Greencoat UK Wind shrugs off slow winds with ambitious share buyback scheme

Greencoat UK Wind has pushed ahead with an ambitious share buyback programme, even as the trust struggles with low wind speeds and falling electricity prices.

In the trust’s half-year results, it reported that net asset value per share had dropped by 2.9 per cent in the last six months, though this is still up 1.1 per cent compared to the quarter before.

Electricity generation for the six months jumped 27 per cent year-on-year but was 15 per cent below budget due to low wind speeds, as well as an export cable failure at one of its sites.

The trust has previously reported that low wind speeds have been a persistent problem in recent months.

After it launched a £100m share buyback programme in October 2023, Greencoat UK Wind has now spent an estimated £55m on buybacks, with about £45m purchased over the last six months.

The renewable energy infrastructure trust sector has struggled over the past four years, but Greencoat has performed better than its wider peer group. It has produced a total return of 5.9 per cent over the past five years, compared to a decline for its wider peer group.

However, despite this, the trust is still trading at a near 10 per cent discount to its net asset value.

Shonil Chande, analyst at Panmure Liberum, argued that the trust continued to be “one of the best strategies in the space, which is reflected in its relative discount”.

There was a “firm” rationale for owning shares, Chande said, due to its high yield, especially with the expected £45m in share buybacks to come, as well as its “relatively simple business model” which ensures a very high dividend cover.

The trust’s dividend cover has averaged two times since it floated in 2013, and has averaged 1.5 times over the past six months, which Chande said “provides bandwidth to continue re-investing into the portfolio at a margin that is unmatched”.

“This means it is much less reliant on capital markets to invest in accretive projects to preserve the NAV in real terms,” he explained.

Lucinda Riches, chair of Greencoat UK Wind, said: “We are pleased to have delivered a resilient performance, extending our sustained track record of growing our dividend at least in line with RPI since our listing in.”

“Portfolio returns have been adjusted over the past two years to reflect the macro environment, and are now set to deliver net returns to investors of 10 per cent on NAV.

“We operate in a mature and growing asset class and, as the market for UK wind assets is expected to grow to threefold over the next decade, we are well placed to capitalise on our leading position, continuing to deliver superior returns and supporting the UK government’s net zero targets.”