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Greencoat UK Wind: a green energy stock for your portfolio?


As soaring summer temperatures remind us of the dangers of climate change, renewable energy stocks will certainly come to the fore in discussions on energy investments.

Greencoat UK Wind (LON: UKW) is one of the leading listed renewable infrastructure funds invested in operating UK wind farms. The company, which is a constituent of the FTSE 250 index, is currently invested in 44 wind farms, both onshore and offshore, with net generating capacity of almost 1.5GW. As we delve deeper into the summer months, both retail and institutional investors should be strongly considering adding green energy stocks such as Greencoat UK Wind into their long-term investment portfolios.

Who are Greencoat UK Wind?

Founded in 2012, Greencoat UK Wind invests in operating UK wind farms to provide shareholders with a sustainable and transparent income stream through an annual dividend on the issue price of 100p. The UK-based company was the first renewable infrastructure fund to list on the LSE main market and is the only infrastructure fund or renewable infrastructure fund domiciled in the UK.

Greencoat UK Wind’s aim is to provide investors with a sustainable annual dividend per ordinary share (7.72p for 2022) that increases in line with RPI inflation while preserving the portfolio’s capital value in the long term, on a real basis, through reinvestment of excess cashflow and the prudent use of portfolio leverage. The fact that the company’s annual dividend increases proportionally with the domestic inflation rate is particularly useful given the current economic climate where UK inflation stood at 9.4% in June.

Investment Policy

Greencoat UK Wind’s 44 wind farms, which are located both onshore and offshore, have produced over 14.4TWh of power since IPO in March 2013. The high productivity and continued success of the business’ assets is largely down to its unique investment policy, which ensures only high quality wind farms are included in its investment portfolio.

Greencoat UK Wind generally invests in operating wind farms situated throughout the UK and its offshore renewable energy zone predominantly with a capacity of over 10MW. The company seeks to acquire 100%, majority or minority interests in individual wind farms, usually held through Special Purpose Vehicles (SPVs) which hold underlying wind farms. When investing in less than 100% of the equity share capital of a wind farm SPV, Greencoat UK Wind will secure its shareholder rights through shareholders’ agreements and other transaction documents.

Set for a Strong End to 2022?

With the issue of climate change having moved to the forefront of economic, social and financial discourse in recent years, retail and institutional investors should certainly be considering investing in green energy stocks. It is likely that the public and media attention surrounding the transition towards green energy and net zero emissions will continue in the coming years, with governments expected to offer further incentives to companies active within the renewable energy space.

From a financial perspective, Greencoat UK Wind has experienced a revenue increase of 172.5% to $423.47 million and a 5% dividend in 2021, suggesting a strong basis for further growth. Its share price is up almost 8% since the start of the year, outperforming the market and many other renewable infrastructure funds.

It is important to note, however, that the company’s upcoming profits could be impacted by a mooted windfall tax on all electricity generators in the UK. This kind of speculation has hit Greencoat UK Wind’s share price in the recent past, although it still appears as though its operational success will continue in the near future.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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