Greencoat generation curbed by weak winds

Total output six per cent below budget at 978.1GWh

Renewable investment fund Greencoat UK Wind has missed its generation target for 2016 due to weaker than usual winds.

Output from its portfolio of 19 windfarms was six per cent below budget at 978.1GWh because of a corresponding fall in wind speeds which were six per cent under the long-term average.

Net cash generation increased by 1.4 per cent year-on-year to £49 million and the fund raised its dividends from 6.26 pence per share (£29.6 million) to 6.34 pence per share (£38.8 million).

It made two acquisitions in 2016 with a combined price tag of £223.5 million – purchasing a 28.2 per cent in the 350MW Clyde onshore windfarm in March and buying the 20MW Screggagh onshore windfarm outright in June – to bring its total generating capacity to 420MW.

Gross asset value increased by more than 35 per cent to £900.1 million and net asset value by more than 50 per cent to £800.1 million. Net asset value growth was 4.1 pence share and the total investor return was 17.4 per cent.

The group launched a 300 million new share issuance programme in April 2016, with the first tranche raising £100 million in May and the second raising £147 million in November. The programme finishes this April.

Commenting on the fund’s financial results, Greencoat Capital partner Stephen Lilley told Utility Week it is “unlikely” to issue the remaining 60 million shares. He said the 300 million figure was “always an arbitrary number” and that the fund turned down a further £250 million of investment after its offerings were oversubscribed.

“When we went out for the second tranche we had £145 million of debt outstanding with £2 million of cost,” said Lilley. “We could have taken a quarter of a billion pounds worth of equity and we didn’t because, what would we have done with £100 million? Have it sit there doing nothing?”

He believed the oversubscription was in part due to investors looking to protect themselves from rising inflation following the Brexit vote in June and said the phenomenon bodes well for future share issuances.

Lilley said although generation from the fund’s portfolio was below the target for the year, its longer-term performance showed the reliability of revenues from wind generation.

“We always said when we started the company that wind was volatile day-to-day and month-to-month but year-to-year not particularly and over a ten-year period it will be boringly average.

“What we’ve had in 2013/14/15/16; if you add up the numbers the variation to average is zero. We’ve had zero change to budget in terms of wind speed; i.e. it isn’t volatile, don’t worry about it.”

The fund is targeting a dividend 6.49 pence per share in 2017.