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Greencoat Renewables capitalises on turn to sustainable energy

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Greencoat Renewables [ISE:GREENCOAT, LSE:GRP], the AIM- and Irish-listed investment manager focussed on euro-denominated renewable energy assets reported its full-year results to 31st December 2022 in Dublin today (27th February). It has a sister company called Greencoat UK Wind.

The last year, since the Russian invasion of Ukraine, has seen national policy-makers in Europe forced to concentrate on decoupling their energy systems from reliance on cheap, imported natural gas from Russia for electricity production and heating.

In tangent with the global push to decarbonise the energy system to deal with the problem of global warming and transition to more sustainable, less-damaging energy systems, the rise in interest for renewables has surged on the back of environmental and energy security concerns.


Market to more than double

Greencoat Renewable has ridden the crest of this wave, reporting a 202% increase in net cash generation of EUR215m (GBP189.8m) on a year-on-year basis. Currently the European renewables market is EUR500bn but is set to grow to EUR1.1 trillion by 2030 with regional and national governments increasing targets to accelerate the energy transition.

The fund had EUR945m, aggregate group debt at the close of 2022. This represented 42% gearing, against gearing cap of 60%. EUR275m of term debt was drawn down from a new facility, and the fund secured EUR175m additional term debt. It had drawn down EUR100m from its revolver by the calendar year end which had EUR300m capacity. This was upsized post-period to EURR350m earlier this month. The group has secured 95% of its debt on a fixed rate basis.

The fund has displayed strong revenue growth year-on-year, driven by an expanding portfolio and exposure to higher merchant prices. It has stable and solid operating margins from wind farm operating cash flow of  around 71% on average over the past four years and a 3.2x gross dividend cover forecast despite wind being below budget.

The fund’s assets generated 2,487GWh of electricity, a 63.4% increase year-on-year. This equated to a saving of 685,997 tonnes of Carbon Dioxide emissions and powered the equivalent of 538,958 homes.

GAV and NAV increases

Gross Asset Value of the fund increased to EUR2.2bn, up from 1.6bn as at 31st December 2021 and Net Asset Value increased to EUR1.3bn from EUR935m in 2021. During the period, the 7.3cents(c)/share The fund’s NAV increase is attributable to cash generated over the period, minus dividend paid of + EUR13.8c, a depreciation of the portfolio and other movement of EUR-7.0c, and the impact of short-term CPI increase of EUR6.2c. The fund has mid to long term assumptions on the power price of EUR-0.4c and a 0.5% increase of discount rates of EUR-5.3c.

Greencoat bought nine windfarms in 2022, increasing the portfolio to 35 installations. The fund invested or committed EUR1.1bn to new assets in 2022. Earlier this month Greencoat announced the acquisition of a 22.5% stake in the Butendiek offshore wind farm in Germany from Marguerite Pantheon, which took generation capacity to 1,228MW and total borrowings to 46% of Gross Asset Value. During the year Greencoat bought its first offshore wind farm and as well as Germany, expanded into Spain and Finland.

The fund declared a dividend of EUR6.18c/share with a target of 6.42c/share for 2023.

Greencoat had no issues raising further capital in 2022, completing a EUP281.5m placement in 1Q22, which was oversubscribed.

Diversified technology

Ronan Murphy, non-executive chairman of Greencoat Renewables said in the statement this morning: “We achieved a number of significant milestones, with the acquisition of nine wind farms, including our first offshore wind farm, and expansion into Germany, Finland and Spain. We have built a portfolio of diversified technology across both onshore and offshore wind, solar, and battery, providing us with a robust platform from which to capitalise on the opportunities ahead.”

The fund’s core market is the Republic of Ireland, but it 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 2022.

The fund has a market capitalisation of EUR1.3bn and has been listed on AIM since July 2017. Greencoat shares on the AIM market opened at EUR1.11 today. Greencoat Renewables has offered a -2.6% year-to-date return, a one-year return of -3.1% and its shares have ranged between EUR1.05 and EUR1.25 over a 52-week period.

As previously reported Greencoat Renewables appears likely to maintain its strong balance sheet metrics and momentum going forward.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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