Monday 27 February 2023

Greencoat UK Wind - Full Yr Results

UKW is one of the largest renewable infrastructure trust with a market value in excess of £3.5bn 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 generating 1.6GW of clean electricity. The trust was launched in 2013 and over this period, returns for investors including dividends have more than doubled making it one of the best performing trust in the renewables infrastructure sector.

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 of 8% to 9% per year which it has exceeded since launch.


UKW recently announced results for the full year to December 2022 (link via Investegate). 

Net assets per share increased 25% from 133.5p to 167p as a result of significantly higher power prices and high inflation combined with very strong cash generation. The NAV figure is reduced by 8p which takes account of impact from the new Electicity Generator Levy.

The portfolio generated 4,362 GWh of clean electricity which was 5% below expectations due to lower than average wind during the second half of the year. Total return for the year (dividend + share price appreciation) was 13.5%. Since launch in 2013, the return has been 153% which equates to an average annualised return of 9.7%.

Dividends should keep pace with inflation and a total of 7.72p per share was paid over the past year. The dividend is linked to the higher RPI which underpins a 13% increase and a target for the coming year of 8.76p giving a forward yield of 5.5% based on the current share price of 157p.

Commenting on the results, Shonaid Jemmett-Page, Chair of Greencoat UK Wind, said:

"2022 was another significant year for the Company, as we continue to build on our well-established track record. Our simple, low risk, and proven strategy has enabled us to increase our dividend once more, and to target a dividend of 8.76p per share for 2023, a 13.4% increase reflecting December's RPI."

"The year represented another significant period of growth, with £1.2 billion invested in high quality assets, increasing our portfolio generating capacity to 1.6GW. This underlines the size and scale that the Group has attained since listing."

She announced that she will be stepping down from the position next year.

UKW has a 12.5% stake in the world's
largest offshore wind farm

I found the Outlook section of the report interesting...

High power prices again drove strong cash generation in 2022 and the Group should continue to benefit from strong cash generation over the next few years through its balanced exposure to power prices. We continue to apply a conservative discount to future power prices, albeit at an appropriately reduced level. The net result has been a material increase in NAV per share.

Assuming a dividend yield of 5 per cent, the 9 per cent total return would be delivered through a combination of dividends (5 per cent) and growth in NAV per share (4 per cent). Given the underlying index linked nature of the portfolio cash flows, both the dividend yield and growth in NAV per share benefit from a high degree of inflation protection. 2022 dividend cover was 3.2x and, in line with the Company's dividend policy, the target dividend for 2023 has been increased by December's RPI to 8.76 pence per share.

We believe that a 9 per cent total return, with inflation protection, should be very attractive to investors in the new higher interest rate environment.

In general, the outlook for the Group is very encouraging, with proven operational and financial performance from the existing portfolio, combined with a healthy pipeline of attractive further investment opportunities.

Obviously this outlook is positive for investors and continues to be very attractive for those seeking income and a hedge against inflation. However it is always subject to the situation in Ukraine and how global power prices and inflation play out over the coming year(s).

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!

According to a recent report from the IEA, the global energy crisis is driving a sharp acceleration in renewable energy and they suggest renewables will become the largest source of global electricity by early 2025.

Here in the UK we are aiming to ramp up offshore wind capacity from 14GW to 50GW by 2030 and hopefully a further 10GW of onshore wind as we target a decarbonised electricity grid by 2035. Labour would go further should they win the next general election with plans to secure clean power by 2030 with a doubling of onshore wind and a quadrupling of offshore wind.

The future certainly looks bright for the likes of UKW and TRIG.

UKW 3 Yr share price/NAV
(click to enlarge)

Similar to TRIG, the shares are now trading at a modest discount to net assets which could well prove to be an attractive purchase opportunity should the share price revert to its more traditional 10% premium over the coming months. UKW accounts for around 12% of my green portfolio and is one of several renewable energy infrastructure trusts which make up just over half of the portfolio. I like the idea of covering my domestic energy bills with the dividend income they generate.

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!

Thursday 23 February 2023

TRIG - Full Year Results

This investment trust was launched in 2013 and gives investors an opportunity to tap into the UK and European renewable energy sector – offshore and onshore wind, solar and battery storage. The geographic breakdown is : UK 60%, Sweden 12%, Germany 9%, France 8% and Spain 8%. They aim to generate sustainable returns from a diversified portfolio of renewable energy infrastructure that contribute towards a zero-carbon future.


This week the company released results for the full year to end December 2022 (link via Investegate).

