Greencoat UK Wind: April 2025 Update

• Greencoat UK Wind is one of the largest investment trusts investing in renewable energy infrastructure and is managed by an experienced team.

• The trust aims to provide investors with an annual dividend which increases in line with inflation whilst preserving the capital value of the portfolio.

• Greencoat UK Wind has increased its dividend target for 2025 to 10.35p per share (from 10.00p per share in 2024). Income is variable and not guaranteed.

How it fits in a portfolio

Greencoat UK Wind aims to provide investors with an annual dividend which increases in line with inflation (as measured by the retail prices index) while preserving the capital value of its investment portfolio. It invests in a portfolio of onshore and offshore wind farms in the UK.

The trust could diversify an income-focused portfolio, as well as providing some shelter against inflation over the long-term. Investors in investment trusts should be aware the trust can trade at a discount or a premium to its net asset value (NAV).

Investors should remember that investing in a single sector like wind farms or renewable infrastructure is a higher-risk approach compared to a more diversified one. We think investment trusts investing in a specific sector should usually only form a small part of a well-diversified investment portfolio.

Manager

Greencoat UK Wind is managed by an experienced team from Schroders Greencoat LLP. Schroders Greencoat LLP is a specialist manager dedicated to the renewable energy infrastructure sector. It has offices in London, Dublin, Germany, the Netherlands and Chicago and has approximately £10 billion under management, making it one of the largest dedicated renewable infrastructure managers in Europe. It was founded in 2009 and invests across lots of different areas, including bioenergy, renewable heat, solar and wind energy infrastructure in the UK, Europe and the United States.

As with any investment trust, there’s also a board that oversees the company management for its shareholders. With six members it has a broad range of financial and investment experience which should ensure it’s able to hold the trust managers to account.

The trust is managed by Stephen Lilley and Matt Ridley. Lilley will be stepping back at the end of April, however, and Stephen Packwood will be named as manager. Both Packwood and Ridley have extensive experience in renewable energy infrastructure, including UK wind. There is also an asset management team attached to the trust who look after the day-to-day operations of the wind turbines.

Process

Greencoat UK wind has a relatively simple process, investing in wind farms that are already up and running, both onshore and offshore, throughout the UK. The power generated by these wind farms is then sold, mostly under long term agreements, to utility companies. In the UK all utility companies must purchase a certain amount of their power from green sources.

The UK government operates certain regulatory support schemes for renewable energy, which are directly linked to the Retail Prices Index (RPI). This means that a proportion of the revenues generated by the windfarms are tied to inflation.

The trust aims to pay a dividend that grows in line with RPI inflation from these revenues. Excess revenue is reinvested either in new assets or to improve existing assets. This should help to preserve the capital value of the trust over time.

There is also a dedicated team at Greencoat who look after the assets on a day-to-day basis, aiming to get the most value out of them and improve them where possible.

As at 31 December, the trust owned 49 different wind farms in the UK. These are spread from the very north coast of Scotland down to the south coast of England and from Northern Ireland to Wales and Norfolk. The split between onshore and offshore wind farms was 55% to 45%.

The fund uses gearing (borrowing to invest) which may increase risk. The current level of gearing in the fund is 39.7%.

Culture

Greencoat UK Wind was the first renewable infrastructure fund to list on the London Stock Exchange. The trust is domiciled in the UK and is a part of the FTSE 250 index of shares.

The trust is managed by Schroders Greencoat. Greencoat Capital LLP was founded in 2009 and acquired by Schroders Capital in 2022. It is one of the largest dedicated renewable infrastructure managers in Europe, with assets under management of approximately £10bn. Schroders is a UK-listed multinational asset management company that employs thousands of investment professionals across 38 locations around the globe.

Schroders Greencoat invests across many renewable energy technologies including bioenergy, solar and wind in the UK, Europe and United States.

ESG

Renewable energy generation and storage is an asset class which is naturally compatible with sustainability objectives. Generating electricity from renewable sources such as wind is an integral part of the transition to net zero and should help the UK to move away from generating electricity from fossil fuels.

Schroders Greencoat consider ESG factors both before investing in an asset and in the ongoing management of that asset. At each individual site ESG processes are assessed monthly by Schroders Greencoat’s asset management team. Health and safety issues are of primary importance and Health and Safety reports are produced quarterly.

Greencoat UK Wind publishes an annual sustainability report which can be found on their website.

Cost

The ongoing annual charge over the trust’s financial year to 31 December 2024 was 0.95%, slightly higher than the 0.92% figure for the previous year. Investors should refer to the latest annual reports and accounts, and Key Investor Information Document for details of the risks and charging structure.

If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 p.a. for a SIPP and £45 for an ISA) per annum also applies. Our platform fee doesn't apply if held in a Fund and Share Account or a Junior ISA. As investment trusts trade like shares, both a buy and sell instruction will be subject to our share dealing charges within any HL account except online deals in a Junior ISA.

Performance

Since the trust’s launch in March 2013 it’s returned 105.15%* for shareholders.

A lot of this return has come in the form of dividends, with the trust having a good track record of paying out a reliable income stream. Past performance is not a guide to the future.

In the trust’s last financial year to 31/12/24, performance was weaker. The trust fell 8.61%* which was clearly disappointing for investors. It was, however, well ahead of the AIC Investment Trust – Renewable Energy Infrastructure peer group which fell 19.20%*. Much of this fall was driven by macroeconomic and political factors, with higher interest rates impacting valuations of renewable energy assets. The discount (the difference between the fund’s price and net asset value) also widened over the year.

The net asset value of the assets held in the fund decreased from £3.8bn to £3.4bn over the year, mainly because the higher discount rates applied impacted the valuations of the wind farms. This is a fall of 7.86% in the net asset value per share.

The main activity in the trust over the year was a sale of the 40% stake in Dalquhandy and Douglas West wind farms. These were the first ever sales that the trust has made in its life. They were made at net asset value and the proceeds used to buy back shares and repay debt.

The trust paid out £221m of dividends over the year. This equates to a dividend per share of 10.00p. For the financial year ending 31/12/25 the board have increased the dividend target to 10.35p per share which is in line with RPI at the end of December which was 3.5%. Remember that dividends are variable and not guaranteed.

Over 2024 the fund bought back £80m of shares.