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Greencoat UK Wind on the rise as institutions clamour for renewables

Snapshot

  • Generating capacity has risen to 980Mw net
  • Portfolio value of £2.42bn across 35 wind farms
  • Shares stand at a big premium to NAV
wind farms

Quick facts: Greencoat UK Wind PLC

Price: 127.5455 GBX

LSE:UKW
Market: LSE
Market Cap: £2.52 billion
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What it does 

Greencoat UK Wind PLC (LON:UKW) is a renewable infrastructure fund investing in operating UK wind farms.

It is listed on the FTSE 250 index and is a UK Investment Trust, with gross assets of £3.3bn. 

 

ROC-solid support

Renewable industry fundamentals remain very supportive.

Under the grandfathering arrangements for renewable ROCs, getting on for half of the firm’s revenue is “fixed” until a 2037 cut off, with the other half linked to wholesale electricity prices.

Although ROCs dominate the portfolio, Greencoat began to prepare for life without subsidies last July when it snapped up a 75% stake in Tom Nan Clach for £126mln.

What was different with this deal was that rather than ROCs, a 15-year contract for difference (CFD) fixes the power price received.

 

How it is doing

The UK government will double the capacity of renewable energy it will subsidise next year as it backs onshore, offshore and floating wind projects, plus solar energy, wind and tidal schemes.

Following the 10-point plan laid out by the Prime Minister in November, the Department for Business, Energy & Industrial Strategy said the fourth round of the contracts for difference (CfD) scheme in late 2021 will aim to double the capacity to 12 gigawatts of renewable energy compared to the 5.8GW at the previous auction in 2019.

Offshore wind will compete for a ring-fenced pot of CfD funding, “given its long-term potential to support the country’s 2050 net zero target”, the government said, with Boris Johnson having already flagged a commitment to raising offshore wind deployments to 40 GW by 2030 as part of making the UK the 'Saudi Arabia of wind'. 

Meanwhile, Greencoat had acquired a 49% stake in the Humber Gateway offshore wind farm as part of a consortium with several pension funds. The total cash consideration payable to vendor RWE will be £648mln. The German utility will continue to hold the remaining 51%.

 

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What analysts say

Research house Kepler said Greencoat has shown this year it is highly resilient and is also achieving its ambition to become a utility-scale investor, which is now giving it the size and clout acquire large institutional size assets.

“UKW is in a strong position to continue to grow, which further embeds its competitive position within the sector – with a lower OCF expected next year and its size enabling attractive asset acquisitions."

“With more investors looking for sustainable investments, UKW’s lower premium to peers might make it attractive to potential investors a relative basis.”

“Over the long run, we would hope for more of a surplus which UKW can reinvest to maintain the value of the NAV in real terms. In the interim, investors will be reassured that their dividend remains on track.“

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Greencoat Capital makes third acquisition this year with 49% stake in Humber...

Greencoat UK Wind PLC (LON:UKW) Stephen Lillie talks to Proactive London about the agreement to acquire a 49% stake in the Humber Gateway offshore wind farm as part of a consortium with several pension funds. This represents their third acquisition this year and means the specialist wind...

on 24/11/20

3 min read