Greencoat UK Wind PLC's Stephen Lilley and Director Matt Ridley talked with Proactive's Stephen Gunnion about the fund’s 2024 results and future strategy.
Proactive: Hello, you're watching Proactive. Joining me today are Stephen Lilley and Matt Ridley from Greencoat UK Wind PLC. Very good to speak with you. You're out with your 2024 results. Could you give us an overview? I'll start with you, Stephen.
Stephen Lilley: Well, thank you for having us on. Matt will take probably quite a lot of the conversation this morning, but I think for me, in terms of 2024, we've been pretty cash resilient. We've had slightly below budget production and have slowed down slightly, but we've done some big refinancings, paid £250 million of dividends as well, etc.
But I think before we get on to, you know, it's a tricky market at the moment and the actions we're going to take, some of which we've done already and some of which we can announce, Matt will cover that. We're still really cognizant of UK wind being in a very good shape for the long term.
There's a massive build-out in the market that we'll be able to participate in and recycle capital back into, as we have always done over the last 12 years. But I think, more importantly, to address at this point, before we get into those sunny uplands, you know, we're a properly returning business.
We have done buybacks. We've got pricing and returns right. We've changed our management fee to align ourselves with investors. We know this is a difficult market and recognize that there's a distinction between private and public markets. We're not in the same place that we were a little while ago.
But ultimately, our return is sufficient. The flow of capital into the sector is somewhere else at the moment. So we see M&A potentially happening in the sector. We think that will be a good thing if the whole wider sector becomes slightly smaller, and we get back to premium and can go into those sunlit uplands.
So that's the context—it's a difficult time for investors. But we're going to do all the stuff that we do well in the short term to manage that properly.
Matt Ridley: It's really, as Stephen said, about coming back and thinking about the long-term view. This is a business that's been built on pricing risk well, and taking action that's in the best interest of its shareholders and also performing.
There are really three things to say. The first is to demonstrate good alignment. Our business is built on trust. We were the first to reduce our investment management fees. We did it in a simple and easy-to-understand way, and it hasn't been matched.
Second, provide the right return. This is a business that has a strong track record of doing exactly that. After we pay our next dividend, we will have returned £1.2 billion of dividends to our shareholders and invested almost £1 billion back in new assets and in the fund.
The last thing is to generate and allocate capital wisely. Over the next five years, we expect our dividend cover to be 1.9 times, allowing us over £1 billion to reinvest in the business. We've announced another £100 million buyback this morning, and we feel that we can go at a better pace on disposals to add to that.
Proactive: Matt, what is needed to improve sentiments in the sector and attract that capital back?
Matt Ridley: I think the fundamental thing is providing the right return. These assets in these trusts have to be attractive enough on a return basis relative to other investment opportunities. There’s more product than demand in this market.
It may be that there's consolidation or private market takeouts in this sector that reduce its size. I think that's broadly something that should be welcomed by shareholders. We feel that there's space for a large, surviving long-term business like ours, but first, the market's got to shrink a bit.
Proactive: Stephen, you've also announced that you are stepping down as co-head of the Schroders Greencoat investment management team. Can you tell us about the succession plans that are in place?
Stephen Lilley: Yes, thank you. I've been working on this since 2010, so it’s 15 years. Having done that, at some point, I’m getting to an age where I want to retire.
We found a very good successor in Steve Packwood, who has 20 years of experience through a whole range of different renewables companies, operationally high in asset management. He and Matt will divide the jobs in a way that suits their skills well.