NextEnergy Solar Fund launches sale process, shares jump 5%

NextEnergy Solar Fund Ltd. shares rose 5% to 50.13 pence Wednesday after the London-listed solar investor launched a formal sale process, inviting offers for the entire company.

"A sale appears the best way forward given the persistent discount to net asset value," Jefferies analysts said in a note, citing the valuation implied by Drax's offer for Bluefield Solar Income Fund as a benchmark for what solar assets are worth to trade buyers.

The board, advised by Rothschild & Co., has not received any approach or entered active discussions as of the announcement, the company said. NextEnergy Capital IM, the fund's investment manager, supports the decision. The Takeover Panel granted a dispensation allowing bidders to remain unnamed while in the process, removing the usual 28-day deadline for interested parties to declare their intentions.

The sale process marks the most decisive step yet by a board that has struggled for years to close a gap between the company's share price and its net asset value, a discount that has prevented the fund from raising fresh equity to finance growth. A successful sale would allow NextEnergy to repay its preference shares, avoiding potential dilution to ordinary shareholders.

Jefferies Flags Preference Share Hurdles

Jefferies flagged several complications that could affect bidding. The make-whole terms attached to the company's preference shares may deter some buyers, while non-core assets — including the NextPower III fund, co-investment interests, a battery storage asset and Italian solar projects — could complicate due diligence. On the positive side, the notice period under the management contract is only 12 months, the broker noted.

NextEnergy Solar Fund owns a diversified portfolio of utility-scale and rooftop solar assets in the UK and Portugal. The company has a debt-free balance sheet and generates predictable income from renewable electricity production, though it has reported weaker financial performance in recent years with declining revenue and reported losses. The shares have traded at a discount to net asset value for several years, damaging the fund's ability to raise fresh equity.

The company said it intends to focus the process on parties that understand the full potential of the business and will update the market on timings in due course. Shareholders have been told to take no action. The board retains the right to modify, suspend or terminate the sale process at any time.

This article is for informational purposes only and does not constitute investment advice.