Challenging year for Greencoat UK Wind

Greencoat UK Wind investment trust has recently published its annual results for 2025, following what proved to be a difficult year for the renewables sector. Like many of its peers, the wind farm operator has fallen out of favour with investors, yet it remains a consistent bestseller among Fidelity Personal Investing customers.

There is little doubt that Greencoat’s main appeal lies in its high level of income, with dividends rising at least in line with inflation every year since launch.¹ The shares now offer an attractive double-digit yield, although this is not guaranteed.

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Objective and approach

Greencoat UK Wind operates a portfolio of 49 wind farms across the UK. It aims to provide investors with an annual dividend that increases in line with the Consumer Price Index (CPI), while preserving capital value in real terms through the reinvestment of excess cashflow.²

Since its initial public offering (IPO) in March 2013, the £2bn trust has paid out £1,415m in dividends and reinvested £999m into new assets.³ However, the past couple of years have been challenging for investors, with the shares slipping to a wide discount to net asset value (NAV) and dipping below the 100p issue price.

Performance

In 2025, the trust recorded a share price total return of -15.7%. This reflected challenging macroeconomic and regulatory conditions, which led to a lower NAV and an increase in the discount amid sector-wide declines.⁴

Despite this, the chair remains optimistic, arguing that strong demand for electricity is creating an attractive backdrop for investment in wind farms. In the annual report, she highlights opportunities from both new construction projects and secondary sales, as developers and utilities seek to recycle capital.⁵

What has gone wrong?

Wind farms are complex assets to value and are highly sensitive to assumptions about future power prices, inflation and other such factors. During 2025, the NAV fell by 11.7%, mainly due to lower forecast energy prices and below-budget power generation because of poor wind speeds.⁶

There was also a disappointing government announcement late in the year. From April 2026, indexation under the Renewables Obligation scheme will move from the Retail Prices Index (RPI) to the lower CPI measure. This is expected to reduce future revenues, with the trust already having adjusted its dividend inflation linkage accordingly.⁷

Borrowing is above the limit

Another challenge for management is that debt currently stands at 42.5% of gross asset value, which is above the 40% limit. Capital allocation is therefore a key focus.⁸

During 2025, the trust raised £181m from disposals to supplement operating cashflows. It spent £109m on share buybacks and £168m on debt reduction. In 2026, the emphasis will shift back towards reinvestment to support future dividends, while continuing asset sales, reducing gearing (borrowing) below 40% and maintaining the buyback programme.⁹

Attractive yield

The trust has announced a target dividend of 10.7p for 2026, which based on the current price of 96p is equivalent to an attractive prospective yield of 11.15%, although this is not guaranteed. In 2025, dividend cover was 1.3 times.¹⁰

Greencoat expects to have around £1bn of capital available from organic excess cashflow over the next 5 years - equating to about 1.8 times dividend cover - assuming power generation and realised energy prices meet budget assumptions.¹¹ Reinvestment is important because wind farms benefit from a subsidy period during which their revenues are fixed by the government and increase in line with CPI, whereas afterwards they are exposed to wholesale prices.

Discount and costs

Despite the active buyback programme, the shares are currently trading at a 28% discount to NAV with a continuation vote scheduled for May.¹² It is an area of the market that remains firmly out of favour.

The latest ongoing charges figure is 0.83%, which seems reasonable for a specialist and illiquid asset class.¹³

What are the brokers’ latest views?

The broker Peel Hunt says that the annual results reflect the ongoing challenges facing the renewables sector, but they also highlight that the capital allocation priorities include: further disposals, reducing gearing below 40%, continuing the share buyback programme and a disciplined return to reinvestment.¹⁴

“There is clearly more to do in 2026 but it is also evident that [Greencoat UK Wind] is operating from a position of strength with an illustrative c.£1bn of excess cash expected to be generated over the next 5 years (after paying CPI-linked dividends, and before disposals).”¹⁵

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Source:

^1,3,5,10 Greencoat UK Wind, annual accounts to 31.12.25
² Greencoat UK Wind
^4,14,15 Peel Hunt, 26.2.26
^{6,7,8,9,11,12,13} Investec, 26.2.26

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Shares in Greencoat UK Wind are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.