Greencoat UK Wind Regulatory News (UKW)

Greencoat UK Wind PLC (UKW)

22 February 2016

UKW - Final results announcement

Annual report for the year ended 31 December 2015

Greencoat UK Wind PLC is the leading listed renewable infrastructure fund, solely and fully invested in operating UK wind farms. The Company'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 and the prudent use of portfolio leverage.

Highlights

· The Group's investments generated 799.3GWh of electricity, 8 per cent. above budget, owing to high wind resource.

· Net cash generation (Group and wind farm SPVs) was £48.3 million.

· Acquisition of Stroupster wind farm using the Group's debt facilities has increased the portfolio to seventeen wind farms, net generating capacity to 301.4MW and GAV to £664.8 million as at 31 December 2015.

· Issuance of further shares in a significantly oversubscribed placing raising £48.3 million in November 2015.

· The Company declared total dividends of 6.26 pence per share in relation to the year and is targeting a dividend of 6.34 pence per share for 2016 (increased by 1.2 per cent., in line with RPI).

· NAV growth of 0.5 pence per share (adjusting for dividends).

· £135 million outstanding borrowings at 31 December 2015, equivalent to 20 per cent. of GAV.

Key Metrics

As at 31 December 2015

Defining Characteristics

Greencoat UK Wind PLC was designed for investors from first principles to be simple, transparent and low risk.

· The Group is invested solely in operating UK wind farms.

· Wind is the most mature and largest scale renewable technology.

· The UK has a long established regulatory regime, high wind resource and £60 billion of wind farms in operation in the short to medium term.

· The Group is wholly independent and thus avoids conflicts of interests in its investment decisions.

· The UK-based, independent Board is actively involved in key investment decisions and in monitoring the efficient operation of the assets, and works in conjunction with the most experienced investment management team in the sector.

· The Group only invests in wind farms that have an appropriate operational track record (or price adjustment mechanism as disclosed in note 14 to the financial statements).

· Low leverage (including no asset level leverage) is important to ensure a high level of cash flow stability and higher tolerance to downside sensitivities.

· The Group invests in sterling assets and thus does not incur currency risk.

Commenting on today's results, Tim Ingram, Chairman of Greencoat UK Wind, said:

"We are pleased to report the continued good performance of our portfolio, with cash generation in line with budget despite the more difficult market environment. We are again increasing our target dividend by RPI to 6.34p per share for 2016.

During the year we analysed many further investment opportunities, but have been very selective, only buying one new wind farm increasing our portfolio to 17 investments with just over 300MW of net generating capacity."

Annual report

A copy of the annual report has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The annual report will also shortly be available on the Company's website at www.greencoat-ukwind.com where further information on the Company can also be found.

Details of the conference call for analysts and investors:

There will be a presentation call at 9.30am today for analysts and investors. To register for the event please notify Tulchan Communications, either by email to ukwind@tulchangroup.com or by telephone on +44 (0)20 7353 4200. Presentation materials will be posted on the Company's website, www.greencoat-ukwind.com, from 9.00am.

For further information, please contact:

Greencoat UK Wind PLC 020 7832 9400

Stephen Lilley

Laurence Fumagalli

Tom Rayner

Tulchan 020 7353 4200

Stephen Malthouse

Chairman's Statement

I am pleased to present the Annual Report of Greencoat UK Wind PLC for the year ended 31 December 2015.

Performance

During the year, portfolio power generation was 8 per cent. above budget at 799.3GWh owing to high wind resource. However, the average power price during the year was below budget (40 per cent. of revenues are subject to floating power prices) with the result that the net cash generated by the Group and wind farm SPVs was in line with budget at £48.3 million (2014: £32.4 million). Dividend cover was 1.7x (adjusted to reflect quarterly dividends).

In 2015, the UK generated 11 per cent. of its electricity from wind, up from 9.5 per cent. in 2014, with wind turbines providing enough electricity to power 10 million homes, approximately one third of UK households.

Power prices were lower than forecast in 2015 owing to lower gas prices. Our quarterly NAV figures always take into account the latest power price forecasts obtained from a leading independent market consultant.

Dividends and Returns

The Company's aim is to provide investors with an attractive and sustainable dividend that increases in line with RPI inflation while preserving capital on a real basis. The Company declared dividends of 6.26 pence per share for the year. The Company paid dividends of £35.9 million during the year, reflecting the switch to quarterly dividends at the beginning of the year and the payment for five quarters in 2015. Dividends paid, adjusted to remove the quarterly hangover from 2014, were £28.8 million.

In addition, NAV per share increased from 102.4 pence (ex-dividend) on 31 December 2014 to 102.9 (ex-dividend) pence on 31 December 2015, an increase in NAV per share of 0.5 pence, whilst RPI increased by 1.2 per cent. over the year. The full year return to investors was thus 6.6 per cent., being dividends declared plus NAV growth per share. Since listing, the growth of the NAV per share has exceeded RPI growth.

Group Structure and Financing

The Group's policy is to have no gearing at the individual asset level and to keep overall Group level borrowings at a prudent level (the maximum is 40 per cent. of GAV) to reduce risk while ensuring that the Group is at least fully invested thus always using capital efficiently. As at 31 December 2015, the Group's borrowings were £135 million, equivalent to 20 per cent. of GAV. Over the medium term, we would expect gearing to be between 20 per cent. and 30 per cent..

As explained in the half-year statement, the Group's structure was simplified and the investment management arrangements were amended, creating value for the Group as explained in note 3 to the Financial Statements, and the Group's acquisition financing package was refreshed. In July 2015, the Company also entered into a longer term loan. All debt facilities are now at the Company level and rank pari passu with each other. The Board expects term financing to be an increasing feature of the Group's capital structure and is pleased with the attractive rates available to the Group, given the senior nature of all facilities.

Acquisitions and Equity Raising

During the year, the Group made one additional high quality investment, increasing our net generating capacity to 301.4MW, through the acquisition of Stroupster in December at a cost of £84.8 million (excluding cash balances). Stroupster is our fourth wind farm from BayWa. This acquisition was the first the Company has made for fifteen months, a result of our selective approach of only acquiring assets when we are confident that they bring value to shareholders.

In November, the Company raised gross proceeds of £48.3 million through the placing of 44.9 million new shares at an issue price of 107.5 pence per share. The Board was delighted that this placing was significantly oversubscribed.

The Board believes that growth of the Company benefits shareholders through increasing liquidity of its shares, increasing its competitive position and providing economies of scale.

Outlook

Wind remains the most mature and widely deployed renewable technology available in the UK and the Company is in a good position to benefit as electricity production from wind is becoming an increasingly important part of the UK's generation mix.