They were the strongest results since launch in 2013 on the back of significantly higher power prices and inflation.

The portfolio generated 5,376 GWh of clean electricity, an increase of 30% on 2021 which is sufficient to power over 1.6m homes and avoid 1.9m tonnes of CO2.

Net assets per share for the period increased by 12% to 134.6p compared to 119.3p a year earlier whilst earning more than doubled from 10p last year to 21.5p in 2022. Factor in dividends and the total return NAV for the year was 18.9%.

The board have announced a fourth quarter dividend of 1.71p (payable March) making a total of 6.84p for the year and then a 5% uplift to 7.18p is planned for the coming year giving a fwd yield of 5.5%.

The shares have traditionally traded at a significant premium to net assets in previous years however, as can be seen from the graph, in recent months the premium has now turned to a small discount which suggests the shares could be good value as and when the discount reverts to a premium again.

TRIG 3 Yr Share Price/NAV
(click to enlarge)

Windfall Tax on Renewables

In November the government announced the introduction of the Electricity Generator Levy. This is a 45% tax on revenues above £75/MWh for the 5 year period 2023 to 2028. Obviously much will depend on the direction of future power prices but early indications suggest this will impact TRIG and reduce NAV by an estimated 8.3p per share.

A little more detail from the report:

“The Autumn Statement in November announced the introduction of the Electricity Generator Levy to applicable UK wind and solar assets. This imposes an effective 70% tax on "excess" revenues from the sale of electricity (excluding where these are derived from government support, i.e. ROCs, CfDs and FiTs). Excess revenues are defined as those above £75/MWh. The 70% effective tax comprises a direct 45% levy on revenues above the threshold and 25% corporation tax as the levy is not considered a deductible expense for corporation tax. The levy is expected to be applied for 5 years from 1 January 2023 and the £75 is indexed by CPI, with the first £10m of "excess revenue" provided as an allowance each year (i.e. escapes the levy).

The impact of the EGL is to reduce the uplift in value from increased power price forecasts. The adverse valuation impact of the introduction of the EGL has been £188.1m. It also has the effect of reducing project sensitivity to changes in power prices down to the £75 threshold, as analysed in the key sensitivities section”.

However, the management calculate that over the next 10 years 63% of revenues are linked to inflation via subsidy support mechanisms whilst most of the remaining revenues will be indirectly supported by power prices which should provide a significant hedge against future inflation.


The demand for more renewable electricity both in the UK and Europe will only be moving in one direction as governments come under increasing pressure to decarbonise their economies and meet their carbon emission reduction targets. The energy crisis brought on by Russia’s invasion of Ukraine last February has served to speed up the transition to renewable energy.

Brilliant from does he do it?

The UK government have brought forward the date for all new cars to be emission free from 2035 to 2030. In a decade we could see 35 million pure electric cars on our roads and this will require lots of clean energy. In addition, gas which heats 85% of our homes is due to be phased out for all new house build from 2024 so there will be increased demand for alternatives such as electric heat pumps for space heating.

Finally, with higher inflation expected to persist this year and maybe remain at a high level whilst the energy crunch play out, I am hoping my renewable energy infrastructure holdings will provide their traditional hedge against rising inflation whilst the 5% income will offset my higher energy bills.

In more recent times, the performance has improved and no doubt the higher power prices due to the global energy crunch is a significant factor. I decided to top up my portfolio last Autumn and the shares currently make up around 12% of my green portfolio.

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!

Wednesday 15 February 2023

NIBE - Full Year Results

NIBE is a heating technology company based in Sweden. It has three basic business areas - Element, Climate Solutions and Stoves. Climate is the fastest growing segment and over the past year accounted for around 2/3rds of sales and 72% of the groups profits. Clearly climate change is rising to the top of the political agenda on a global basis and the company is well positioned to take advantage of the opportunities this provides - especially in the field of heat pumps which will become an option for heating our homes as an alternative to fossil fuels such as natural gas. It is one of the leading companies in Europe and North America in the area of sustainable solutions for domestic heating.

The company has been trading for over 70 years and has a long-standing ethos of working on sustainable solutions and energy efficiency. It was floated on the stockmarket in 1997 and has grown sales at an average of 18% p.a. over this period with an ever increasing global presence.

Heat pumps and related technology are tried and tested solutions for space heating in Scandinavian countries but relatively unknown in many parts of the world. Many countries, including the UK are actively looking at ways to decarbonise the domestic heating sector which accounts for around 40% of carbon emissions.


