Completed on Nov 29, 2025

Greencoat UK Wind PLC is a renewable infrastructure fund, invested exclusively in UK wind farms. The fund’s aim is to provide investors with an annual dividend that increases in line with RPI inflation while preserving the capital value of its investment portfolio in the long term on a real basis through reinvestment of excess cash flow.

The fund is one of the few FTSE 250 listed stocks to raise their dividend for 9 years straight and very well positioned to sustain the dividend growth through the high inflationary period due to revenues being explicitly and implicitly tied to inflation.

Interest Rates

For the first ~7 years of the fund’s life since IPO in 2013 the share price has traded at a modest premium to the NAV however since 2022 that has changed. Over the last 3 years the stock price has slowly traded at a larger and larger discount to NAV with the latest calculation being 140.7p NAV and 99.65p SP meaning a (41.05/140.7p​)×100≈29.17% discount to current NAV.

When the “risk free” rate for investors increases, investors demand a higher-dividend yield to assume the risk of owning the fund instead of long term government bonds. Therefore, the stock is sold off until the dividend yield hits a premium more worth the risk. To represent this in the NAV, the fund changed the discount rate it used to calculate current value of future cash flows. NAV is highly sensitive to the discount rate of future cash flows as that causes the current value of those cash flows to be worth far less. As you can see from the 10 Year Gilt rates below, 2022 is when the yields started rising due to geopolitical events like the war in Ukraine, which means the discount rate that they used for their calculation of NAV went up from 7% (2021) to 11% (2024) and is the main cause for the declining NAV in that period. Other factors include the reduction in predicted average wind speeds by 2.4% which will be discussed later.

In their most recent half yearly report, Greencoat state that 0.5% increase in interest rates has a 6.3p negative effect on NAV. While this is offset by increased revenues due to inflation-indexed subsidies and higher realised price per MW/H, it’s overall a largely negative effect on current value of future cash flows.

Switching to CPI from RPI

The government is trying to switch everything to track CPI instead of RPI, as it’s the global standard and also reduces its costs. In 2020, it confirmed that the inflation indexed bonds that were previously issued would be switched without any compensation for bond holders.

The government recently started a discussion into whether payments under the RO and Feed In Tariff schemes should also be switched to CPI. It is also considering freezing rates until backdated “shadow” CPI levels catch up. This would hugely affect renewable energy providers and, as stated by UKW, would drop the NAV by 2.4p for an instant switch to CPI at current levels and by 10.6p for freezing and re-aligning with the “shadow” amount.

Reduced Average UK Wind Speeds

Over the past 4 years, wind speeds in the UK have been lower than average. This has caused power generation to be well under budgeted estimates and has resulted in lower-than-expected cash flows and therefore smaller dividend cover. This has meant less excess cash to re-invest to maintain NAV and is also likely a cause for investors being cautious in believing NAV calculations.

Cost of Management

Effective from 1 January 2025, the management fee for running the fund has been based on the lower of the NAV or Market Cap. This is a very shareholder-friendly change which means the management fees are cheaper when the share price is trading at a discount. Based on the earlier calculation of discount to NAV, this means that the fees are also ≈29.17% cheaper.

Capital Allocation

Capital allocation at the fund since the IPO has been fantastic. They have continuously made decisions that boost the NAV. During periods where the share price was trading at a premium to NAV per share, they did equity financing (share dilution) to raise capital and buy more assets. Whilst many shareholders see dilution as bad for shareholders, when it’s done at above NAV it is accretive for NAV per share.

Since the shares have recently started trading at a discount to NAV, Greencoat have been doing buybacks with excess cash flows because this also increases the NAV per share by reducing shares outstanding. The fund’s ability to be dynamic with its capital allocation will allow them to continue outperforming the market in the long run. The increase in the size of the market for UK wind assets is also likely to provide opportunities to get assets at great prices going forward, as a lot of capital will be required in the industry.

In no particular order:

1. Change from RPI to CPI: The biggest near-term risk is the potential shift in the indexation measure from RPI to CPI. These will be accounted for in my calculation of expected returns below.