The policy changes announced during 2015 to the Renewables Obligation for onshore wind are not relevant to the Company as they relate to new capacity that is not yet built. This is not anticipated to have a significant impact on the investment opportunities available to the Company as the market size of operating UK wind farms (both onshore and offshore) is expected to reach £60 billion over the next few years providing extensive and very encouraging opportunities for further value creating investment. However, the announcement of the immediate loss of the Climate Change Levy exemption for renewable electricity in July's Budget had a negative impact on NAV, although this was largely offset by the reduction in the Corporation Tax rate announced at the same time.

The Investment Manager has generated a healthy pipeline of attractive further investment opportunities, resulting in significant potential for the Group to benefit from the growing market noted above. At the same time, the Board and the Investment Manager are prudent in their approach to acquisitions in order to ensure value for shareholders, as further outlined in the Investment Manager's report.

At the time of writing, world markets are displaying some turmoil. However, the Company's assets are long term with an anticipated remaining life of an average of 21 years and, as stated above, only 40 per cent. of revenue from generation is subject to floating power prices. Given the strength and stability of cash generation from our investments, we can confidently target total dividends of 6.34 pence per share in respect of 2016 (increased in line with RPI).

Governance

With the listing of the Company coming to its third anniversary in March 2016, we are planning to undertake an externally assisted Board review during the course of the year.

Annual General Meeting

The 2016 AGM will take place on 27 April 2016 at 2.30pm at the offices of the Investment Manager. Details of the formal business of the meeting are set out in a separate circular which is being sent to shareholders with the Annual Report. We look forward to meeting shareholders on that occasion.

Tim Ingram

Chairman

21 February 2016

Strategic Report

Introduction

The Directors present their Strategic Report for the year ended 31 December 2015. Details of the Directors who held office during the year and as at the date of this report are given in the Annual Report.

Investment Objective

The Company's aim is to continue 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 and the prudent use of portfolio gearing. The 2015 dividend of 6.26 pence per annum is targeted to increase in line with the RPI to 6.34 pence for 2016. The target return to investors is an IRR net of fees and expenses of 8 per cent. to 9 per cent.. Progress on the objectives is measured by reference to the key metrics.

Investment Policy

The Group invests in unlevered operating UK wind farms predominantly with a capacity of over 10MW, which sell the power produced and associated green benefits to creditworthy UK offtakers under route-to-market power purchase agreements.

The Group is structured by design to be a utility friendly buyer and co-investor in utility owned wind farms since utilities are the owners of the significant majority of UK operating wind farms. The Group is wholly independent and is not tied to any particular utility or developer.

As the Group has no borrowings at the asset level, and only limited borrowing at the Group level, the annual dividend is sufficiently protected against lower power prices. At the same time, it has the ability to benefit from higher power prices as the Group is not required to be locked into long term fixed price contracts.

The Group has used debt facilities to make additional investments in the year. This has enhanced the Group's attractiveness to sellers since execution risk is greatly diminished, with the Group effectively being a cash buyer. The Group will continue to use debt facilities to make further investments.

The Group will look to repay its drawn debt facilities by refinancing them in the equity markets at appropriate times in order to refresh its debt capacity. While debt facilities are drawn, the Group benefits from an increase in investor returns because borrowing costs are below the underlying return on investments.

In contrast to the PFI infrastructure sector (smaller in terms of total equity invested and occupied by larger funds), where links to developers may be beneficial in sourcing new acquisitions, independence is of key importance for the Company to continue to make acquisitions at the best possible price. The Investment Manager's relationships across the sector are also helpful.

The Group invests in both onshore and offshore wind farms with the amount invested in offshore wind farms being capped at 40 per cent. of GAV at acquisition.

The Group believes that there is a significant market in which it can continue to grow over the next few years.

Structure

The Company is a UK registered investment company with a premium listing on the London Stock Exchange. Prior to 29 December 2015, the Group included the Company, LLP and Holdco. However, as disclosed in note 19 to the financial statements, on 30 April 2015, the structure of the Group was simplified and LLP transferred its equity interest of one ordinary share in Holdco to the Company. LLP was dissolved on 29 December 2015 and from this date the Group comprises the Company and Holdco. Holdco invests in SPVs which hold the underlying wind farm assets. The Group employs Greencoat Capital LLP as its Investment Manager.

Discount Control

The Articles of Association require there to be a continuation vote by shareholders if the share price were to trade at an average discount of 10 per cent. or more over a 12 month period. Notwithstanding this, it is the intention of the Board for the Company to buy back its own shares in the market if the share price is trading at a material discount to NAV, providing of course that it is in the interests of shareholders to do so.

Review of Business and Future Outlook

The wind farm assets have performed in line with management expectations in terms of energy production, operational expenditure and overall cash flow generation. A more detailed discussion of the individual project performance and a review of the business in the year together with future outlook are covered in the Investment Manager's Report. 

Key Performance Indicators

The Board believes that the key metrics, which are typical for investment funds, together with cash generation will provide shareholders with sufficient information to assess how effectively the Group is meeting its objectives.

Ongoing Charges

The ongoing charges ratio of the Company is 1.41 per cent. for the year to 31 December 2015. This is made up as follows and has been calculated using the AIC recommended methodology.

Investment management fees paid to the Investment Manager, as detailed in note 3 to the financial statements, are based on NAV. If they were stated with reference to the Adjusted Portfolio Value (in line with a number of the Company's peers) then the annual management fee would be 0.9 per cent., assuming 25 per cent. medium term gearing (current gearing 20 per cent.).

The Investment Manager is not paid any performance or acquisition fees.

Corporate and Social Responsibility

Environmental

The Group invests in wind farms and the environmental benefits of renewable energy are widely known. The Group's Environmental, Social and Governance policy outlines the Group's approach to responsible investing, as well as the environmental standards which it aims to meet. Responsible investing principles have been applied to each of the investments made.

Employees and Officers of the Company

The Company does not have any employees and therefore employee policies are not required. The Directors of the Company are listed in the Annual Report.

Social, Community and Human Rights Issues

The Company's Environmental, Social and Governance policy also outlines the Company's aims in relation to social standards, covering the requirement to continue to meet legal standards and good industry practice. The policy requires the Company to make reasonable endeavours to procure the ongoing compliance of its portfolio companies with the policy. The Investment Manager monitors compliance at the investment phase and reports on an ongoing basis to the Board.

Gender Diversity

As at the date of this report, the Board comprised four men and one woman. The Board is aware of the benefits of diversity and considers this when appointing Board Directors. The Investment Manager operates an equal opportunities policy and its partners and employees comprise thirteen men and ten women.

Principal Risks and Uncertainties

In the normal course of business, each investee company has a rigorous risk management framework with a comprehensive risk register that is reviewed and updated regularly and approved by its board. The key risks identified by the Board to the performance of the Group are detailed below.

The Board maintains a risk matrix considering the risks affecting both the Group and the investee companies. This risk matrix is updated annually to ensure that procedures are in place to identify, mitigate and minimise the impact of risks should they crystallise. This enables the Board to carry out a robust assessment of the risks facing the Group, including those principal risks that would threaten its business model, future performance, solvency or liquidity.

