Will the Greencoat UK Wind share price be propelled to fresh highs?

Greencoat UK Wind’s share price is up more than 11% over the last year, and has recovered well from an October slide to 52-week lows. Investing in operating domestic onshore and offshore wind farms, the FTSE 250 listed renewable infrastructure fund looks well placed to avoid pressure from the government’s 45% windfall tax on renewable energy generators.

The Greencoat UK Wind [UKW.L] share price is up more than 11% over the last year, and has recovered well from an autumn slide to 52-week lows.

Greencoat UK Wind invests in operating domestic onshore and offshore wind farms, and as a constituent of the FTSE 250 index, is the first and leading listed renewable infrastructure investment trust fund with a market cap of around £3.53bn (as at 11 December).

Managed by Schroders Greencoat, the fund offers investors exposure to the energy transition movement, and while there are some tailwinds bolstering increased wind energy consumption, the Greencoat Wind share price looks well placed to avoid a hit as a result of the government’s new 45% windfall tax on renewable energy generators. With that in mind, we look at where the Greencoat UK Wind stock is heading next.

What’s happening with the Greencoat UK Wind share price?

The Greencoat share price closed at 152.10p on Friday 9 December, 9.73% below its 52-week high at 168.50p, reached on 21 September. The stock actually slipped sharply to a low of 130.40p on 12 October, but has since reversed that decline moving back up 16.64%.

Greencoat UK Wind offers opportunity to back clean energy

With 45 wind assets across the UK, Greencoat UK Wind is a stock which offers an opportunity for investors looking for exposure to the energy transition theme, according to broker Liberum, as reported Proactiveinvestors. The broker adds that while a lack of diversification might be a weakness, Greencoat has maintained a covered RPI-linked dividend since its IPO almost 10 years ago.

Liberum forecasts “supernormal NAV [net asset value] growth over the next few years as wholesale prices are realised above current modest assumptions”. The broker noted Greencoat’s first-half cash generation soared by 217% year-on-year to £328m.

Will new tax charge hit Greencoat UK Wind stock?

The UK government’s 45% windfall tax on renewable energy generators, announced in last month’s autumn statement, may not have a significantly adverse impact on Greencoat UK Wind’s share price prospects, according to Questor, writing in the Telegraph.

This is because its valuation won’t be affected by the windfall tax, as the tax only applies when electricity is sold for more than £75 per megawatt‑hour, whereas Greencoat’s “valuation model appears to include [a] power price below £75”, according to stockbroker Numis. And if Greencoat does sell its power for more than £75 per MWh, while it would then need to pay the extra tax, its revenues would also be higher, negating the possible impact. 

Numis estimates higher electricity prices have added around 15p a share to the fund’s NAV, and offers a positive view on the case for renewable stocks, saying, “while we believe the uncertainty around the extent of government interference has made investors more nervous, we believe the long‑term investment case for listed renewables remains intact”.

Tailwinds boosting onshore and offshore wind energy

Meanwhile, onshore wind generation received a boost last week after UK prime minister Rishi Sunak said the government would consult on changes to national planning policy, meaning onshore wind farms could go ahead if they get “local support”, reported the Financial Times. Sunak’s change of heart came after pressure from a number of Conservative MPs, including former prime ministers Liz Truss, and Boris Johnson.

In a fillip for offshore wind energy, the FT reported recently that BP [BP.L] has boosted its offshore wind unit by recruiting executives from a number of its rivals, including Orsted, Iberdrola and RWE. The strategy comes as competition for renewable energy talent hots up. BP’s offshore wind chief, Matthias Bausenwein, told the FT that the company’s aim is to be “a leading developer for offshore wind and add certain projects every year towards 2030 and beyond”.

What’s next for the Greencoat Wind share price?

Back in July, Questor rated Greencoat UK Wind a ‘hold’, while Numis’s 170.0p price target compares favourably with last week’s 152.10p close. Liberum reckons that even if prices plateau, the energy crisis is likely to persist, and it places a ‘buy’ rating on the stock. The broker says: “Pricing will moderate in the medium term but the energy crisis is not quickly or easily resolved … a share price at close to par fails to reflect the upside from cautious power curves.” Liberum has a target price of 172.0p on Greencoat’s share price, indicating a potential upside of 13.15% versus Friday 9 December’s close.