2. Reduction of average UK wind speeds: (UK wind power potential could fall by 10% by 2100 because of climate change - Carbon Brief) There are some studies that suggest we could see lower average wind speeds going forwards, due to climate change. The fund has reduced their estimation of future average wind speeds even though there is no real conclusive evidence that it will happen.

3. Valuation Risk: The fund doesn’t disclose exactly how they calculate NAV and there is some risk that they have made overly optimistic assumptions in this calculation. It’s hard to pin these down but here are some potential worries:

1. Consistently Overestimating Power Generation: As listed in the ‘UK average wind speeds’ section above, the right column of the table shows that every single year going back to 2016 the fund has underdelivered on power generation, even when UK average wind speeds were higher than expected. This suggests some incorrect assumptions in the NAV.

2. Decommissioning Liabilities: (Source:

Greencoat Flapping in the Wind - by David Turver)

“Note 10 to their accounts identifies about £280m of guarantees and indemnities made by the company to cover things like decommissioning and other indemnities. However, Note 2 records that they consider the fair value of these indemnities to be zero because they “do not expect Group cashflows to crystalise as a result of these guarantees”.

However, this might not be the full extent of the under-recording of decommissioning liabilities. For instance, Note 10 indicates a guarantee to the Crown Estate of £3.4m for the decommissioning of Rhyl Flats offshore wind farm. However, the 2023 accounts for Rhyl Flats shows the present value of decommissioning liabilities of £29.2m. Grossing this up using their discount rate of 3.75% to the expected life of 23 years gives an expected cash cost of some £40.7m in 2032. UKW owns 24.95% of Rhyl Flats, so its share of the total would be £10.2m, three times more than the amount recorded in Note 10.

Similarly, they record in Note 10 a guarantee of £11.8m to cover decommissioning and rent for North Hoyle wind farm. However, the 2024 accounts declare a provision for decommissioning with a present value of £12.1m. Grossing this up to their discount rate of 6% out to 2034 gives a cash cost of £21.7m. UKW owns 100% of North Hoyle, so it will be on the hook for the entire amount, nearly double the recorded guarantee.”

4. Political Risk: The conservative party has stated that they would scrap certain renewable subsidies if they were in government and Reform would likely try to do the same. Whilst these subsidies are bound by contract and likely hard to legally get out of, this still poses a risk of impacting future cash flows. The only way to account for this would be to use a lower growth rate for NAV in expected returns as a form of margin of safety.

5. Assets Life Risk: The fund lists asset life as one of its keys risks and says “In the event that the wind turbines do not operate for the period of time assumed by the Group or require higher than expected maintenance expenditure to do so, it could have a material adverse effect on investment returns.

The Group performs regular reviews and ensures that maintenance is performed on all wind turbines across the wind farm portfolio. Regular maintenance ensures the wind turbines are in good working order, consistent with their expected life-spans.”

6. Electricity Prices: Quite obvious, but a material drop in energy prices for an extended period of time would substantially hurt the fund’s cash flows. This risk feels very small to me – with huge data centres the increased load to the grid for electric cars and a widespread shift away from fossil fuel generation demand for power is very likely to stay high. They are also calculating NAV based on their realised price per MW/H dropping from £60 down to below £40 in 2060.

7. Financing: The fund aims for 40% leverage to improve returns, this is currently made up of three types of loan. RCF (Revolving credit facility which is higher rate and used for fast access when money is needed for acquisitions. SPV level loans (of which they just have the Hornsea 1 loan), this type is held within the subsidiary and has no claim on other UKW assets. Then finally corporate level debt with banks. The weighted average cost of this debt is 4.6% with a total amount of £2.269 billion. There is no expected risk of re-financing this debt and even if there is, the cashflows are enough to pay off the debt in full as it matures due to the laddered nature if needed. The weighted cost of debt maturing in the next 2 years is 5.03% if including RCF or 4.24% if not. There might be a very slight increase in debt costs over the next year but in the long term this servicing cost is expected to come down. The Hornsea debt is the only one that is being amortised.