As it is not possible to eliminate risks completely, the purpose of the Group's risk management policies and procedures is not to eliminate risks, but to reduce them and to ensure that the Group is adequately prepared to respond to such risks and to minimise any impact if the risk develops.

The spread of assets within the portfolio both by asset type (onshore and offshore) and by geographical location ensures that the portfolio benefits from a diversified wind resource and spreads the exposure to a number of potential technical risks associated with grid connections and with local distribution and national transmission networks. In addition, the portfolio includes six different turbine manufacturers, which diversifies technology and maintenance risks. Finally, each site contains a number of individual turbines, the performance of which is largely independent of other turbines.

Risks Affecting the Group

The ability of the Group to achieve its investment objective depends heavily on the managerial experience of the management team within the Investment Manager and more generally on the Investment Manager's ability to attract and retain suitable staff. The sustained growth of the Group depends upon the ability of the Investment Manager to identify, select and execute further investments which offer the potential for satisfactory returns.

The Investment Management Agreement includes key man provisions which would require the Investment Manager to employ alternative staff with similar experience relating to investment, ownership, financing and management of wind farm projects should for any reason any key man cease to be employed by the Investment Manager. The Investment Management Agreement ensures that no investments are made following the loss of key men until suitable replacements are found and there are provisions for a reduction in the investment management fee during the loss period. It also outlines the process for their replacement with the Board's approval. The key men also have an equity stake in the Company.

The Group will finance further investments either by borrowing or by issuing further shares. The ability of the Group to deliver enhanced returns and consequently realise expected real NAV growth is dependent on access to debt facilities and equity capital markets. There can be no assurance that the Group will be able to borrow additional amounts or refinance on reasonable terms or that there will be a market for further shares.

A significantly strengthening economy may lead to higher future interest rates which could make the listed infrastructure asset class relatively less attractive to investors. In such circumstances, it is likely that there will be an increase in inflation (to which the revenues and costs of the investee companies are either indexed or significantly correlated) or an increase in power prices (due to greater consumption of power) or both. Both would increase the investment return and thus would provide a degree of mitigation against higher future interest rates.

Risks Affecting Investee Companies

If a change in Government renewable energy policy were applied retrospectively to current operating projects including those in the Group's portfolio, this could adversely impact the market price for renewable energy or the value of the green benefits earned from generating renewable energy. The Government has evolved the regulatory framework for new projects being developed but has consistently stood behind the framework that supports operating projects as it understands the need to ensure investors can trust regulation. This principle of "grandfathering" was confirmed in the Energy Act 2013.

Other things being equal, a decline in the market price of electricity would reduce the portfolio companies' revenues. Approximately 40 per cent. of the Group's revenues are exposed to the floating power price.

The Group's dividend policy has been designed to withstand significant short term variability in power prices. A longer period of power price decline would materially affect the revenues of investee companies. In general, independent forecasters expect UK wholesale power prices to rise in real terms from current levels, driven by higher gas and carbon prices combined with the ongoing phasing out of coal-fired power stations. In the short term, power prices are likely to remain volatile.

Wind Resource

The investee companies' revenues are dependent upon wind conditions, which will vary across seasons and years within statistical parameters. The standard deviation of energy production is 10 per cent. over a 12 month period (2 per cent. over 25 years). Since long term variability is low, there is no significant diversification benefit to be gained from geographical diversification across weather systems.

The Group does not have any control over the wind resource but has no asset level gearing and has designed its dividend policy such that it can withstand significant short term variability in production relating to wind. Before purchase, the Group carries out extensive due diligence and relevant historical wind data is available over a substantial period of time. The other component of wind energy generation, a wind farm's ability to turn wind into energy, is mitigated by only purchasing wind farms with a proven operating track record.

When acquiring wind farms that have only recently entered into operation, only limited operational data is available. In these instances, the acquisition agreements with the vendors of these wind farms will include a ''wind energy true-up'' which will apply once two years' operational data has become available. Under this true-up, the net load factor will be reforecast based on all available data and the purchase price will be adjusted, subject to de minimis thresholds and caps.

Wind turbines may have shorter lives than their expected life-span of 25 years. In the event that the wind turbines do not operate for the period of time assumed by the Group in its business model or require higher than expected maintenance expenditure to do so, it could have a material adverse effect on investment returns.

The Group invests in companies that own wind turbines that have an appropriate operational track record. 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.

The physical location, operation and maintenance of wind farms may, if inappropriately assessed and managed, pose health and safety risks to those involved. Wind farm operation and maintenance may result in bodily injury or industrial accidents, particularly if an individual were to fall from height, fall or be crushed in transit from a vessel to an offshore installation or be electrocuted. If an accident were to occur in relation to one or more of the Group's investments and if the Group were deemed to be at fault, the Group could be liable for damages or compensation to the extent such loss is not covered under insurance policies. In addition, adverse publicity or reputational damage could ensue.

The Board reviews health and safety at each of its scheduled Board meetings and has appointed Martin McAdam as Health and Safety Director. The Group engages a leading health and safety consultant to ensure the ongoing appropriateness of its health and safety policies.

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Investment Manager's Report. The Group faces a number of risks and uncertainties, as set out above. The financial risk management objectives and policies of the Group, including exposure to price risk, interest rate risk, credit risk and liquidity risk are discussed in note 18 to the financial statements.

The Group continues to meet day-to-day liquidity needs through its cash resources.

As at 31 December 2015, the Group had net current assets of £7.2 million (2014: £8.1 million) and had cash balances of £7.2 million (2014: £8.3 million) (excluding cash balances within investee companies), which are sufficient to meet current obligations as they fall due. The major cash outflows of the Group are the payment of dividends and costs relating to the acquisition of new assets, both of which are discretionary. The Group had £135 million (2014: £105 million) of outstanding debt as at 31 December 2015. The Group is expected to continue to comply with the covenants of its banking facilities going forward.

The Directors have reviewed Group forecasts and projections which cover a period of not less than 12 months from the date of this report, taking into account foreseeable changes in investment and trading performance, which show that the Group has sufficient financial resources.

On the basis of this review, and after making due enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Longer Term Viability

The Company is a member of the AIC and complies with the AIC Code which was revised in February 2015 to reflect changes to the UK Code. In accordance with the revised AIC Code, the Directors are required to assess the prospects of the Group over a period longer than the 12 months associated with going concern. The Directors conducted this review for a period of ten years, which it deemed appropriate, given the long term nature of the Group's investments which are modelled over 25 years, coupled with its long term strategic planning horizon.

In considering the prospects of the Group, the Directors looked at the key risks facing both the Group and the investee companies, focussing on the likelihood and impact of each risk as well as any key contracts, future events or timescales that may be assigned to each key risk.

