A deal by Greencoat UK Wind to buy back £100 million of its own shares has been described by the investment fund as a “highly attractive investment opportunity”, given its subdued valuation.
Greencoat also said that it intended to pay an annual dividend of 10p per share this year and next, higher than expected. It said the decisions reflected “continued operational strength, which the board and manager believe is not reflected in the share price”. Its shares rose 3½p, or 2.7 per cent, to 133¾p last night.
Greencoat UK Wind, which invests in British wind farms, was listed in 2013, becoming the first renewable infrastructure fund on London’s main market. It is managed by Schroders Greencoat, known as Greencoat Capital until Schroders acquired a 75 per cent stake in a deal completed last year.
The fund has interests in 48 onshore and offshore wind farms with net generating capacity of almost two gigawatts. It has expanded its offshore portfolio through last year’s acquisition of a 12.5 per cent stake in Hornsea One and this year’s deal for a 13.7 per cent net stake in the London Array.
It said the share buyback programme would be carried out over the coming 12 months, and added: “Reflecting the discount to net asset value that the shares are currently trading at, as well as the company’s prospects, strong balance sheet and cashflow generation, the board has determined that the commencement of a share buyback programme will also provide greater flexibility to achieve an optimal use of cash to deliver value for shareholders.”
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Greencoat aims to pay a dividend that increases in line with retail prices inflation, which gave it a target payout of 8.76p per share this year.
However, it said that “in recognition of the very strong cashflow delivered by the business through 2023 to date”, it now intended to pay a fourth-quarter dividend ahead of expectations, taking the 2023 dividend to 10p per share. It said it would target a 10p-per-share payout in 2024, 14 per cent up on the original 2023 target, “higher than forecast December 2023 RPI inflation”. It said it expected that future dividends would continue to be increased in line with retail prices inflation.
Alexander Wheeler, at RBC Capital Markets, said the fund “maintains a sector-leading return of 10 per cent which is not reflected in the [approximate] 21 per cent discount to net asset value, as the market continues to fail to differentiate [the fund] from its peers”.
