Greencoat UK Wind (UKW)

14/08/2025

Results analysis from Kepler Trust Intelligence

Greencoat UK Wind's (UKW) half-year results for the six months to 30/06/2025 and announced dividend cover of 1.4x, despite lower than budgeted wind generation. UKW's target dividend per share stands at 10.35p for the full-year 2025 and equates to a yield of c. 8.7%.

UKW declared total dividends of 5.18p per share with the trust having now paid £1.3 billion in dividends since inception. In addition, UKW has generated £1bn of excess cash flow which has been re-invested in the company. Although net asset value (NAV) per share fell, UKW has provided a total shareholder return of 140.7% since listing, the highest in its peer group.

UKW reinvested £40 million into share buy backs, adding 0.6p per share to the NAV. Total buybacks have been £131m, at an average price of 130p per share. The trust's second buyback programme, provides for at least a further £69m.

Excess cashflow beyond this 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.

UKW's capital allocation is supported by the announced partial disposal of three assets for a total £181m. All assets were sold at NAV, and cumulative disposals now total £222 million.

UKW's assets generated 2,581GWh of renewable electricity in the period, equivalent to powering c. 2.2m homes and avoiding 2.4m tonnes of CO2. Low wind meant generation was below budget.

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 in Greencoat UK Wind's (UKW) half-year results; the validity of the valuation and resilience of the income. With that in mind, these results contain several positives, such as disposals at NAV and robust cash generation that supports the dividend.

That being said, there have been some challenges, including low wind speeds and falling power price forecasts which have put downward pressure on the NAV and cash generation. However, these are external factors, 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.

Despite the impact of these external factors, UKW has still increased its dividends that were comfortably covered by net income which represents solid cover in our view. We believe the decreases in finance costs and management fees that supported the net cash generation is encouraging, as these are factors within the trust's control, demonstrating that managers have used what they can to maintain income stability.

The disposals made at their latest valuation provides crucial, real-world evidence that buyers are not seeing the discount in the valuation manifest in UKW's share price which gives confidence in the NAV in our view. Furthermore, the proceeds have been put towards reducing gearing which has supported dividend cover, and also further de-risked the trust which should add reassurance.

Whilst these results have seen some important metrics be impacted, the trust's resilience shows how much margin of safety was built into the model. Whilst NAV and dividend cover have fallen, we believe the current discount more than accounts for this, with the high yield also considerable compensation.

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