As a sector-focused infrastructure fund, the Group aims to produce stable and inflating dividends whilst preserving the capital value of its investment portfolio on a real basis. The Directors believe that the Group is well placed to manage its business risks successfully over both the short and long term and accordingly, the Board has a reasonable expectation that the Group will be able to continue in operation and to meet its liabilities as they fall due for a period of at least ten years.

Whilst the Directors have no reason to believe that the Group will not be viable over a longer period, they are conscious that it would be difficult to foresee the economic viability of any company with any degree of certainty for a period of time greater than ten years.

By order of the Board

Tim Ingram

Chairman

21 February 2016

Investment Manager's Report 

The investment management team's experience covers ownership, financing and operation of wind farm projects, both onshore and offshore, and investment in renewable energy infrastructure. All the skills and experience required to manage the Company's business lie within a single investment manager. The team is led by Stephen Lilley and Laurence Fumagalli.

Stephen has nineteen years of investment management and financing experience in addition to six years in the nuclear industry. Prior to joining the Investment Manager in March 2012, from May 2010 Stephen led the Renewable Energy Infrastructure team at Climate Change Capital (CCC). Prior to that, he was with M&G where he was a senior director of Infracapital Partners LP, the European Infrastructure fund of the Prudential Group. During this time, Stephen led over £400 million of investments, including the acquisition of stakes in Kelda Group (Yorkshire Water), Zephyr (wind farms) and Meter Fit (gas/electricity metering). He also sat on the boards of these companies after acquisition. Prior to this he was a director at Financial Security Assurance where he led over £2 billion of underwritings in the infrastructure and utility finance sectors including: major transport and health PPPs; the securitisation of Kielder Water for Northumbrian Water; and the repackaging of a number of utility bonds. He has also worked for the investment companies of the Serco and Kvaerner Groups.

Laurence also has nineteen years of investment management and financing experience. Prior to joining the Investment Manager in March 2012, Laurence held a number of senior roles within CCC from 2006 to 2011. Initially he co-headed CCC's Advisory team, a provider of project finance, M&A, strategic and policy advice in the European renewables and clean-tech sectors. In 2007, Laurence transferred to CCC's Carbon Finance team as Managing Director responsible for origination and execution for all regions outside of China. Laurence joined Stephen in the Renewable Energy Infrastructure team in early 2011. Prior to joining CCC, Laurence spent approximately ten years in the European power sector in project and structured finance. From 2003-2006, Laurence headed the Bank of Tokyo-Mitsubishi's London-based renewables team, where he financed and advised on over 1GW of installed UK wind capacity. Prior to the Bank of Tokyo-Mitsubishi, Laurence worked in the power project finance team at Greenwich NatWest (formerly NatWest Markets).

The Investment Manager is authorised and regulated by the Financial Conduct Authority and is a full scope UK AIFM.

Investment Portfolio

The Group's investment portfolio as at 31 December 2015 consisted of interests in SPVs which held the following underlying operating wind farms:

Portfolio Performance

Generation for the year was 799.3GWh, 8 per cent. above budget owing to high wind resource(1).

Power prices were lower than forecast in 2015 owing to lower than forecast gas prices.

Higher generation and lower power prices offset each other, leading to cash generation and dividend cover in line with budget (see financial performance below).

Generation for the year was negatively impacted by various major outages:

· failure of a grid transformer at Earl's Hall Farm, which resulted in the wind farm being offline from 18 April to 6 June, while the Distribution Network Operator (UKPN) resolved the issue;

· a turbine being offline at Little Cheyne Court until 21 March as a result of a lightning strike in late 2014;

· the replacement of two gearboxes at Little Cheyne Court, following end of warranty inspections;

· failure of the grid energisation resistor at Bin Mountain, which resulted in two weeks' downtime in August; and

· repeated yaw gear failures at Maerdy.

Insurance proceeds or liquidated damages have been (or are expected to be) received in respect of all of the above faults. All faults have now been resolved with the exception of the yaw gear failures at Maerdy, which remain under investigation by Siemens and are being remedied on a case-by-case basis in the interim. The yaw gears are responsible for turning the turbines to face the wind and have been subject to overload at Maerdy in high wind conditions.

In December 2015, the Group agreed an amount of £2 million to be paid from Velocita on 31 March 2016 in settlement of the Maerdy wind energy true-up. The Maerdy load factor assumption has been reduced accordingly (no net impact on NAV as a result of the true-up). The true-up mechanism is designed to mitigate the risk associated with investing in a wind farm before sufficient operational data are available. Wind energy true-ups in respect of Cotton Farm, Earl's Hall Farm, Kildrummy, Middlemoor and Stroupster remain outstanding as disclosed in note 14 to the financial statements.

(1) Deviations from budget lie within reasonable statistical parameters. The standard deviation of energy yield over a 12 month period is 10 per cent. (2 per cent. over 25 years).

Health and Safety

There were no major incidents in the year to 31 December 2015. A health and safety audit was conducted across January and February 2016 by an independent consultant. No material areas of concern were identified.

Acquisitions

During the year, the Investment Manager priced 48 wind farms totalling 1,854MW, with 12 (941MW) being presented to the Investment Committee. Of the 48 wind farms priced: one investment was made by the Group during the year (Stroupster); 12 were acquired by other buyers; and 26 are subject to continuing discussions.

Stroupster was acquired from BayWa on 1 December 2015 for £84.8 million (excluding cash balances). Stroupster was the fourth wind farm acquired from BayWa (Cotton Farm and Earl's Hall Farm were acquired in October 2013 and Kildrummy was acquired in June 2014). The Company was the natural counterparty for BayWa owing to agreed documentation and trusted execution.

Financial Performance

The table below demonstrates strong dividend cover in the year of 1.7x. Net cash generation was £48.3 million. Cash balances (Group and wind farm SPVs) increased from £19.0 million to £22.0 million in the year to 31 December 2015.

(1) Excluding cash balances.

(2) Numbers do not cast owing to rounding

(3) February 2015 dividend has been halved for dividend cover calculation purposes as it relates to six months as opposed to three months.

Investment Performance

The NAV at 31 December 2014 was £486.2 million (105.5 pence per share) and increased to £529.8 million (104.5 pence per share) by 31 December 2015.

Total dividends of £35.9 million were paid in 2015, including £14.2 million paid in February 2015 in respect of the six months to 31 December 2014, after which the Company switched from semi-annual to quarterly dividends.

Total dividends of £29.6 million have been paid in respect of 2015 (6.26 pence per share), including £7.9 million paid on 12 February 2016 in respect of Q4 2015.

Summary:

The relatively weak NAV growth in the year reflects lower forecast power prices and the loss of the Climate Change Levy exemption for renewable electricity from 1 August 2015 announced in the July 2015 Budget.

