Greencoat UK Wind PLC Kepler Trust Intelligence: Flash Update
April 29 2022 - 6:42AM
RNS Non-Regulatory
TIDMUKW
Greencoat UK Wind PLC
29 April 2022
Greencoat UK Wind (UKW)
29/04/2022
Flash update from Kepler Trust Intelligence
Greencoat UK Wind (UKW) stands out from the peer group as the
only pure play wind trust, exposed solely to the UK. It has a
relatively simple model, which aims to invest in wind farms at
attractive rates of return, and over time use around two-thirds of
cashflows to pay a dividend that rises with inflation each year, as
well as re-invest the remaining third of annual cashflows to
preserve the capital base in real terms. In an average year, this
allows for a strong level of dividend cover. And it is this
dividend cover that allows the managers to run an 'un-hedged'
exposure to power prices, yet still be confident of hitting the
board's dividend target.
At times this has looked to be a potential disadvantage (when
power prices crashed in the early stages of the pandemic for
example). However, UKW has been a significant beneficiary of the
very high wholesale electricity prices we are currently
experiencing. This benefit has come through excess cashflows at
roughly twice the "model" rate (3p net of depreciation for the
quarter), but also through a 5.2% NAV increase as a result of
higher forward power prices (for the period 2022-2025) increasing
the value of the trust's assets.
Rising assumptions for 2022 inflation (but no further out) has
also led to a significant 4.5% increase in NAV. Cumulatively, and
when added together this has resulted in a very strong NAV, which
will be welcomed by shareholders. It also provides credence to the
manager's approach, which even before this announcement had
provided the strongest NAV total returns in the peer group.
UKW's dividend target of 7.72p for 2022 offers shareholders a
prospective dividend yield of 4.85%. At the current share price of
159p, the shares trade at a premium to NAV of 6.5%, which compares
to the average over the last five years of 11.8% (Source:
Morningstar).
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