The Company's aim is to provide investors with a
sustainable annual dividend per ordinary share (6.34p for 2016)
that increases in line with RPI inflation while preserving the
portfolio's capital value in the long term, on a real basis,
through reinvestment of excess cashflow and the prudent use of
The revenue that operating wind farms receive in the UK is made
up of a number of components, primarily from the sale of power
produced and green benefits accredited. All are sold under long
term agreements to utilities who are obliged by law to procure a
certain percentage of power from green sources.
These revenue streams and the high EBITDA margin of unlevered
operating assets provide the Company with a dividend cover, above
the target annual dividend, that should be capable of withstanding
significant downsides in wind volume and power price in any individual
Due to the direct RPI indexation of the UK Government's strong
regulatory support mechanisms for renewable energy and the
significant-influence of RPI in the growth of other cashflow
components, the Company intends to increase the dividend in line
with RPI inflation.
The excess cashflow (dividend cover) will be reinvested in new
UK operating wind farm assets.
The Company intends to target returns to investors equivalent to
an IRR net of fees and expenses of 8% to 9%. The Company will also
seek to enhance these returns through active management of the wind
farms. The company also wants to maintain exposure to power prices
in order to benefit from any higher than expected increases.
The Company is an independent owner of wind farms assets and has
no formal relationship with any seller. It will look to
further diversify its portfolio with new asset acquisitions.
Any new investment will also be approved by the independent
UK-domiciled board, selected to bring together functional expertise
in investment management, accounting and fund management, policy
and wind acquisition and operational management.
No Currency Risk, Operating Track Record
The Company's focus will be in investing in sterling assets as
it considers significant currency risk to be inappropriate given
the Company's desire to produce a simple, stable and RPI-indexed
dividend stream. For the same reason, the Company's focus will be
in investing in assets with an appropriate track record as it does
not wish to take significant wind energy modelling risk.
The Company believes that there is a significant market into
which it can grow over the next few years. The estimated total
value of UK assets either in operation, construction or having been
consented is around £60 billion.
Most of this asset base will be owned by utilities who will seek
investors to take long term ownership of the assets and will
recycle capital into construction
programmes. Accordingly, the Company has structured
itself to be an ideal long term owner of operating assets and
partner of utilities. The Company is capitalised in a similar way
to utilities in order to easily invest alongside them, and its
strategic desire for power price exposure is also attractive to the
utility vendors who dislike the negative rating implications of
long-term PPAs associated with project finance used by many other
The Company uses a medium-term revolving credit facility to
acquire new assets. In due course, like other listed infrastructure
funds, the Company will refinance that debt in the equity markets.
Unlike those funds, it has also refinanced that debt in the longer
term bank loan market. The Company does not have any long-term,
project-level debt (unlike the other listed infrastructure funds
and some renewable infrastructure funds). All debt is ranked pari
passu and whilst in place, the Company will benefit from a modest
increase in yield.
Like other listed infrastructure funds, the Company expects to
repeat this cycle of acquisition using portfolio-level debt and
equity (and longer term debt) refinancings at regular
intervals. In due course, it may also refinance into the debt
By reinvesting in new assets, as described above, the Company
expects to preserve NAV per share on a real basis in addition to
growing NAV by additions to the portfolio.