GREENCOAT UK WIND PLC

Initial response to the Government consultation on changes to inflation indexation in the Renewables Obligation scheme, market backdrop and capital allocation update

Renewables Obligation Consultation

On 31 October 2025, the UK Government published a consultation on potential changes to the inflation indexation in the Renewables Obligation (“RO“) scheme. The RO consultation has two options (noting that the consultation also invites suggestions for alternative options):

1.   Switch the indexation on the RO buy-out price from the Retail Price Index (“RPI“) to the Consumer Price Index (“CPI“) from March 2026;

2.   Freeze the current RO buy-out price until CPI catches up with RPI, in effect as if the RO buy-out price had always been inflated by CPI. Thereafter, CPI would apply. By the Government’s estimates, the catch up would occur around 2034/5 and so the RO buy-out price would remain frozen until then.

Based on the information available, initial calculations by the Investment Manager indicate that the impact of option 1 would reduce the latest reported NAV per share of the Company by 2.4p and option 2 by 10.6p.

The overarching policy aim is to reduce consumer bills given the costs of the RO are ultimately levied on consumers. By the Government’s own calculations, option 1 would save “approximately £3 per year for an average UK household” in 2030/31.

Whilst we draft our full response to the consultation, as well as engage directly with Government and peers, the Board and Investment Manager felt it helpful to set out some of the arguments we will make on behalf of investors and consumers.

Investors have made good faith investments into UK renewable energy projects based on stable, government-backed, inflation-linked support. Retrospective revision to the RO will inevitably erode investor confidence. The listed renewables market is a bellwether for investor sentiment and, in the five trading days that followed the Government’s announcement, the six largest UK listed renewable funds[1] saw their combined market cap fall by circa £400 million / 5%.

Investor confidence is also expressed through the cost of capital; we anticipate that investors will demand a higher return on new investments to compensate for the risk of further Government intervention. A small increase in the cost of capital would substantially increase the cost to consumers of new renewable energy projects and can reasonably be expected to outweigh the purported savings to consumers and so serve to increase, rather than decrease, bills.

The role of renewables in the UK electricity market

UK electrical demand is, conservatively, set to increase by 30% by 2035, driven by the electrification of transport, heat and the expansion of data centre capacity. This sits against a backdrop of scheduled plant retirements in the next decade, with a quarter of the UK’s nuclear fleet and 20% of the gas fleet set to retire.

Renewable energy projects, in particular onshore wind and ground-mounted solar, remain the cheapest and quickest to build forms of new generation in the UK. It is therefore vital to retain investor and consumer support for renewable energy projects.

The renewable energy sector must also show what it has done, and can do, to reduce bills for consumers.  

Specifically, renewables can further reduce consumer bills in the near term.  The Review of Electricity Market Arrangements consultation included discussion of a voluntary Contract for Difference, where existing generators could agree to a fixed electricity price below the prevailing wholesale price.  Generators and investors would receive price certainty through a scheme that is voluntary, and consumers would enjoy a price lower than the current market level without volatility. 

Depending on take up, we estimate that this could reduce consumer bills by £30 per annum for an average UK household – substantially more than the proposed changes to RO indexation. It could also be delivered relatively quickly.  Investors could expect such an arrangement to be value neutral.

We will continue to engage with Government on this, and other ways, so that the sector and Government can work together to reduce bills whilst maintaining investor confidence.

Market Backdrop and Capital Allocation Update

Notwithstanding the impact of the RO Consultation on sentiment towards the listed renewables market, the Board and the Investment Manager are fully engaged and actively working to improve the Company’s overall attractiveness for shareholders.

The fees for the Investment Manager are already fully aligned with shareholders by reference to market capitalisation, which continues to be unmatched by peers, and disciplined capital allocation remains a key priority, in particular:

·    UKW reiterates its 10.35p dividend target for 2025, representing an annual distribution to shareholders of approximately £225m;

·    In the past 12 months, UKW has completed £222m of assets disposals at NAV with proceeds allocated to debt repayment and share buybacks;

·    As at 10 November 2025, UKW had completed £198m of share buybacks from its announced £200m total buyback programme. Share buybacks completed to date have added 1.7p per share to NAV.

As the Company approaches completion of its £200m total buyback programme, it is working towards further asset disposals, with a range of potential buyers. Furthermore, underlying asset cashflows are expected to increase as we enter the seasonally higher winter cash generation period and UKW continues to benefit from structurally high forecast dividend cover.

The Board and Investment Manager remain confident in their ability to allocate excess capital across further buybacks and de-gearing whilst maintaining strategic flexibility for the Company. This puts the Company in a position of strength from which to assess future capital allocation priorities.

Lucinda Riches, Chairman of UKW, said:

“The Board and the Investment Manager recognise the complexity of the market and are committed to enhancing the Company’s long-term attractiveness for our shareholders.

We will continue to navigate this market backdrop through strong sector leadership and disciplined capital allocation. Our attractive proposition and track record since IPO positions us well and we are resolutely focused on doing the right thing for shareholders.”