Climate change is the greatest challenge of our time. We need to reduce greenhouse gas emissions by 50% by 2030 compared to 2010 levels to keep on track for net zero by 2050. All of the products offered by the company are designed to make a significant contribution to tackle climate change. They offer sustainable, energy-efficient solutions such as heat pumps that reduce energy consumption by up to 80% and reduce GHG emissions in all types of buildings both domestic and commercial.

Last year, the EU announced their 'Green Deal' and proposals to target net zero carbon emissions by 2050. A central part of the strategy will be the goal to decarbonise the energy sector and prioritise energy efficiency and transition to a power sector based on renewable energy. In the US, the Biden administration has pledged to cut greenhouse gas emissions by at least 50% by 2030. This is double the country's previous commitment under the 2015 Paris agreement.

(click to enlarge)

Of course the situation in Ukraine and the resulting energy crunch has brought a sharp focus to the dangers of our dependence on fossil fuels and there is now a growing realisation of the need to speed up the decarbonisation process and move to a greener, more decentralised energy system based on cheaper renewables.

Heat Pumps

The largest sector for the group is climate solutions and within this sector, the largest element is heat pumps. These pumps extract the stored energy from the sun contained in the soil or air and transfer this energy indoors to provide indoor heat as well as hot water. The two main types of heat pump are ground source where pipes are laid under the soil and air source where heat is extracted directly from the air.

In the UK (and much of Europe) around 85% of our homes are heated by gas central heating. However we have legislated for net zero emissions by 2050 and will need to find alternative ways to heat the nations homes as gas (fossil fuel) will not be an option. We have already ruled out gas central heating for all new homes built after 2024 so electric heat pumps (as well as solar and battery storage) could play a big part in the huge transition of our energy use.

The UK offers financial incentives to install a heat pump via the new Boiler Upgrade Scheme. These incentives will go a long way towards the costs of installing a heat pump system with a grant of £5,000. The aim is to offer 30,000 grants in each of the first three years on a first come first serve basis.

Obviously the demand for solutions which support the switch from fossil fuels to renewables will grow and grow. As the market grows so prices fall which in turn creates greater demand. Companies like NIBE who have a clear commitment to sustainable solutions will be the likely beneficiaries of the transition to a new way of doing things. This is why I decided to add this company to my green portfolio.

Results for 2022

The company have today released full year results for 2022 (link via company website).

Combined sales increased by 30% to SEK 40bn and generated net profits of SEK 5.7bn (2021 4.3bn) which reflects a margin of 14%. The company pays a small dividend which will increase by 30% this year to SEK 0.65 per share (subject to FX considerations for UK shareholders!).

Given the backdrop of the global pandemic and the conflict in Ukraine, this has been an excellent performance and the new target for sales is doubled to 80bn.

Commenting on the results, Gert Lindquist, MD and CEO said: “We would sum up 2022 as a year of extremely strong demand. The main reason for this was the realisation by both politicians and end-consumers that we need to end our dependence on fossil fuels in order to be able to deal with the climate change issue in earnest. This realisation has been further strengthened by Russia’s terrible invasion of Ukraine. Our biggest challenge during the year concerned material and component supply, which impacted our delivery capacity, but this situation has gradually improved. In the fourth quarter, our production and deliveries were at a substantially higher level than before, while productivity also improved. This was the result both of our sub-suppliers’ ability to adjust to a much higher level of demand and our own extensive measures to increase capacity. We can therefore look back on a strong full-year performance, with continued robust growth in both sales and profits, and report that we exceeded SEK 40 billion, which means we were once again able to double sales in four years”

The shares were added to my green portfolio in June 2020 at the price of SEK 50 (adjusted for share split) and advanced steadily to reach an all-time high of SEK 135 by the end of 2021. The shares retreated quite sharply during 2022 but have recovered to the current price of SEK 123. The holdings currently makes up around 6% of my green portfolio.

NIBE 12m share price

From what I have seen so far, this appears to be a very well run and profitable company with a focus on providing solutions to the global problem of climate change. As the world increasingly moves away from its dependence on fossil fuels, this will provide huge opportunities for growth from companies such as NIBE which offers ready-made, energy efficient systems using renewable energy.

The biggest challenge we face is the reduction of greenhouse gas emissions to slow down the current rate of climate change. There is now a growing awareness of the impacts from a changing climate and the rise in extreme weather which threatens our living conditions, biodiversity and political stability. NIBE and its products will increasingly be part of the solution and is a good example of how businesses are an essential part of solving the climate crisis we face.

Although I have disposed of most individual share holdings over the past year, I think NIBE is likely to be a long term hold.

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!