Reconciliation of Statutory Net Assets to Reported NAV

NAV Sensitivities

NAV is the sum of:

· discounted cash flow valuations of the Group's investments;

· cash (at Group and wind farm SPV level); and

· other relevant assets and liabilities of the Group

less Aggregate Group Debt.

The DCF valuation of the Group's investments represents the largest component of NAV and the key sensitivities are considered to be the discount rate used in the DCF valuation and long term assumptions in relation to energy yield, power prices and inflation.

The unlevered discount rate used in the DCF valuation is between 8 and 9 per cent.. The market discount rate has remained constant since listing. A variance of +/- 0.5 per cent. is considered to be a reasonable range of alternative assumptions for discount rate.

Base case energy yield assumptions are P50 (50 per cent. probability of exceedance) forecasts produced by expert consultants based on long term wind data and operational history. The P90 (90 per cent. probability of exceedance over a 10 year period) and P10 (10 per cent. probability of exceedance over a 10 year period) sensitivities reflect the future variability of wind and the uncertainty associated with the long term data source being representative of the long term mean. Given their basis on long term operating data, it is not anticipated that base case energy yield assumptions will be adjusted (other than any wind energy true-ups with compensating purchase price adjustments).

Long term power price forecasts are provided by a leading market consultant, updated quarterly and adjusted by the Investment Manager where more conservative assumptions are considered appropriate. Base case real power prices increase from approximately £40/MWh (2016) to approximately £60/MWh (2030). The sensitivity below assumes a 10 per cent. increase or decrease in power prices relative to the base case for every year of the asset life, which is relatively extreme (a 10 per cent. variation in short term power prices, as reflected by the forward curve, would have a much lesser effect).

The base case long term RPI assumption is 2.5 per cent. (0.5 per cent. above the long term 2.0 per cent. CPI target).

Gearing

As at 31 December 2015, the Group had £135 million of debt outstanding, equating to 20 per cent. of GAV.

£135m outstanding debt comprised a term debt facility of £75 million, together with associated interest rate swap and £60 million drawn under the Group's revolving credit facility.

All borrowing is at the Company level (no project level debt).

Outlook

The regulatory outlook for operational wind farms in the UK remains stable owing to the UK Government's policy of "grandfathering" for operational projects. The Group invests in operational wind farms, backed by known and fixed support mechanisms.

Notwithstanding this, the loss of the Climate Change Levy exemption for renewable electricity from 1 August 2015 announced in the July 2015 Budget had a negative impact on NAV, although this was largely offset by announced reductions in the Corporation Tax rate. The removal of the exemption is effectively an increase in taxation and benefits HM Treasury accordingly. The Group was previously assuming the removal of the exemption from 2022.

In contrast to operational wind farms, regulatory risk is the key risk faced by renewable developers. With the new Government, 2015 saw several changes in this area, affecting solar and onshore wind in particular. The CFD regime, which replaces the Renewables Obligation for new projects, brings considerable uncertainty for developers.

There is currently over 8GW of operational onshore wind capacity plus over 5GW offshore. Installed capacity is set to grow over the next few years to over 12GW onshore plus over 12GW offshore, despite recent policy changes for new projects. In monetary terms, the secondary market for operational UK wind farms is approximately £30 billion, increasing to £60 billion in the medium term. The Group currently has a market share of approximately 2 per cent..

As an owner of operational wind farms, the key risk faced by the Group is power price. In general, independent forecasters expect UK wholesale power prices to rise in real terms from current levels, driven by higher gas and carbon prices combined with the ongoing phasing out of coal-fired power stations. In the short term, power prices are likely to remain volatile.

The long term power price forecast is updated each quarter and reflected in the reported NAV. The power price forecast incorporated in the current NAV is considerably lower than the forecast applicable at listing (March 2013), with consequently reduced downside exposure.

The outlook for the Group is very encouraging, with proven operational and financial performance from the existing portfolio combined with a healthy pipeline of attractive further investment opportunities.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements, and have elected to prepare the Company financial statements, in accordance with IFRS as adopted by the EU. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for the Group for that period.

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRS as adopted by the EU, subject to any material departures disclosed and explained in the financial statements;

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and

· prepare a Director's Report, a Strategic Report and Director's Remuneration Report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.

Website Publication

The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the UK governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors' Responsibilities Pursuant to DTR4

The Directors confirm to the best of their knowledge that:

· the Group financial statements have been prepared in accordance with IFRS as adopted by the EU and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group; and

· the Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and the parent company, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board,

Tim Ingram

Chairman

21 February 2016

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2015

All results are derived from continuing operations.

Consolidated Statement of Financial Position

As at 31 December 2015

Authorised for issue by the Board on 21 February 2016 and signed on its behalf by:

Statement of Financial Position - Company

As at 31 December 2015

Authorised for issue by the Board on 21 February 2016 and signed on its behalf by:

Consolidated and Company Statement of Changes in Equity

For the year ended 31 December 2015

Other distributable reserves were created through the cancellation of the share premium account on 5 June 2013. This amount is capable of being applied in any manner in which the Company's profits available for distribution, as determined in accordance with the Companies Act 2006, are able to be applied.

After taking account of cumulative unrealised gains of £15,058,250, the total reserves distributable by way of a dividend as at 31 December 2015 were £254,329,308.

After taking account of cumulative unrealised gains of £25,941,397, the total reserves distributable by way of a dividend as at 31 December 2014 were £250,674,433.

Consolidated Statement of Cash Flows

For the year ended 31 December 2015

Statement of Cash Flows - Company

For the year ended 31 December 2015

Notes to the Consolidated Financial Statements

For the year ended 31 December 2015

1. Significant accounting policies

The consolidated annual financial statements have been prepared in accordance with IFRS to the extent that they have been adopted by the EU and with those parts of the Companies Act 2006 applicable to companies under IFRS.

The annual financial statements have been prepared on the historical cost basis, as modified for the measurement of certain financial instruments at fair value through profit or loss. The principal accounting policies are set out below.

These consolidated financial statements are presented in pounds sterling which is the currency of the primary economic environment in which the Group operates and are rounded to the nearest thousand, unless otherwise stated.

The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 and accordingly has not presented a Statement of Comprehensive Income for the Company alone. The profit after tax of the Company alone for the year was £30,648,335 (2014: £30,446,391).

New and amended standards and interpretations not applied

There have been no new or revised standards adopted in the year.

At the date of authorisation of these financial statements, IFRS 9 "Financial Instruments" was issued but will not become effective until accounting periods beginning on or after 1 January 2018 and has not been applied in these financial statements.

Other accounting standards have been published and will be mandatory for the Company's accounting periods beginning on or after 1 January 2016 or later periods, however the impact of these standards is not expected to be material to the reported results and financial position of the Group.

