UKW is one of the largest renewable infrastructure trust with a market value in excess of £2.2bn and a constituent of the FTSE 250. The trust has a fairly simple business model operating a portfolio of 35 onshore and offshore wind farms throughout the UK. The trust was launched in 2013 and over this period, returns for investors including dividends have just about doubled making it one of the best performing trust in the renewables infrastructure sector. Total returns over the past 5 years compare well with other holdings... UKW 80% v TRIG 77% v BSIF 81%.
The trust pays quarterly dividends and aims to maintain payments at least in line with RPI inflation. The company's target is for a total shareholder return including dividends of 8% to 9% per year which it has exceeded since launch.
UKW has recently announced results for 2019 (link via Investegate).
Revenues increased to £128m (£117 in 2018) and generating 2,385 GWh of clean electricity which represents an increase of 19% on the previous year. Total return for the year (dividend + share price appreciation) was 25.4% which includes dividends of 6.94p paid quarterly. Since launch in 2013, the return has been 115% which equates to an average annualised return of 11.5%.
Dividends should keep pace with inflation and the target for the coming year is 7.1p which gives a forward yield of 5.0% based on the current share price of 140p.
In December, the company agreed to purchase two new wind farms in Scotland for a total of £104m. Windy Rig (43.2MW) and Twentyshilling (37.8MW) are both subsidy free projects under construction and should be operational in 2021.
UKW raised a total of £506m over the year from two oversubscribed placings which has been deployed in the new acquisitions.
Commenting on the results, Tim Ingram, Chairman of Greencoat UK Wind, said:
"2019 represented another significant year of growth for Greencoat UK Wind. During the year, we made nearly £600 million of investments and raised over £500 million of new equity.
Net cash generation remained strong, leading to a robust dividend cover of 1.4x despite portfolio generation and power prices being below budget for the period. For 2020, the Company is targeting a dividend of 7.1 pence per share, increased for the seventh consecutive year in line with RPI.
Our portfolio is now providing sufficient electricity to power nearly 1 million homes and reducing carbon dioxide emissions by approximately 1.2 million tonnes per annum through displacing thermal generation .
We were pleased to announce the acquisition of Slieve Divena II last week and our pipeline of acquisition opportunities remains very healthy."
|UKW & TRIG -v- FTSE All Share Index Feb 2020|
(click to enlarge)
UKW accounts for around 7% of my green portfolio and is one of several renewable energy infrastructure trusts which make up just over half of the portfolio. The stormy weather has coincided with the stormy global markets of the past week or so resulting from the spread of coronavirus. Last week the markets were in freefall losing around 10% however the renewables have held up well and were down around 2% or 3% so must be classed as defensive.
I expect there will be further deals to be done over the coming year and likely further issue(s) of new shares offered to existing shareholders at a discount so I may well be adding to my current holding. Under the renewables obligation certificate (ROC) arrangements, around half of UKW revenues are effectively guaranteed until 2037 and going forward they will likely take advantage of long term contracts for difference which again fixes the prices of the electricity generated. More homes and businesses receive clean energy whilst more carbon dioxide from thermal fossil fuel generation is displaced and investors receive their relatively safe 5% inflation-proofed income...a win, win all around!
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!