Investec view: Greencoat UK Wind (UKW) declared a NAV of 121.4p/share, which represents a decrease of 1.7p/share over the year. Key drivers included a change to the modelled corporation tax rate (-2p), a reduction in power price forecasts (-5p) and a reduction in discount rates which added 4p. However, it is worth noting that the NAV has increased ahead of RPI since launch. The company declared an aggregate dividend of 6.94p/share, which was covered 1.4x by operational cash flow. We note that cover was lower than in previous years (historically 1.5-1.8x, although it did fall to 1.4x in 2016), and this was predominantly due to lower wind speeds and generation, in addition to lower UK power prices. UKW’s debt has a bullet repayment structure and therefore dividend cover of 1.4x does not take into account any amortisation of its debt, unlike its peers. UKW provides investors with exposure to a diversified portfolio of wind assets in the UK. We like the simple capital structure and note that it has the lowest gearing in the peer group. That said, we believe the company needs to do more surrounding its disclosure on power price forecasts. The company trades on a material premium, although this is supported by what we believe to be conservative discount rates. A dividend yield of 4.9% remains attractive, particularly in the current interest rate environment and we remain comfortable with our Buy recommendation. Power price forecasts: Given the recent bearish forecasts by BNEF, we believe that this reporting period provided a chance for the peer group to provide more colour on the forecasts used in portfolio valuation. Unfortunately, UKW has not taken this opportunity. UKW simply states that base case real power prices increase from £45/MWh (2020) to £48/MWh (2050). The shape of the curve is not provided. Given the importance of the forecast curves to valuations, we believe that disclosure needs to improve, with greater focus on what adjustments are made to curves, cannibalisation assumptions and capture price assumptions. (See our recent note here.) Increase in dividend target: During the year, UKW declared a dividend of 6.94p/share, in line with its stated target. This was covered 1.4x by operational cash flow. For 2020, the company is targeting a dividend of 7.1p/share, which represents an increase of 2.3%, in line with RPI. Continued overleaf