Kepler Trust Intelligence: Flash Update
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).
CLICK HERE TO READ THE FULL REPORT
Visit http://www.trustintelligence.co.uk/investor for more high quality independent investment trust research.
Important information
This report has been issued by Kepler Partners LLP. The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.
Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.
Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.
The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.
The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.
This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.
Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm's internal rules. A copy of the firm's Conflict of Interest policy is available on request.
PLEASE SEE ALSO OUR TERMS AND CONDITIONS
Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 70 Conduit Street, London W1S 2GF with registered number OC334771.
Reach is a non-regulatory news service. By using this service an issuer is confirming that the information contained within this announcement is of a non-regulatory nature. Reach announcements are identified with an orange label and the word “Reach” in the source column of the News Explorer pages of London Stock Exchange’s website so that they are distinguished from the RNS UK regulatory service. Other vendors subscribing for Reach press releases may use a different method to distinguish Reach announcements from UK regulatory news.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
Latest directors dealings
- 9 minutes ago Tertiary Minerals
- 9 minutes ago Hargreaves Services
- 13 hours ago ASOS
- 13 hours ago MJ Gleeson
- 13 hours ago Rolls-Royce Holdings