Member Info for Actuary63

According to the National Grid website, solar power has generated 14.6% of GB electricity over the past week, compared with 5.7% over the past year. It's about time we had some good news and I'm looking forward 1 April - 30 June quartely update.

https://grid.iamkate.com/

Thanks for the recommendation, Trek. Another huge dividend yield, but this time on a stock with a record of growth. I'll certainly look at ENRG if I'm sitting on a pile of cash following an acquisition.

Possible adverse scenarios should always be a factor in pricing assets, but were such scenarios unknown when ukw was trading at 160p? Also consider that the price of solar funds such as fsfl have fallen as much as ukw, so the market hasn't been reacting to problems specific to wind power. For me, the simpler explanations involving higher interest rates and adverse sentiment are the most plausible ones.

Low windspeeds, yet net cash generation less depreciation was 5.3p - 1.5p = 3.8p per share.

Going back to the first quarter of 2022, the same report announced "strong" cash generation less depreciation of 3p per share.

Reduction in wind over the past couple of years has been puzzling and disappointing, but has this been offset by greater efficiency of new turbines?

My understanding is that power sold under Contracts-for-Difference is effectively sold at a pre-determined price up-rated by inflation, so there is no risk from uncertain future electricity prices. However some renewable power is also sold at merchant rates, and UKW gets more of its revenue in this way than other renewable funds.

Hello Aldershares,

I agree the buybacks are good for shareholders, but I don't think cancelling the shares acquired is important. Maybe they are thinking ahead to when the share price might have recovered and they want to start raising equity capital. Much simpler just to sell shares held in Treasury.

Hi TrekMadone,

I noticed their remark about consolidation too. It doesn't sound like great news for long-term income investors, but there may be a way to profit by re-investing in the ones that remain. If they give us 100p per share for FSFL, we could re-invest the proceeds in FGEN and TRIG, which might only cost 90p. Thus income is preserved until they all get taken over.

Thanks for your insights, Parnassius, which give a rational explanation for irrational prices. It seems that the kind of people who rely on wealth managers only see market prices, so a falling market price means a bad investment that must be sold. I suppose we shouldn't really complain because it creates buying opportunites for the rest of us.

The funny thing is that I'm sure people who have buy-to-let property as retirement assets wouldn't get panicked by adverse market valuations as long as their rental income seems secure. Having a physical asset rather than securities seems to make a psychological difference.

Hello Sparky,

The National Grid live website gives you solar power's contribution to UK electriticty generation if you like to keep tabs. Last week has been pretty good, I think.

https://grid.iamkate.com/

Hello AdamAnt,

I agree with every word of your last post, but I fear that you may be wasting your time with Bott, who appears to be a determined troll with unknown and possibly nefarious motives. As you say, MFVI is separate issue from dividend cover, and the reasons for negative MFVI over 2024 have not been hidden from investors. Lower than expected wind speeds and electricity prices are the most obvious risks for this business.

Bott wrote:

"The audited figure on page 68 is only one income element: the other main element is hugely negative, £341.2 million, reducing operating profit to £23.6 million and leaving PBT to a negative £55.3 million. "

The negative figure of £341.2 million is a "movement in the fair value of investments" and not a negative cash-flow. It is entirely consistent with the change in NAV shown in page 11 of the account, which Bott thinks cannot be trusted because it is not an audited financial statement. The reasons for this negative figure, that caused the NAV per share to fall from 164.1p to to 151.2p, are indicated on page 11. Lower projected energy yields (i.e. wind speeds) reduced NAV per share by 6.5p and lower projected power prices reduced NAV per share by 5.2p.

Bott's insinuation that the financial statements that appear before the audited account are misleading or fraudulent has no foundation, as is his claim that the revenues shown in the audited accounts have not been generated by the sale of electricity generated by wind.

The "dire performance" of UK was only really in 2024. People seem to have forgotten that 2022 was a windfall year thanks to high electricity prices. But of course it's true that recent problems are sector specific, i.e. low wind resource and high interest rates.

On page 9 of the 2024 report and accounts, there is a figure of £399 million for wind farm cash flows during 2024. These revenues are net of project-level debt interest and arise from the equity stake UKW has in the wind farms.

On page 68 of the same report we find the Consolidated Statement of Comprehensive Income for 2024, which shows the group's investment income over the year was £394.7 million, a very similar figure to the wind-farm cash flow on page 9. One wouldn't expect them to be identical because of the difference between cash-flow and realised income, but it confirms that the income earned by UKW is from wind farm revenues.

Bott,

If UKW doesn't own the revenues from its wind farms, how did it make windfall profits and pay windfall taxes in 2023? What you're saying implies the company's auditors have also been deceived or have been bribed by the UKW to certify the accounts as true and fair. Statements that the market suddenly 'wised up' are nonsense. The market reacts to new information, and the adverse information for ukw has been rising interest rates and low wind resources, not wild conjectures about false accounting.

The most likely explanation, I'm afraid, is that you've shorted the stock and are hoping to panic investors into keeping the price falling.

Hello Bott,

At the start of 2021, UKW's NAV per share was 122.2p compared with a market price per share of 134.2p. The dividend paid during 2021 was 7.1p compared with 10p in 2024. If the market is right now, it must have been horribly wrong 4 years ago to value the shares at a premium to NAV.

The NAV per share has fallen over the past couple of years because of a higher discount rate and below-average wind in 2024. As an investor who has sold a trust that was using capital to pay dividends (HFEL), I have zero concern that UKW is in the same boat.

Lack of demand must be the reason for the large discounts to NAV we're seeing in IT sector. UKW would be an obvious asset for a defined-benefit pension scheme seeking to match pension liabilities. More risky than index-linked bonds, but with a huge and extraordinary risk premium. Also an excellent asset for an income drawdown portfolio, offering a much higher yield than annuities.

Hello Starbright,

This is good news if they'll bid up the market price of undervalued trusts, but not good news if they are hoping to wind up these trusts by voting against their continuation. I'd rather go on collecting tax-free dividends in my ISA than redeem my shares, even if offered NAV.

Agree with you, Gavster.

Nothing has happened in the performance of Renewable Trusts to justify the scale of recent price falls. Although the rise in interest rates has certainly had a negative impact, this is allowed for in NPV by the use of higher discount rates.

So if the market is right now, it must have been badly wrong 2 years ago. And if it could be wrong 2 years ago, it could certainly be wrong now. As Warren Buffet said, in the short-run the market is a voting machine, in the long-run it's a weighing maching.

My main reason for believing wind and solar are (and will) be cost efficient methods of generating electricity is the massive investment by China in renewables. I don't believe for one minute that the CCP would be doing this out of any wish to placate Green lobbyists or for international PR.

https://en.wikipedia.org/wiki/Wind_power_in_China

Starbright, thanks for the comment. Obviously people have been selling renewable trusts, and I've always thought the likely cause was fear of negative price trends rather than a change in fundamentals. I'd be interested to know how you found out about what DFMs have been doing.