Results analysis: Greencoat UK Wind

UKW’s disposals have strengthened confidence in the NAV, with dividend cover remaining resilient.

David Brenchley

Updated 14 Aug 2025

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Greencoat UK Wind (UKW). The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

• Greencoat UK Wind’s (UKW) half-year results for the six months to 30/06/2025 saw the trust announce dividend cover of 1.4x for the first half, despite lower than budgeted wind generation. UKW’s target dividend per share stands at 10.35p for the full-year 2025, up 3.5% from 10p in 2024 and equates to a yield of c. 8.7 % on the current share price. The net asset value (NAV) per share fell c. 5.2% to 143.4p, due primarily to lower-than-budgeted cash generation and a reduction in forecast power prices.
• During the six-month period, UKW declared total dividends of 5.18p per share, including a 2.5p per share payment with respect to Q4 2024. The dividend is a key plank of UKW’s total return proposition, and the trust has now paid £1.3 billion in dividends to shareholders over its 12-year life, almost half of its current market capitalisation of c. 2.7 billion. In addition, UKW has generated £1bn of excess cash flow which has been re-invested in the company. UKW’s average dividend cover over its life is 1.8x.
• UKW generated £163 million in net cash in the six months to 30/06/2025, down c. 1.3% from the £165.4 million generated in the six months to 30/06/2024. Despite the fall in NAV, UKW has provided a total shareholder return of 140.7% since listing in 2013, or 7.4% annualised, the highest in its peer group. UKW aims to provide a 10% return to investors on NAV, net of all costs.
• On capital allocation, UKW reinvested £40 million to buy back its own shares during the period, which added 0.6p per share to the NAV. It has currently completed £131 million of share buybacks in total, at an average price of 130p per share. The trust’s second buyback programme, which was announced in February, provides for at least a further £69 million in cash to be allocated to share buybacks.
• Excess cashflow beyond that is likely to be applied to a reduction in UKW’s gearing. Aggregate group debt was c. £2.25bn as at 30/06/2025, equivalent to 41.5% of gross asset value (GAV), or c. 71% of NAV. The weighted cost of debt was 4.59% across a range of maturity dates (November 2026 to March 2036).
• UKW’s capital allocation is supported by the announced partial disposal of three assets (Andershaw, Bishopthorpe and Hornsea 1) for £181 million. All assets were sold at NAV, and cumulative disposals now total £222 million.
• In total, UKW’s collection of 49 wind farm investments generated 2,581GWh of renewable electricity in that six-month period, an equivalent amount to power approximately 2.2m homes. This was c. 14% below budget, owing to low levels of wind that have been experienced across the industry. As at 30/06/2025, UKW’s portfolio powers 2.2 million homes in the UK and avoids the emissions of 2.4 million tonnes of CO2 per annum.
• Lucinda Riches, chairman of UKW, commented on capital allocation remaining a key focus, saying: “In the medium term, we can see the significant need for capital in the sector and expect that this should provide investment opportunities that surpass the returns afforded by share buybacks and de-gearing, especially when viewed over a longer-term horizon. The Board and Investment Manager continue to evaluate suitable investments and will remain strategically opportunistic.”

Kepler View

In our view, there are two key considerations when looking at near-term updates for long-term assets such as those owned by Greencoat UK Wind (UKW); the validity of the valuation and resilience of the income. With that in mind, these results contain several positives shareholders, such as a number of disposals at NAV and robust cash generation leading to solid dividend cover that supports a yield of over 8%.

That being said, there have been some challenges in the year, most notably through low wind speeds impacting generation. Furthermore, broader power price forecasts fell, over both the near-term and long-term. Both of these factors have led to downward pressure on NAV and cash generation. However, these are external factors that are broadly out of the control of the managers. Wind generation is a key input, although can fluctuate, and power prices have been volatile in the past few years due to macro factors. Demonstrating this recently, in the post results period, near term spot prices have picked up again which will have a positive impact on the next NAV should things stabilise here.

Despite the impact of these external factors, UKW has still paid dividends in the period that are an increase of 3.5% on the same period last year. These were comfortably covered by net income 1.4x, which, whilst down on the previous period, still represents solid cover in our view. What we believe is particularly encouraging from a shareholder’s perspective are decreases in line items such as finance costs and management fees which have helped support the net cash generation figure, reflecting the reduction in gearing and change to policy respectively in the past few months. These are factors within the trust’s control, demonstrating that, despite the external challenges the trust faced, it has pulled at the levers it has in order to maintain income stability.

The managers have also made many strides in realising capital through over £200m of disposals, all of which have been made at their latest valuation. Ultimately, valuing assets such as these involves some element of estimation, and therefore, these transactions provide crucial, real-world evidence that private asset buyers are not seeing the discount in the valuation of these asset manifest in UKW’s share price. This in turn gives confidence in UKW’s NAV in our view. Furthermore, some of the proceeds of these disposals have been put towards reducing gearing. This has not only supported the cash generation and therefore dividend cover, as mentioned above, but also further de-risked the trust. In a backdrop of higher-for-longer interest rates, we believe this should add reassurance.

Ultimately, whilst these results have seen some important metrics be impacted, the fact the trust remains resilient is a testament to the simplicity of the approach in the first place, and how much margin of safety was built into the model. And whilst the NAV and dividend cover have fallen, we believe the current discount of c. 18 % more than accounts for this, with a yield of over 8% also considerable compensation for those who hold the long-term performance of the trust in mind