Greencoat UK Wind is a good starting point for investors looking to tap into the energy transition theme, according to broker Liberum.
In an overview of the energy and infrastructure sector, Greencoat is one of seven recommendations by the broker.
Currently, it has 45 wind assets in the UK and while it lacks diversification Greencoat is unique in maintaining a covered RPI-linked dividend since IPO, said Liberum
While the electricity generator’s levy (EGL) limits upside potential to high power prices, cautious existing power curve assumptions result in minimal impact on the current NAV, according to the broker.
“We forecast supernormal NAV growth over the next few years as wholesale prices are realised above current modest assumptions,” it said, noting that first-half cash generation increased 217% year-on-year to £328mln.
“Pricing will moderate in the medium term but the energy crisis is not quickly or easily resolved.
“A share price at close to par fails to reflect the upside from cautious power curves.”
Buy with a target price of 172p is Liberum’s initiation view.
Shares today were up 0.4% at 153p.