The Directors have concluded that the Company continues to satisfy the criteria to be regarded as an investment entity as defined in the amendments to IFRS 10, IFRS 12 and IAS 27 and measures its subsidiaries at fair value through profit or loss, in accordance with IAS 39 "Financial Instruments: Recognition and Measurement" instead of consolidating those subsidiaries.

The financial support provided by the Company to its unconsolidated subsidiaries is disclosed in note 10.

Notwithstanding this, IFRS 10 requires subsidiaries that provide services that relate to the investment entity's investment activities to be consolidated. Accordingly, the annual financial statements include the consolidated financial statements of Greencoat UK Wind PLC, Greencoat UK Wind 1 LLP (dissolved on 29 December 2015 as disclosed in note 19) and Greencoat UK Wind Holdco Limited. In respect of these entities, intra-Group balances and any unrealised gains arising from intra-Group transactions are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated unless the costs cannot be recovered. The financial statements of subsidiaries that are included in the consolidated financial statements are included from the date that control commences until the dates that control ceases.

The Company has taken the exemption permitted by IAS 28 "Investments in Associates and Joint Ventures" and IFRS 11 "Joint Arrangements" and upon initial recognition, will measure its investment in Associates and Joint Ventures at fair value, with subsequent changes to fair value recognised in the Income Statement in the period of change.

Financial assets and financial liabilities are recognised in the Group's Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are only offset and the net amount reported in the Consolidated Statement of Financial Position when there is a currently enforceable legal right to offset the recognised amounts and the Group intends to settle on a net basis or realise the asset and liability simultaneously.

At 31 December 2015 and 2014 the carrying amounts of cash and cash equivalents, receivables, payables, accrued expenses and short term borrowings reflected in the financial statements are reasonable estimates of fair value in view of the nature of these instruments or the relatively short period of time between the original instruments and their expected realisation. The fair value of advances and other balances with related parties which are short-term or repayable on demand is equivalent to their carrying amount.

The classification of financial assets at initial recognition depends on the purpose for which the financial asset was acquired and its characteristics.

All financial assets are initially recognised at fair value. All purchases of financial assets are recorded at the date on which the Group became party to the contractual requirements of the financial asset.

The Group has not classified any of its financial assets as Held to Maturity or as Available for Sale.

The Group's financial assets comprise of only investments held at fair value through profit or loss and receivables.

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They principally comprise trade and other receivables and they are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method, less provisions for impairment. Transaction costs are recognised in the Consolidated Statement of Comprehensive Income as incurred.

The Company assesses whether there is any objective evidence that financial assets are impaired at the end of each reporting period. If any such evidence exists, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the loss is recognised in profit or loss.

Investments are designated upon initial recognition as held at Fair Value through Profit or Loss. Financial assets are recognised / derecognised at the date of the purchase / disposal. Investments are initially recognised at cost, being the fair value of consideration given. Transaction costs are recognised in the Consolidated Statement of Comprehensive Income as incurred. Thereafter, investments are measured at subsequent reporting dates at fair value in accordance with IFRS.

Fair value is defined as the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction.

Fair value is calculated on an unlevered, discounted cash flow basis in accordance with IAS 39. Gains or losses resulting from the revaluation of investments are recognised in the Consolidated Statement of Comprehensive Income.

A financial asset (in whole or in part) is derecognised either:

· when the Group has transferred substantially all the risks and rewards of ownership; or

· when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the assets or a portion of the asset; or

· when the contractual right to receive cash flow has expired.

Financial liabilities are classified according to the substance of the contractual agreements entered into.

All financial liabilities are initially recognised at fair value net of transaction costs incurred. All financial liabilities are recorded on the date on which the Group becomes party to the contractual requirements of the financial liability.

In relation to non-current loans and borrowings the Directors are of the view that the current market interest rate is not significantly different to the respective instrument's contractual interest rates, therefore the fair value of the non-current loans and borrowings at the end of the reporting periods is not significantly different from their carrying amounts.

All loans and borrowings are initially recognised at cost, being fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Loan balances as at the year end have not been discounted to reflect amortised cost, as the amounts are not materially different from the outstanding balances.

The Group's other financial liabilities measured at amortised cost include trade and other payables and other short term monetary liabilities which are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the Consolidated Statement of Comprehensive Income.

Derivatives may be embedded in other financial instruments, such as an interest rate swap in a borrowing. Embedded derivatives are treated as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract, the terms of the embedded derivative would meet the definition of a stand-alone derivative if they were contained in a separate contract and the combined contract is not held for trading or designated at fair value. These embedded derivatives are measured at fair value with changes in fair value recognised in the Consolidated Statement of Comprehensive Income. Embedded derivatives which are closely related to the host contract are not separated from the host instrument.

Borrowing costs are recognised in the Consolidated Statement of Comprehensive Income in the period to which they relate on an accruals basis.

Financial instruments issued by the Company are treated as equity if the holder has only a residual interest in the assets of the Company after the deduction of all liabilities. The Company's ordinary shares are classified as equity instruments.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from proceeds.

Incremental costs include those incurred in connection with the placing and admission which include fees payable under a placing agreement, legal costs and any other applicable expenses.

Cash and cash equivalents comprise cash balances, deposits held on call with banks and other short-term highly liquid deposits with original maturities of three months or less, that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Consolidated Statement of Comprehensive Income.

Dividends payable are recognised as distributions in the financial statements when the Company's obligation to make payment has been established.

Interest income is accounted for on an accruals basis using the effective interest rate method. Dividend income is recognised when the Group entitlement to receive payment is established.

Expenses are accounted for on an accruals basis. Share issue expenses of the Company directly attributable to the issue and listing of shares are charged to the share premium account.

The Company issues shares to the Investment Manager in exchange for receiving investment management services. The fair value of the investment management services received in exchange for shares is recognised as an expense at the time at which the investment management fees are earned, with a corresponding increase in equity. The fair value of the investment management services is calculated by reference to the definition of investment management fees in the Investment Management Agreement.

Under the current system of taxation in the UK, the Group is liable to taxation on its operations in the UK.

Current tax is the expected tax payable on the taxable income for the period, using tax rates that have been enacted or substantively enacted at the date of the Consolidated Statement of Financial Position.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments, except where the Group is able to control the timing of the reversal of the difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the Consolidated Statement of Comprehensive Income except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Deferred tax assets and liabilities are not discounted.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, as a whole. The key measure of performance used by the Board to assess the Group's performance and to allocate resources is the total return on the Group's net assets, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the financial statements.

For management purposes, the Group is organised into one main operating segment, which invests in wind farm assets.

All of the Group's income is generated within the UK.

All of the Group's non-current assets are located in the UK.

2. Critical accounting judgements, estimates and assumptions

The preparation of the financial statements requires the application of estimates and assumptions which may affect the results reported in the financial statements. Estimates, by their nature, are based on judgement and available information.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities are those used to determine the fair value of the investments as disclosed in note 9 to the financial statements.

