Greencoat UK Wind beats its dividend target

Greencoat UK Wind (UKW) has released its results for its financial year ending 31 December 2023.

  • UKW’s NAV fell slightly from £3.9bn to £3.8bn, equal to a fall from 167.1p to 164.1p on a per share basis. UKW’s share price also fell over the period, from 152p to 151.5p, finishing the year with a market cap of £3.5bn.
  • Excluding dividends, the largest detractors to NAV came from the discount rate shift and power price movements. This was offset by the £405m in net chase generation and the positive impact of inflation.
  • UKW’s discount rate increased by 1% over the year, with the levered IRR for the portfolio being 11%. This equates to a net return of 10% for investors.
  • UKW made several NAV accretive investments, with £174.2m of NAV accretion from investment in Dalquhandy, London Array, South Kyle and Kype Muir Extension wind farms, which increased the portfolio to 49 operating wind farm investments. UKW made a total investment of £821m across all the aforementioned sites.
  • UKW’s gross gearing was 38% as of 31 December, with a weighted cost of 4.59%, and gross assets of £6.2bn.
  • UKW’s target dividend is 8.76p per share, however with the increased dividend for the final quarter of 3.43p per share, declared dividends for 2023 were 10p per share.
  • The target dividend for 2024 is also 10p per share, an increase of 14.2% versus the target dividend for 2023 and significantly above December’s RPI of 5.2%.
  • UKW generated £405m in cash over the period, covering its dividend by 2.1x. Its investments also generated 4,743GWh of sustainable electricity.
  • In October UKW announced a £100m share buyback programme, with 14m shares having been repurchased as of 27 February.
  • UKW’s previous chair, Shonaid Jemmett-Page, retired in 2023, and was replaced by Lucinda Riches.

UKW’s investment manager commented:

There are currently approximately 30GW (£100 billion) of operating UK wind farms (15GW onshore plus 15GW offshore). The Group’s market share is approximately 7 per cent. As at 31 December 2023, the average age of the portfolio was 7.5 years (versus 5 years at IPO in March 2013).

“The portfolio is robust in the face of downside power price sensitivities and remains exposed to significant upside (power prices, asset life extension, asset optimisation, new revenue streams, interest rate cycle etc). The levered portfolio IRR of 11 per cent and net return to investors of 10 per cent should be very attractive versus other investment opportunities.

“Given the leading market position of the Group and the Investment Manager, there is no shortage of investment opportunities, further fuelled by the challenging fundraising environment affecting all buyers (in both public and private markets). The Company will continue to review its capital allocation policy and will assess new acquisitions in this light.

“In general, the outlook for the Group is extremely encouraging.”

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