Yield, sunshine and strategy: Why solar funds still shine through the gloom

It has been a tough year for UK-listed renewable infrastructure trusts, but amid falling net asset values and rising leverage, two names are quietly making a case for income investors willing to look through the cycle: Bluefield Solar Income Fund (LSE:BSIF) and NextEnergy Solar Fund Ltd (LSE:NESF)

Both trusts posted a 2.4% fall in NAV over the first quarter. Yet below the surface, operational resilience and high yields tell a more constructive story.

Bluefield Solar Income Fund stands out for its solar generation performance, which came in 9% above forecast thanks to a record March for sunshine. This helped offset a 20% shortfall in wind generation and the seasonal dip in revenue.

Even with NAV falling to 123p, the dividend yield stands at 9.6% and the shares trade on a 25% discount, offering compelling value on a forward income basis.

Operationally, there was one minor hiccup. Bluefield is addressing an identified inverter fault across a small part of its portfolio, committing £7 million to a targeted replacement programme. 

High-yield story

NextEnergy Solar Fund offers a similarly high yield and is navigating a complex backdrop with a pragmatic approach.

While NAV fell to 95.1p, the fund met its full-year dividend target of 8.43p, maintaining cover at 1.1 times. With 94% of revenues fixed through subsidies and hedges, the income stream remains secure despite power price volatility.

Generation figures will follow in the annual results, but NextEnergy has flagged improved irradiance in March, which helped offset earlier weakness.

The sale of five projects is ongoing, with two still progressing through a competitive process. At 69p, the shares trade on a 27% discount to NAV, with a 12% dividend yield.

The common thread across both funds is disciplined income delivery, proactive asset management and a clear intent to address market scepticism around discount levels. In a sector where growth is constrained and sentiment subdued, that combination is worth paying attention to.

For income-focused investors willing to accept some volatility in capital values, Bluefield and NextEnergy offer rare double-digit yields backed by tangible cash flows and real assets.

If their respective boards deliver on strategic reviews and asset disposals, the discounts could begin to narrow. Until then, investors are being well paid to wait.