Also as disclosed in note 9, the key assumptions that have a significant impact on the carrying value of investments that are valued by reference to the discounted value of future cash flows are the useful life of the assets, the discount factors, the level of wind resource, the rate of inflation, the price at which the power and associated benefits can be sold and the amount of electricity the assets are expected to produce.

Useful lives are based on the Investment Manager's estimates of the period over which the assets will generate revenue which are periodically reviewed for continued appropriateness. The standard assumption used for the useful life of a wind farm is 25 years. The actual useful life may be a shorter or longer period depending on the actual operating conditions experienced by the asset.

The discount factors are subjective and therefore it is feasible that a reasonable alternative assumption may be used resulting in a different value. The discount factors applied to the cash flows are reviewed annually by the Investment Manager to ensure they are at the appropriate level. The Investment Manager will take into consideration market transactions, where of similar nature, when considering changes to the discount factors used.

The revenues and expenditure of the investee companies are frequently partly or wholly subject to indexation and an assumption is made that inflation will increase at a long term rate.

The price at which the output from the generating assets is sold is a factor of both wholesale electricity prices and the revenue received from the Government support regime. Future power prices are estimated using external third party forecasts which take the form of specialist consultancy reports. The future power price assumptions are reviewed as and when these forecasts are updated. There is an inherent uncertainty in future wholesale electricity price projection.

Specifically commissioned external reports are used to estimate the expected electrical output from the wind farm assets taking into account the expected average wind speed at each location and generation data from historical operation. The actual electrical output may differ considerably from that estimated in such a report mainly due to the variability of actual wind to that modelled in any one period. Assumptions around electrical output will be reviewed only if there is good reason to suggest there has been a material change in this expectation.

3. Investment management fees

As disclosed in note 19, the structure of the Group was simplified during the year. As part of this restructuring the Company entered into a new Investment Management Agreement with the Investment Manager, replacing the previous agreement between the Company, LLP, Holdco and the Investment Manager, and the minimum term under the Investment Management Agreement has been extended by 15 months.

Under the terms of the revised Investment Management Agreement and effective from 1 April 2015, the Investment Manager is entitled to a combination of a Cash Fee and an Equity Element from the Company. The amount of the Cash Fee, which was previously a Base Fee plus PPS, remains unchanged and is now fully tax deductible.

The Cash Fee is based upon the NAV as at the start of the quarter in question on the following basis:

· on that part of the then most recently announced NAV up to and including £500 million, an amount equal to 0.25 per cent. of such part of the NAV;

· on that part of the then most recently announced NAV over £500 million and up to and including £1,000 million, an amount equal to 0.225 per cent. of such part of the NAV; and

· on that part of the then most recently announced NAV over £1,000 million, an amount equal to 0.2 per cent. of such part of the NAV.

The Equity Element due to the Investment Manager, which remains unchanged from the previous Investment Management Agreement, is calculated quarterly in advance and has a value as set out below:

· on that part of the then most recently announced NAV up to and including £500 million, 0.25 x 0.2 per cent.; and

· on that part of the then most recently announced NAV over £500 million up to and including £1,000 million, 0.25 x 0.1 per cent.

The ordinary shares issued to the Investment Manager under the equity element are subject to a three year lock up starting from the quarter in which they are due to be paid.

Prior to 31 March 2015, PPS was paid quarterly in advance, in each case based upon the NAV as at the start of the quarter in question on the following basis:

· on that part of the then most recently announced NAV up to and including £500 million, an amount equal to 0.25 per cent. of such part of the NAV;

· on that part of the then most recently announced NAV over £500 million and up to and including £1,000 million, an amount equal to 0.225 per cent. of such part of the NAV; and

· on that part of the then most recently announced NAV over £1,000 million, an amount equal to 0.2 per cent. of such part of the NAV,

in each case less an amount equivalent to the quarterly Base Fee of £275,000.

Investment management fees and PPS paid or accrued in the year to 31 December 2015 were as follows:

The value of the Equity Element and the Cash Fee detailed in the tables above include the true-up amount for the year calculated in accordance with the Investment Management Agreement.

Investment management fees and PPS paid or accrued in the year to 31 December 2014 were as follows:

The value of the Equity Element and the PPS detailed in the tables above include the true-up amount for the year calculated in accordance with the Investment Management Agreement.

4. Return on investments

5. Operating expenses

The fees to the Company's auditor includes £3,600 (2014: £3,500) payable in relation to a limited review of the half-yearly report.

During the year, BDO was paid £nil (2014: £50,000) in relation to a capital raise of the Company which was included in share issue costs.

6. Taxation

The tax credit for the year shown in the Statement of Comprehensive Income is lower than the standard rate of corporation tax of 21 per cent. to 31 March 2015 (2014: 23 per cent.) and 20 per cent. from 1 April 2015 (2014: 21 per cent.) (average rate of 20.25 per cent. (2014: 21.5 per cent.)). The differences are explained below.

7. Earnings per share

Dilution of the earnings per share as a result of the equity element of the Investment Management fee as disclosed in note 3 does not have a significant impact on the basic earnings per share.

8. Dividends declared in relation to the year

On 13 January 2016, the Company announced a dividend of 1.565 pence per share in relation to the quarter ended 31 December 2015, bringing the total dividend declared in respect of the year to 31 December 2015 to 6.26 pence per share. The record date for the dividend was 22 January 2016 and the payment date was 12 February 2016.

The following table shows dividend paid in the prior year.

9. Investments at fair value through profit or loss

The unrealised movement in fair value of investments of the Group during the year and the prior year were made up as follows:

The unrealised movement in fair value of investments of the Company during the year and the prior year are as follows:

IFRS 13 "Fair Value Measurement" requires disclosure of fair value measurement by level. The level of fair value hierarchy within the financial assets or financial liabilities is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the following three levels:

· Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

· Level 2 - inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

· Level 3 - inputs for assets or liabilities that are not based on observable market data (unobservable inputs).

The determination of what constitutes 'observable' requires significant judgement by the Group. The Group considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The only financial instruments held at fair value are the instruments held by the Group, through the SPVs, which are fair valued at each reporting date. The Group's investments have been classified within level 3 as the investments are not traded and contain unobservable inputs. The Company's investments are all considered to be level 3 assets. As the fair value of the Company's investments is ultimately determined by the underlying fair values of the SPV investments, the Company's sensitivity analysis of reasonably possible alternative input assumptions is the same as for the Group.

Due to the nature of the investments, they are always expected to be classified as level 3. There have been no transfers between levels during the year ended 31 December 2015.

Any transfers between the levels would be accounted for on the last day of each financial period.

The Investment Manager will carry out the asset valuations, which form part of the NAV calculation. These asset valuations will be based on discounted cash flow methodology in line with IPEV Guidelines and adjusted where appropriate, given the special nature of wind farm investments.

