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To invest mostly in operating UK wind farms with the aim to provide investors with an annual dividend that increases in line with RPI inflation while preserving the capital value of its investment portfolio.
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What is nice is that the new nav takes into account , updated interest rates, corporation tax, discount rates energy price curves and the new energy tax, so essentially most of the variables that were over hanging the valuation. The only potential issue now will be any changes to marginal pricing and how hard the wind blows!
Hopefully it will now return to a premium which will see a nice increase even from the current price (160)
Divi up to 8.76 for 2023.
The BBC have made a right hash of this article...power and energy are not the same thing! But of course this is great news otherwise.
I was surprised at the 2028 date in the briefing report as I thought that the time scale stemming from for the REMA consultation was submissions by October, response next Spring with a view to implementation of any move from marginal pricing in 2025 (it came up in a Q&A at one of the UKW presentations earlier in the year).
If you look at some of the published submissions, the move from marginal pricing may not be that easy (or even the best route) but it is something that they are considering in the EU as well.
It may be that having viewed the submissions they realise it could not be achieved in the original timeframe.?
I do wonder how/if the government will manage to separate electricity from gas pricing. If the UK's supply was self-contained I imagine it would be achievable, but there are a large number of interconnectors with France, Norway, Netherlands, Ireland etc it could be tricky.
I see that the levy is due to run until 2028, which suggests to me that they're not confident of de-linking any time soon.
Seems the government want build 300000 new houses a year. It will require a lot of onshore wind solar and batteries to power that lot as Sizewell C will take 15 to 20 years to build....
There is an article on this topic in IC, Stifel look to have set a higher threshold for the price though.
'Greencoat UK Wind (UKW) has yet to give a post Autumn Statement update but Stifel analysts calculate that its revenues should not be affected unless power prices fall below £120/MWh next year.'
Hopefully Greencoat will provide a more definitive clarification.
Although it has been lost in the noise around the windfall tax, I can see the government being keen to bring forward the proposals to disconnect electricity from gas pricing (they were originally looking at 2025). Until this issue is resolved and the pricing clarified it will continue to weigh on the sector.
Thanks TC, good info and a bit of a relief
Thank you, TC.
That's a good read.
And, roll on tomorrow. It's UKW pay day!
GRQ.
Under the headline “ Three of our favourite funds will be hit by a 45pc tax – here’s how they'll fare” the Telegraph (behind a paywall) reports it’s view on the windfall tax impact on UKW.
“Let’s look first at Greencoat UK Wind, rated a buy in July 2020 and in May and July of this year. The good news here is that, according to analysts at Numis, the stockbroker, the trust’s valuation will not be affected by the windfall tax.
This is because the tax will apply when electricity is sold for more than £75 per megawatt-hour and Greencoat’s “valuation model appears to include [a] power price below £75”, Numis wrote after the Autumn Statement. (It said the same of Next Energy Solar, which has not been tipped by this column.)
This is not to say that Greencoat will pay no windfall tax; rather that it has valued its assets on the assumption that electricity prices will be less than the threshold for the tax. If it sells its power for more than £75/MWh it will indeed be liable to pay the extra tax but its revenues will also be higher than it expected when it valued its assets.”
Excellent, thanks for that - I had been searching for it but it was not coming up with the searches.
Details here https://www.gov.uk/government/publications/electricity-generator-levy-technical-note
First sight it is liveable to UKW.
Where was that released?
Devil in the detail, but doesn’t look like it will have a big effect on GC UK wind
The new windfall tax seems to be a 45% levy on electricity sold above £75/MWh. It seems to be roughly in line with expectations
A lot of talk about energy security and renewables but then applies a 45% levy! The devil will be in the detail.
The statement was that the levy was on 'older' renewables so (sensibly) it will not be on the CFD income. Will this tax be deductible for investment (as for oil and gas producers) though?
Hopefully the company will issue an update for their prediction of the impact of these measures.
Looks like Scottish Power is clear on their response to. No new investment in the U.K. Greencoat should follow suit. Pay down debt and stop any further expansion. They need to protect shareholders interest now.
A lot of UKW's assets are on the older ROC scheme and are exposed to a windfall tax. The price has already taken a hit from the potential for a windfall tax of some sort. Whether the price goes up or down on the announcement of the details is just a matter of whether it's better or worse than expected.
Hi
Im new to this board, so apologies if this has been discussed before. Is the governments proposed new round of the windfall tax (likely to target renewable energy generators such as wind farms) going to have a significant affect on the sp here? Or is UKW insulated from any windfall taxes imposed on renewable generators due to the CfD contracts?