Greencoat UK Wind (UKW)
01/05/2024
Flash update from Kepler Trust Intelligence
Greencoat UK Wind (UKW) has
released its net asset value (NAV) update for the first quarter of
2024. The trust announced a NAV of 160.0p per share for the end of
March, marking a small 0.4% decline on the 164.1p per share at the
start of the year.
The NAV decline was largely
due to lower-than-expected power generation. This was due to lower
availability, including an outage at the Hornsea 1 facility, and
lower wind speeds.
The trust generated net cash
of 5.5p per share over the quarter.
UKW continued its £100m
buyback scheme into the quarter as well. The trust repurchased
13.8m shares during the quarter. Buybacks have now totalled 20.4m
shares at a cost of £28m since being announced in October of last
year.
The trust's strong cash
generation mean it is well-placed to continue growing without
tapping equity markets. Cash holdings totalled £250m at the end of
March, with an additional £200m available via the trust's £600m
credit facility.
Kepler View
We have noted on several
occasions now that Greencoat UK Wind's (UKW) total return strategy
puts it ahead of the pack in the current market, and performance in
Q1 provides further evidence of that. The managers provided a clear
breakdown in their 2023 interims, showing that power prices could
fall substantially and UKW would still be able to pay a fully
covered dividend and generate surplus cash.
With regard to the first of
those claims, we saw power prices and generation coming in lower
than anticipated in Q1. That was due to a mix of reduced site
availability and wind generation being weaker than
expected.
The total return strategy of
the trust is worth highlighting as well. Discounts have widened out
across the sector, effectively precluding trusts from tapping
equity markets to make further investments. UKW's scale, strong
balance sheet, and robust cash generation means it can continue to
meet commitments and invest in new projects at attractive rates
without having to do this anyway.
We think the trust today
looks particularly interesting, given that we are arguably now at
the end of the UK rate hiking cycle. The trust continues to look
capable of increasing its dividend above the rate of inflation and
delivering NAV growth on a real basis. Along with the extensive
buyback programme, we think the trust may start to look
increasingly attractive to investors as those traits shine through
and we see a separating of the 'wheat from the chaff' in the
sector.
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.