The valuations are based on a detailed financial model produced by the Investment Manager which takes into account, inter alia, the following:

· due diligence findings where relevant;

· the terms of any material contracts including PPAs;

· asset performance;

· power price forecast from a leading market consultant; and

· the economic, taxation or regulatory environment.

The DCF valuation of the Group's investments represents the largest component of NAV and the key sensitivities are considered to be the discount rate used in the DCF valuation and long term assumptions in relation to energy yield, power prices and inflation.

The unlevered discount rate used in the DCF valuation is between 8 and 9 per cent.. The market discount rate has remained constant since listing. A variance of +/- 0.5 per cent. is considered to be a reasonable range of alternative assumptions for discount rate.

Base case energy yield assumptions are P50 (50 per cent. probability of exceedance) forecasts produced by expert consultants based on long term wind data and operational history. The P90 (90 per cent. probability of exceedance over a 10 year period) and P10 (10 per cent. probability of exceedance over a 10 year period) sensitivities reflect the future variability of wind and the uncertainty associated with the long term data source being representative of the long term mean. Given their basis on long term operating data, it is not anticipated that base case energy yield assumptions will be adjusted (other than any wind energy true-ups with compensating purchase price adjustments).

Long term power price forecasts are provided by a leading market consultant, updated quarterly and adjusted by the Investment Manager where more conservative assumptions are considered appropriate. Base case real power prices increase from approximately £40/MWh (2016) to approximately £60/MWh (2030). The sensitivity below assumes a 10 per cent. increase or decrease in power prices relative to the base case for every year of the asset life, which is relatively extreme (a 10 per cent. variation in short term power prices, as reflected by the forward curve, would have a much lesser effect).

The base case long term RPI assumption is 2.5 per cent. (0.5 per cent. above the long term 2.0 per cent. CPI target).

Sensitivity analysis

The fair value of the Group's investments is £657,590,555 (2014: £583,188,538). The analysis below is provided to illustrate the sensitivity of the fair value of investments to an individual input, while all other variables remain constant. The Board considers these changes in inputs to be within reasonable expected ranges. This is not intended to imply the likelihood of change or that possible changes in value would be restricted to this range.

The sensitivities above are assumed to be independent of each other. Combined sensitivities are not presented.

10. Unconsolidated subsidiaries, associates and joint ventures

The following table shows subsidiaries of the Group. As the Company is regarded as an Investment Entity as referred to in note 1, these subsidiaries have not been consolidated in the preparation of the financial statements:

* The Group's investments in Drone Hill, North Rhins, Sixpenny Wood and Yelvertoft are held through SYND Holdco.

The following table shows associates and joint ventures of the Group which have been recognised at fair value as permitted by IAS 28 "Investments in Associates and Joint Ventures":

* The Group's investments in Middlemoor and Lindhurst is 49 per cent. (2014: 49 per cent.) and their place of business is the UK. These are held through ML Wind.

Security deposits and guarantees provided by the Group on behalf of its investments are as follows:

The fair value of financial guarantees provided by the Group are considered to be £nil and the fair values of cash security deposits are as disclosed in the table above.

11. Receivables

12. Payables

(1) Management fee payable by the Group and the Company consists of the Cash Fee payable for the quarter to 31 December 2015 as well as the 2015 true-up amount calculated in accordance with the Investment Management Agreement.

13. Loans and borrowings

The loan balances as at 31 December 2015 have not been revalued to reflect amortised cost, as the amounts are not materially different from the outstanding balances.

On 27 April 2015, the Company entered into a revolving credit facility with RBS, RBC and Santander of up to £225,000,000. £105,000,000 was drawn down and used to repay the £105,000,000 outstanding under the previous loan facility between Holdco, RBS, RBC and Santander as disclosed in notes 9 and 19.

As disclosed in note 19, on 26 November 2015, £85,000,000 was drawn down and used to purchase Stroupster.

The final maturity date of the revolving credit facility is 23 April 2018 which is the third anniversary of the facility agreement. The margin is 2 per cent. per annum. The Company is also obliged to pay a quarterly commitment fee of 0.7 per cent. per annum on the undrawn commitment available under the revolving credit facility.

As at 31 December 2015, accrued interest on the revolving credit facility was £109,172 (2014: £517,836) and the outstanding commitment fee was £215,562 (2014: £nil).

In the prior year, Holdco entered into an acquisition loan facility agreement with RBS, RBC and Santander and borrowed a total of £183,000,000. The outstanding balance on this facility as at 31 December 2014 was £105,000,000.

The final maturity date of the acquisition loan facility was 24 June 2017 which was the third anniversary of the amended facility agreement. The margin was 235 basis points until 24 June 2015, 300 basis points in year two and 375 basis points in year three, if not refinanced with debt or equity. The loan was secured by a fixed charge over the shares in Holdco and a floating charge over Holdco's bank accounts. The minimum interest coverage under the terms of the facility agreement was 2.0x (with dividend lockup at 2.5x).

On 22 July 2015, the Company entered into a seven year term debt facility with CBA of £75,000,000, together with the associated interest rate swap. The margin is 1.65 per cent. per annum and the swap rate is 1.94 per cent. per annum.

The swap is an embedded derivative closely related to the host contract. Accordingly it has been treated as a single fixed rate loan agreement which effectively sets interest payable at a fixed rate of 3.59 per cent..

As at 31 December 2015, accrued interest on the term debt facility and associated swap was £464,862 (2014: £nil).

All borrowing ranks pari passu and is secured by a debenture over the assets of the Company, including its shares in Holdco, and a floating charge over Holdco's bank accounts.

14. Contingencies

At the time of acquisition, six of the wind farms in the portfolio (Cotton Farm, Earl's Hall Farm, Kildrummy, Maerdy, Middlemoor and Stroupster) had less than two years' operational data. Consequently, in line with the Group's policy of applying a wind energy true-up to wind farms which have only recently entered into operation, the purchase price for these wind farms may be adjusted so that it is based on a two year operational record, once the operational data has become available.

As disclosed in note 9, in December 2015, the Group agreed an amount of £2 million to be paid from Velocita on 31 March 2016 in settlement of the Maerdy wind energy true-up. The Maerdy load factor assumption has been reduced accordingly (no net impact on NAV as a result of the true-up).

The maximum that the purchase price of the remaining five wind farms may be adjusted by is £21.4 million. The Directors and the Investment Manager are of the opinion that the estimate of the energy yield utilised at acquisition for the five remaining assets is the most appropriate unbiased estimate of the yield following two years' operational data. Any variances of actual energy production from the date of acquisition to the date of signing this report are attributable to weather fluctuations and other short term operational factors rather than more fundamental factors that might influence the long term assessment. Therefore it is not appropriate to recognise an asset or liability in respect of these acquisitions.

15. Share capital - ordinary shares of £0.01