To make it easy, I will just calculate NAV and assume dividends are left in cash within the fund. (Rate of return will be higher if, at below NAV, dividends are re-invested and/or buybacks happen.)

Optimistic Outlook: Share Price Returns to NAV within 3 years and NAV grows at 10% (The fund’s target)

Current Share Price: 99.65p

NAV After 3 years: 187.27p
Ending NAV=140.7p×(1.10)^3=187.27p

Total Return Over 3 Years:
Total Return=(Ending NAV/Starting SP)​−1 =(187.27p/99.65p)​−1≈1.8793−1=87.93%

Annualised Rate of Return (CAGR):
CAGR=((1+Total Return)^⅓)−1
CAGR=((1.8793)^⅓)−1≈0.2340=23.40%

Base Case: Switch to CPI instantly (-2.4p NAV), Share Price Returns to 90% of NAV within 3 years and NAV grows at 8%

Current Share Price: 99.65p

NAV After 3 years: 174.22p
Ending NAV=138.3p×(1.08)^3=174.22p

Total Return Over 3 Years:
 Total Return=(Ending NAV/Starting SP)​−1 =(174.22p/99.65p)​−1≈1.7483−1=74.83%

Annualised Rate of Return (CAGR):
CAGR=((1+Total Return)^⅓)−1
CAGR=((1.7483)^⅓)−1≈0.2047=20.47%

Pessimistic Outlook: Freeze at current rate and switch to “shadow” CPI Rate (-10.6p NAV), Share Price Stays at current discount to NAV and NAV grows at 8% for 3 years

Current Share Price: 99.65p

Starting NAV 130.1p

Nav After 3 Years: 174.22p
Ending NAV=130.1p×(1.08)^3=163.89p

Current Discount: 1−(99.65p/140.7p)=29.17%

End Price with Discount: 163.89p*(1-0.2917)=116.08p

Total Return Over 3 Years:
 Total Return=(Ending NAV/Starting SP)​−1 =(116.08p/99.65p)​−1≈1.1649−1=16.49%

Annualised Rate of Return (CAGR):
CAGR=((1+Total Return)^⅓)−1
CAGR=((1.1649)^⅓)−1≈0.05=5%

For this pessimistic outlook to be true, the worst-case decision for the switch to CPI would need to happen (this would hugely disincentivise future investment in renewables, making net-zero 2050 and clean power by 2030 a lot harder to achieve) plus the fund would have to miss its target returns by 2% annually. I’ve chosen 2% to account for the fact that Greencoat have missed their generation estimates by an average of 2.4% since 2013. In their 2024 annual report they revised future estimated wind speeds down by 2.4% (conveniently similar) but I’m just being conservative. All of this, as well as the fund still trading at a 29% discount to ending NAV, means I calculate the CAGR is still 5%.

All of the above is very much looking into worst case scenarios, I'm very much of the opinion that 1st priority in investing should be making sure that you don’t lose money and the upside will take care of itself. That being said here are some of the things that could materially increase returns:

1. Reduction in interest rates would hugely boost NAV. For example, if interest rates in 3 years were 2% then that would add 26.8p to current NAV.
2. Rise in electricity costs would increase dividend coverage and allow buybacks and potential acquisitions of new sites to increase NAV – or simply allow for special one-time dividends like they have done in the past (should be a last resort if no other capital allocation is available at high compound rate of returns).
3. An expected increase in onshore windfarms by 2x and off-shore by 3x means that constructors will be looking for lots of buyers to free up capital to start on new projects, potentially creating opportunities for effective use of capital at higher rates of return.
4. Buybacks at current prices are VERY efficient due to the discount to NAV and reduce the dividend burden by reducing shares outstanding.
5. The stock price could return to NAV at a faster rate than 3 years, which would make CAGR for the investment higher but over less time.
6. Stock price could return to trading at a premium to NAV like it did for the first 7 years of the fund's life.
7. Battery storage on site at wind farms could increase returns by allowing flexibility for delivering power at periods with the highest demand. This currently does not offer good rates of return but as battery technology improves it’s something the fund is investigating. (Wind power provides the best opportunity for this as a lot of power is generated overnight during periods of low demand)