Results analysis from Kepler Trust Intelligence

Greencoat UK Wind PLC

01 August 2024

 

Greencoat UK Wind (UKW)

01/08/2024

Results analysis from Kepler Trust Intelligence

UKW's NAV per share decreased in the six-month period from 164.1p per share on 31 December 2023 to 159.3p per share on 30 June 2024, a fall of 2.9%. This movement reflected lower net cash generation in the period, and a fall in forecast power prices. Adding back the dividend, UKW's NAV total return for the interim period to 30 June 2024 was + 0.7%. That the lower electricity generation and the failure of the Hornsea 1 cable resulted in a dividend cover of 1.5x, is in our view testament to the resilience built into UKW's investment model. We understand that if Hornsea 1 had been fully operational, dividend cover would have been in the order of 1.7x.

In the first half, UKW bought back a further £44m of shares at an average cost of 140p per share and at an average discount to NAV of 14.2%. As of 30 June 2024, the company has bought back a total of £53m of shares under the £100m programme announced in October 2023. The board state that they will continue to maintain a strictly disciplined approach to acquisitions, only investing when it is considered to be in the interests of shareholders to do so. The board and the investment manager continue to actively explore selective disposals. Divestment proceeds would generally be expected to be used to repay the revolving credit facility. Gearing as at 30 June 2024 was 39% of GAV, with a weighted cost of debt of 4.63%. The refinancing process of both the revolving credit facility and selected term debt tranches is at an advanced stage and will conclude earlier than the first maturity date, with "significant appetite to lend" amongst lenders.

Kepler View

UKW has investments in a diversified portfolio of 49 operating UK wind farms with net generating capacity totalling 2,007MW. With a new UK government having increased the goal of wind farm build out by an additional £100bn, as the 5th biggest renewable generator in the UK (the top four being utilities) UKW should be well placed to help deliver this. UKW is therefore more relevant than ever, with a significant societal benefit of its investments' allowing developers to recycle capital, as well as being a generator of strong investment returns.

With the levered portfolio prospective total return standing at 10% the fees, UKW continues to look attractive in a risk adjusted basis against many other investment opportunities. At the time of writing, the discount to NAV has narrowed from the widest point, and is significantly narrower than peers reflecting in our view the quality of the portfolio and the higher return.

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