Greencoat UK Wind powering 1m homes but low wind speeds and falling power prices knock earnings – Greencoat UK Wind says its power generation was behind budget in 2019 – as wind speeds were below average for the year – its earnings were also impacted by falling power prices.
Reduced assumptions about future power prices contributed to a fall in the NAV over the year from 121.4p to 119.7p. Earnings were strong enough though for the trust to meet its 6.94p dividend target (covering the dividend 1.4x on a cash basis) and it is confident enough to raise that to 7.1p for 2020. An increase in the premium that the shares trade at relative to the NAV gave investors a total return of 25.4% for the year.
The power price forecast change took about 5p off the NAV. Other factors affecting the NAV return in the year included an assumed 19% corporation tax rate (versus 17% that had been built into their valuation model and a reduction in the discount rate used to value future cashflows, which added about 4p to the NAV.
£506m of new money was raised from investors over 2019 and this has been used to expand the portfolio, notably into new wind farms that don’t attract government subsidies – increasing the trust’s dependence on future power prices.
Part of the portfolio is financed by £600m of debt, which the trust is paying a weighted average of 2.77% interest on.
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