What it does
Since it listed in 2013, UK Wind's generating capacity within the portfolio has risen to 980Mw from 127Mw with a value of £2.4bn spread across 35 operating wind farms.
The company recently completed three major new deals: Tom nan Clach, Stronelairg and Dunmaglass.
Greencoat has already forecast a 7.1p payout for 2020 underpinned by the majority of its windfarm investments having ROC (Renewable obligation certificates) certification.
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 is already preparing for life without subsidies.
The 75% stake in Tom Nan Clach cost £126mln with the development handed over to Greencoat in July.
What was different with this deal was that rather than ROCs, a 15-year contract for difference (CFD) fixes the power price received.
In December, UKW entered an agreement to build a subsidy-free wind farm near Inverness with developer Innogy Renewables for £57.5mln.
The transaction will be completed in October 2021, once the Glen Kyllachy farm is fully operational, although the first export of electricity is targeted for July of that year.
The farm, designed to have a capacity of 48.5Mw.
How it's doing
In its results statement for 2019, the renewable infrastructure fund said its investments generated 2,386-gigawatt hours (Gwh) of electricity during the year. This was below budget owing to weather conditions while power prices were also below budget.
Despite this, net cash generation clocked in at £127.7mln, enabling the company to pay out £93.2mln in dividends (6.94p per share); the company is targeting dividend payments in the current year of 7.1p.
The group's net assets at the end of 2019 stood at £1,84bn.
What the boss says: Tim Ingram, chairman
" Our portfolio is now providing sufficient electricity to power nearly 1 million homes and reducing carbon dioxide emissions by approximately 1.2 million tonnes per annum through displacing thermal generation."
- NAV at end December of 121.4p
- Tom nan Clach comes onstream
- More acquisitions to grow the portfolio further
What the research says: Kepler
The dividend forecast for next year is 7.1p, representing a compound annual growth of 18.3% since listing.
NAV progression has also remained ahead of inflation, with growth of 22.1% against inflation over the same period of 17.4%.
In share-price terms, shareholders have enjoyed a total return of 115.1% since launch to 31 December 2019.
During 2019, the trust’s earnings were below budget thanks to wholesale power prices remaining below average last year and thanks also to lower power generation from the wind-farm portfolio.
Even so, UKW’s dividend was well covered at 1.4x. The manager’s long-term expectation is 1.7x.
UKW trades at a premium to the peer-group average, perhaps because of the higher investment returns so far delivered, the higher discount rate, and also because of its well-covered dividend.