New Energy Solar to cut value of PV portfolio

Australian solar farm operator New Energy Solar Ltd (ASX:NEW) said today it expects to write down the value of its portfolio by 8%-10% because of the impact the COVID-19 crisis has had on electricity price forecasts.

The company’s photovoltaic (PV) assets in Australia and the US have 15.4 years, on average, remaining on their long-term power purchase agreements (PPA). Based on New Energy Solar’s calculations, more than 96% of its revenues are contracted for the next five years.

The company’s independent valuers use future electricity price forecasts when determining the value of uncontracted cashflows from the solar parks after their PPAs end. As a result, the lower long-term electricity price forecasts will reduce New Energy Solar’s portfolio valuations and auditor-reviewed net asset value per stapled security (NAV) for the first half (H1) of 2020, as compared to what has been reported for 2019.

The estimated 8% to 10% write-down translates into a reduction of between AUD 0.12 and AUD 0.15 per stapled security.

“These adjustments in long-term electricity price forecasts are not inconsistent with the reductions in long-term forecasts of 5-10% announced this year by other renewable power companies and with the recent reductions in long-term forecasts of oil and gas prices of 20-25% announced by major energy companies,” New Energy Solar commented. It said industrial demand for energy has been especially hurt by the pandemic.

The company's H1 report will be published later this month.

(AUD 1 = USD 0.72/EUR 0.61)

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