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Greencoat Renewables expands wind footprint; adds solar farm

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Greencoat Renewables [ISE: GREENCOAT, AIM:GRP], the AIM- and Irish-listed investment manager focussed on euro-denominated renewable energy assets reported its results in Dublin today (12th September).

With Europe in the grip of the biggest energy challenge in a generation and the clamour to find low carbon energy solutions, it was expected that the investment company would have had a good year-to-date.

The fund has more than 800MW of generation capital under management across the European Union. Its core market is the Republic of Ireland, but also manages assets in Sweden, Finland, Denmark, Germany, France, Spain and Northern Ireland, primarily in wind, but with a co-located battery project at Killala, in County Mayo, a 10.8MW storage facility which came online in January this year.

Greencoat Renewables has a market capitalisation of EUR1.4bn (GBP1.2bn), as at 30th June 2022, with net cash generation of EUR92.1m. The fund has been listed on AIM since July 2017 and shares on the AIM market opened at EUR1.25 today. and has offered a 11.6% year-to-date return, a one-year return of 5.5% and its shares have ranged between EUR1.06 and EUR1.25 over a 52-week period.

Wind is becoming increasingly important to the energy mix in the UK, so too in Ireland where Greencoat Renewables announced that it has reduced Carbon Dioxide emissions 677,000 tonnes in the year and powered 485,800 homes.

Significant milestone

The company’s chairman, Rónán Murphy said in a statement this morning: “The period saw 217MW of new generating assets added to the company’s portfolio, taking our total installed capacity above the 1GW threshold. The company achieved a significant milestone with the acquisition of our first offshore wind asset in Germany and further strengthened our European diversification with a commitment to acquire new assets in Spain, Sweden and France.”

Gross Asset Value  increased to EUR2.2bn in the first half of this year, compared with EUR1.4bn in the same period in 2021. Net asset value (NAV) rose to EUR1.2bn in the first half of 2022, compared with EUR749m in the first half of last year.

The company reported net cash generation of EUR92.1m, up from EUR40.2m in 1H21, which offered gross dividend cover of 3x. The company offered a dividend of 3.09 cents per share. Greencoat Renewable had a successful share placement of EUR281.5m, at an issue price of EUR1.12 per share, an issue which was oversubscribed, which Murphy said: “enables us to maintain sufficient agility to take advantage of current and future acquisition opportunities, while maintaining our gearing position within the company’s investment policy.”

The company has a net debt position of EUR898.7m, equivalent to 42% of gross asset value. Of this EUR275m of term debt was drawn-down in 1H22 via a new debt facility, with EUR300m undrawn as at 30th June. Murphy said more than 95% of group’s debt is on a fixed interest rate with substantial available debt capacity with “over EUR450m potential firepower.”

Greencoat Renewables generated 1,127GWh of electricity, up from 745GWh in 1H21 and total installed capacity increased to 1,028MW, up from 686MW in 1H22, which the company attributed to an increase in portfolio size to 28 wind farms, adding five since the previous year and the Killala battery project becoming operational.

Mood music

It has been a year of considerable disruptions in energy markets across Europe, primarily driven by the war between Russia and Ukraine and its impact on wholesale natural gas prices – the source of much of the northern EU’s electricity and heating needs. Although this has caused stress to many households and businesses across Europe, it has provided a boon for Greencoat Renewables. The background melody of transitioning from a carbon-intensive energy generation system to a clean, secure and independent system should also be music to the ears of Greencoat Renewables. Murphy said: “The importance of the transition to clean energy and securing energy independence is clearer than ever. With the EU expecting a requirement for up to EUR1 trillion in new investment by 2040, the company is set to play a significant role in enabling and accelerating this transition.”

Greencoat Renewables has been energetic in terms of acquisitions across Europe. The company listed a number of new assets including the Tullahennel Wind Farm, a 37MW wind farm in County Kerry, which the company acquired for EUR75m and is operating under the Irish government’s renewable energy feed-in tariff (REFIT) until 2023; the Soleidra Wind Farm a 27MW wind farm in north-eastern Spain, that sells power on a per-merchant basis; and invested in EUR360m for a 50% stake in the 316MW Borkum Riffgrund 1 Offshore Wind Farm in Germany, which was both the company first German investment and first offshore wind investment. It is operating the farm in partnership with Danish clean energy provider Ørsted A/S (CPH:ORSTED), the world’s largest developer of offshore wind power by amount of built offshore wind farms.

Bertrand Gautier, investment manager for Greencoat Renewables said: “We are very pleased to enter the continental offshore wind market with a significant strategic stake in Borkum Riffgrund 1. This acquisition will contribute to Greencoat Renewables’ strategy to build a diversified portfolio of high-quality renewable electricity generation assets supported by strong contracted cash-flows and will support the company’s further expansion into Continental Europe.”

Gautier continued: “The acquisition further strengthens Greencoat Renewables’ partnership with Ørsted and positions us well for future acquisitions in the European offshore sector […] We believe that offshore wind is key in allowing governments to reach their decarbonization objectives and we see a 63GW investment opportunity across our selected jurisdictions by 2030.”

Continental expansion for Greencoat Renewables

The company retains its core market in Republic of Ireland, however, the company is slowly shifting focus to the very large secondary markets of continental Europe where it sees a significant opportunity to aggregate operating renewable energy generation assets.

In light of the increasing scope in the acquisition pipeline across Continental Europe, Greencoat Renewables is considering a change to its investment policy regarding the 40% limit on non-Ireland investments, in order to support the company’s continued diversification in Europe, providing access to a wider set of opportunities.

Murphy said: “The expansion into the Nordics last year and into Spain and Germany this year is indicative of the company’s intentions, seeing opportunities to aggregate significant investments in diversified geographies, as we have demonstrated in Ireland.”

He continued: “The company continues to explore new European markets where we can see low Levelized Cost of Electricity opportunities in both wind and solar, with underlying Euro-denominated cashflows. This includes opportunities in the Baltics and Italy.”

The company was also awaiting completion on a number of other deals, including the Axpo French Portfolio, 65MW of generation capacity in northern France, which recently entered operations on the back of a 15-to-20-year tariff, and; Erstrask North in Sweden, a EUR135m investment in a 134.4MW wind farm located in Norrbotten Län, which is entering into operation in 4Q23 and will sell power on a per-merchant basis.

Murphy said: “With Europe expected to require EUR1 trillion of new clean energy investment by 2040, the Company is well positioned to play a significant role in enabling and accelerating this transition, directly contributing to meeting emissions targets and reducing reliance on gas across Europe.”

Greencoat Renewables diversifying in to Solar

The company also took moves to start diversifying out of wind and adding solar to its generation mix, as well as opportunities in Spain the company announced the acquisition of the 80MW South Meath Solar Farm from Norwegian state-owned company, Statkraft in July, alongside a pension fund. The solar farm is set to become operational in 4Q23. The transaction is structured under a forward sale model and will only complete once the solar farm is fully operational. Statkraft will finance and manage the construction of the solar farm and will continue to provide management services once operational.

Greencoat Renewables is sister company to London-listed Greencoat UK Wind [LON:UKW], which The Armchair Trader wrote about recently  and managed by Greencoat Capital LLP, an investment manager in the listed renewable energy infrastructure sector.

 

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