Greencoat UK Wind (UKW)

10/11/2025

Flash update from Kepler Trust Intelligence

The Department for Energy Security and Net Zero has launched a consultation on proposed changes to the inflation indexation used in the Renewable Obligation (RO) and Feed-in Tariff (FiT) schemes.  This has hit share prices across the renewables sector. It is important to realise that this is only a consultation, and not necessarily an inevitable change. The net result of a previous consultation in 2023, which covered fixed price certificates and included indexation arrangements, was that no amendments were made to indexation (or anything else). Whilst this recent news has added to the already challenging backdrop for the sector, the share price move for UKW seems extreme, such that the worst outcomes would appear to be more than accounted for by the current share price discount to NAV.

Kepler View

If either proposal in the consultation were implemented, it would likely translate into a one-off hit to NAV. However, whilst UKW is clearly 100% exposed to the UK government subsidy regime (rather than other geographies), it has a mix of revenues streams across Renewable Obligation Certificates (ROCs), other subsidy schemes (such as CfDs) and market power prices. It is only the indexation mechanism on the RO and not value of the certificate itself that is up for debate within the consultation. The potential negative effects will also be mitigated by the relatively short remaining life of the ROCs in the portfolio (average remaining duration c. 7yrs) and we also note the structurally high dividend cover of UKW's model. UKW also derives a significantly lower proportion of its revenues from the Renewables Obligation than solar peers, and so we would expect UKW to be significantly less affected than many in the listed peer group.

Fundamentally, UKW appears resilient. UKW's structurally high dividend cover means that it has options to deploy surplus cashflows towards new investments, buybacks or reducing debt. We note that UKW continues to buy shares back, illustrating the confidence the board has in strength of the balance sheet. UKW's conservative approach means there are likely to be considerable levers to pull in order to mitigate a sizeable amount of any potential impact.

CLICK HERE TO READ THE FULL REPORT 

Visit Kepler Trust Intelligence for more high quality independent investment trust research.

Important information

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm's internal rules. A copy of the firm's Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 70 Conduit Street, London W1S 2GF with registered number OC334771.