Greencoat UK Wind (UKW) warned the UK government’s change to the inflation link in renewable subsidies could reduce net asset value (NAV) by between 3p and 5p per share.
In Parliament yesterday, the government announced plans to remove the carbon price support (CPS) tax on fossil fuels used in electricity generation from April 2028. This has put more pressure on the valuations of renewable energy trusts.
High yielder blown lower
A quarterly dividend-payer offering a 10% yield, Greencoat UK Wind has increased its shareholder reward for 12 consecutive years by at least the rate of retail price inflation.
Greencoat UK Wind closed 2025 with NAV per share of 133.5p, down from 151.2p as of December 2024. A 5p reduction would lower that NAV by 3.8%.
Shares in the first renewable investment trust to list on the London Stock Exchange’s main market fell on the unwelcome news.
Pain brought forward
The UK wind farm investor pointed out that CPS tops up the UK emissions trading scheme price by £18 per tonne of carbon dioxide. It feeds into electricity prices where a carbon emitting generator, such as a gas plant, is the marginal price setter.
Forecasts by the trust’s investment manager Schroders Greencoat had already assumed that CPS rates would fall significantly as renewable energy expands in the UK.
‘Yesterday’s announcement brings this forward,’ warned Greencoat UK Wind.
Schroders Greencoat estimates the power price impact of the CPS removal is £4 to £5 per megawatt hour for the period from April 2028 to the early 2030s, tapering to £2 to £3 per megawatt hour thereafter. This could reduce the trust’s NAV per share by 3p to 5p.
Analyst views
QuotedData’s Matthew Read said: ‘Power price forecasting is a complicated business, with multiple moving parts feeding through to long-term assumptions.
‘Carbon price support is clearly a factor, but its removal was anticipated over the longer term anyway and, while it will have an impact, the effect of this on power price forecasts will not be unique to Greencoat UK Wind and will be an issue for the wider renewable generation sector.’
Read added that a greater concern is this phasing out of CPS seems to have been brought forward due to political pressure. ‘It’s an easy win for the government at a time when power prices have spiked again due to the conflict in the Middle East’, he explained.
Winterflood analyst Ashley Thomas estimates that a £7 per megawatt hour power price impact in 2028/2029 would reduce Greencoat UK Wind’s cash flow by roughly £40 million.
‘In addition to Greencoat UK Wind, we would highlight that Bluefield Solar Income Fund (BSIF), Foresight Solar Fund (FSFL) and NextEnergy Solar Fund (NESF) have material GB merchant power price exposure and are likely to have similar proportional NAV impacts to those of UKW.’
Read the press release here: https://www.greencoat-ukwind.com/investor-relations/regulatory-news/
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