The value of Greencoat UK Wind’s underlying assets dipped by 0.4 per cent across the quarter as power generation came in nine per cent below budget.
“We suspect that many of the managers’ expectations have been optimistically biased,” said Stifel analyst Iain Scouller. “We think we will see a similar generation undershoot at many of the other wind and solar funds for this period.”
The wind farm-focused investment trust, which is a popular buy among retail investors, said today it continued with its share buyback plan, purchasing 11.8m shares during the last quarter, with £70.5m in total now spent on share buybacks.
The trust’s stock price rose 0.9 per cent upon market open this morning.
In its third quarter update, Greencoat said it had also acquired full ownership of the Kype Muir wind farm in Scotland for £14.3m, which it previously held a minority stake in.
“We continue actively to progress selective disposal opportunities, with a view to reducing the company’s gearing and providing flexibility for further capital allocation,” said Greencoat’s chair Lucinda Riches.
Yesterday, the trust announced it had changed terms of its revolving credit facility, cutting down from the amount it can borrow from £600m to £400m, but with an interest rate of just 1.5 per cent, instead of 1.75 per cent.
It also refinanced £325m of term loans that were approaching maturity and placed a further £100m of term debt, which it used to fund a reduction in the amount borrowed from its revolving credit facility to £300m.
“We do like Greencoat UK’s dividend growth policy, being the only renewable fund linking its dividend size to RPI [Retail Price Index] growth,” said Scouller.
“However, this does mean the rate of dividend increase in 2025 is likely to be much lower than the 14.2 per cent increase delivered this year, given RPI has fallen to 2.7 per cent in September 2024.”
“We retain a Positive recommendation and would argue given the solid long-term track record and dividend growth profile, the shares should trade on a sub-10 per cent discount.”
