NextEnergy Solar (NESF ) has uncovered an accounting software problem that overstated its accounts by £15.9m and has contributed to a 5.5% drop in net asset value (NAV) to correct.

The company, which two weeks ago impressed shareholders with plans to raise capital through a partial disposal of its portfolio, said a reporting module in its accounting software included an excess of working capital which created an omission of VAT payable accounts that led to an incorrectly high NAV calculation.

Rectifying this meant 2.7p per share had to be taken off its valuation at 31 December. Instead of standing on assets worth £713m and a NAV per share of 120.9p, its end-of-year valuation was £697.1m with a NAV per share of 118.2p.

The NAV fell to 114.3p in the first quarter, valuing the portfolio at £674.4m excluding debt at 31 March. This decline reflected falls in short-term inflation which were only partly offset by rising power-price forecasts.

The company said the accounting error had no impact on cash flow from the business or on dividend cover. 

Nevertheless, the revelation took the shine off the board lifting the fund’s dividend target for 2023/24 by 11% to 8.35p per share. It forecast the payout would be covered 1.3 to 1.5 times by earnings and was not dependent on any of the recently announced asset sales. 

Liberum analyst Joseph Pepper said: ‘The accounting adjustment is clearly disappointing and will raise concerns as to controls given it impacts a number of NAV announcements, including the audited 2022 accounts, but based upon the statement this morning it appears to be an isolated incident and NESF has confirmed it is working with external advisers to strengthen controls going forward.’

NESF shares slid 3.5% to 104p, a 9% discount to the 31 March NAV but on a forward dividend yield of 8% that looks to be the highest in the renewables fund sector.