, but the range of likely outcomes is tilted favourably toward those prepared to hold and wait for macro (inflation and rates) normalisation.
Hello Starbright,
Graphs showing the power price forecast are also on the same page. As you say, they assume that the recent spike will be reversed and power prices will be much lower, in real terms, over the next 20 years. It's reassuring that the cash-flows can withstand this - it seems much of price volatility has been hedged.
@Actuary63 - 100% agreed re forward curves. But there’s an element of “base effect” in these, an unwinding of the spike caused by the Ukraine war. This is being revealed in the -ve NAV adjustments. If the charts on pg53 showed (say) 10 years history as well as 20 years projected the transient impact of this spike would be more readily apparent. If you had looked at the pg53 chart back in 2019, would it have shown a materially different long-term outlook? Essentially the NAV(s)became over-inflated for a variety of reasons and the air is being let-out more gradually. I think investors able to access the current yield can look past this. Just my view..!
Sorry for multi-posts….
It’s also worth noting that the shareholder base of NESF has more representation from genuine Insto investors (Artemis, L&G, Valu-Trac, ABRDN etc) than many of the other renewables funds which have problematic %holdings by DFM’s who are essentially spivved-up retail. It’s these insto investors who will call the shots on the discontinuation vote. They are already making their presence felt - for example through the pausing of new storage investments. Their continued presence on the register is a positive for holders, or for potential holders attracted by the 11%+ yield.
Enough from me on this now.
Hello Starbright,
Reductions in NAV caused by a higher discount rate are nothing to worry about. But reductions due to reduced power price forecasts and "project actuals" are more of a concern (see page 50 of report for details).
The graph I have used to construct my own cash-flow model is on the bottom right of page 53. The projected revenues shown are from operational assets and should allow for the latest power price forecasts. They do not include revenues from new assets that will emerge over time. Based on this graph, the projected return on buying the shares at 77p is over 12% per annum. This would reduced to 9-10% per annum if the shares were bought at 105p.
Management are fixated on the NAV - because that is how they are paid! - and the consequent “discount” that arises.
But institutional holders will always remind them that “The Company’s principal purpose is to provide ordinary shareholders with attractive risk-adjusted returns,
principally in the form of dividends with a progressive annual dividend policy in place.”
In the end it’s the dividend stream that matters.
My view is that new investors in NESF (and the other renewables funds) should largely ignore the NAV, and its consequent “discount”. What these funds/companies refer to as NAV is VERY different to the NAVs fund investors are used to from the likes of CTY etc. It is in reality nothing more than the directors best estimate of the value of the funds investments. There is very little M2M, other perhaps than the odd transaction such as the Whitecross disposal, which lends some support but is fact from conclusive.
Better - I think - to ignore the NAV and focus on the sustainability of the dividend. In its results pres today management stated that £80m of cashflow was generated in the year, against which were set £17m of costs. This leaves £63m, of which £48m is paid out via the divi. Taking this at face value - alongside their comments on asset durability - the divi is well covered (1.3x) by current cashflow generation. A frustrating situation no doubt for management, who enjoy raising capital and initiating projects, but not necessarily so bad for yield-seeking investors who’d just like to keep collecting the divis…
On this basis I am content to hold, accepting some event-risk related to the continuation vote in August.
Technical perspective:
Neckline (resistance) at 79.
If forms a right shoulder, then 71 is in sight.
Fundamental perspective:
Many measures, e.g. Losses, gearing, NAV, debt, cost of capital etc. are still heading in the wrong direction. Market may see these improving with recent price appreciation. Probably already discounted
Why share buy back? (should be given to shareholders as part of dividend)
Price Discount to NAV shows how market still undervalues the stock. Will take significant changes to energy market and/or interest rates to change this.
What still (seriously) concerns me here is the trajectory of the forward power price curve. It continues to drop fare into the future. I can't reconcile how that will affect future dividends and future NAV.
... double checked NESF fall in NAV over the year ... seems a tad higher than elsewhere in sector but NAV at 104p even given a trade up by the trust is a marked discount historically speaking.
Hi Temple and all. Yes, looking good. I would have preferred more capital return by way of an extra divi rather than buybacks (that only reward sellers). Annoyingly I had a limit sale kick in yesterday late on which was set when I bought at 72p recently as a trade to increase my core holding, but hey, a successful trade is just that.
I'll still be wary as the buyback may be a signal that a large holder needs a way of selling, but that could be just the cynical investor in me. Each way, the SP has bee weighted down maybe with a large seller and this provides that seller a quicker exit.
So.. Back to 90's.. Again..
The share looks way oversold to me along with GSF and others in the sector … Nat Gas prices are up in USA … the question is whether Bailey will give Sunak a boost and drop interest rates tomorrow … if he doesn’t Sunak is going to look out of touch in every which way possible making one wonder how he made his millions during the financial crisis outside of insider information.
11% yield is ridiculously high where a 10% capital gain with a few ups and downs along they way seems a no brainer … market however is selling into spikes so will see if I get the trading sum at a lower price than late yesterday will a sell off in morning. Not bothered either way … boots filled here.
GLA
Holders - particularly those here for the divi - can relax…
Key Highlights:
Financial:
· NAV per ordinary share of 104.7p (31 March 2023: 114.3p).
· Ordinary shareholders' NAV of £618.6m (31 March 2023: £674.4m).
· Income generated of c.£80m (31 March 2023: c.£79m)
· Financial debt gearing (excluding preference shares) of 29.3% (31 March 2023: 28.4%).
· Total gearing (including preference shares) of 46.4% (31 March 2023: 44.6%).
· Weighted average cost of capital of 6.4% (31 March 2023: 5.7%).
· Weighted average cost of debt of 4.5% including preference shares (31 March 2023: 3.9%).
· Weighted average discount rate across the portfolio of 8.1% 1 (31 March 2023: 7.3%).
Dividend:
· 11% increase in total dividends paid of 8.35p per ordinary share for the twelve months ended 31 March 2024 (31 March 2023: 7.52p).
· Dividend cover for the twelve months ended 31 March 2024 was 1.3x (31 March 2023: 1.4x).
· Increased target dividend to 8.43p per ordinary share for the year ending 31 March 2025.
· Attractive high dividend yield of c.11%, as at closing share price on 17 June 2024.
· Forecasted target dividend cover of 1.1x - 1.3x for the year ending 31 March 2025.
· Total ordinary dividends paid since IPO of £345m or 67.8p per share.
Those bought with the sell off after the ex divi have been cleared on the spike ... reading the RNS with interest now.
Interesting announcement(s) today.
- NESF has sold “Whitecross” for £27m (reportedly a 14% premium to its holding value) via a competitive sales process. An open-market transaction that supports directors’ recent assertions re NAV etc.
- A £20m share buyback programme has been initiated.
These are positive developments for holders….
As I said below .. this share spikes when she goes .... luvvit.
That would be nice! Hopefully we’ll get some certainty of a rate cut on the 20th too, even if it’s coming in August.