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.

CLICK HERE TO READ THE FULL REPORT 

Visit Kepler Trust Intelligence for more high quality independent investment trust research.

Important information

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm's internal rules. A copy of the firm's Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 70 Conduit Street, London W1S 2GF with registered number OC334771.