REG - Greencoat UK Wind - RO Consultation and Capital Allocation Update

Greencoat UK WindAnnouncement

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RNS Number : 9628G  Greencoat UK Wind PLC  11 November 2025

LEI: 213800ZPBBK8H51RX165

 

11 November 2025

 

 

GREENCOAT UK WIND PLC

(the "Company")

 

Initial response to the Government consultation on changes to inflation
indexation in the Renewables Obligation scheme, market backdrop and capital
allocation update

 

Renewables Obligation Consultation

On 31 October 2025, the UK Government published a consultation on potential
changes to the inflation indexation in the Renewables Obligation ("RO")
scheme. The RO consultation has two options (noting that the consultation also
invites suggestions for alternative options):

1.   Switch the indexation on the RO buy-out price from the Retail Price
Index ("RPI") to the Consumer Price Index ("CPI") from March 2026;

2.   Freeze the current RO buy-out price until CPI catches up with RPI, in
effect as if the RO buy-out price had always been inflated by CPI. Thereafter,
CPI would apply. By the Government's estimates, the catch up would occur
around 2034/5 and so the RO buy-out price would remain frozen until then.

Based on the information available, initial calculations by the Investment
Manager indicate that the impact of option 1 would reduce the latest reported
NAV per share of the Company by 2.4p and option 2 by 10.6p.

 

The overarching policy aim is to reduce consumer bills given the costs of the
RO are ultimately levied on consumers. By the Government's own calculations,
option 1 would save "approximately £3 per year for an average UK household"
in 2030/31.

 

Whilst we draft our full response to the consultation, as well as engage
directly with Government and peers, the Board and Investment Manager felt it
helpful to set out some of the arguments we will make on behalf of investors
and consumers.

 

Investors have made good faith investments into UK renewable energy projects
based on stable, government-backed, inflation-linked support. Retrospective
revision to the RO will inevitably erode investor confidence. The listed
renewables market is a bellwether for investor sentiment and, in the five
trading days that followed the Government's announcement, the six largest UK
listed renewable funds 1  (#_edn1) saw their combined market cap fall by circa
£400 million / 5%.

 

Investor confidence is also expressed through the cost of capital; we
anticipate that investors will demand a higher return on new investments to
compensate for the risk of further Government intervention. A small increase
in the cost of capital would substantially increase the cost to consumers of
new renewable energy projects and can reasonably be expected to outweigh the
purported savings to consumers and so serve to increase, rather than decrease,
bills.

 

The role of renewables in the UK electricity market

 

UK electrical demand is, conservatively, set to increase by 30% by 2035,
driven by the electrification of transport, heat and the expansion of data
centre capacity. This sits against a backdrop of scheduled plant retirements
in the next decade, with a quarter of the UK's nuclear fleet and 20% of the
gas fleet set to retire.

 

Renewable energy projects, in particular onshore wind and ground-mounted
solar, remain the cheapest and quickest to build forms of new generation in
the UK. It is therefore vital to retain investor and consumer support for
renewable energy projects.

 

The renewable energy sector must also show what it has done, and can do, to
reduce bills for consumers.

 

Specifically, renewables can further reduce consumer bills in the near term.
The Review of Electricity Market Arrangements consultation included discussion
of a voluntary Contract for Difference, where existing generators could agree
to a fixed electricity price below the prevailing wholesale price.
Generators and investors would receive price certainty through a scheme that
is voluntary, and consumers would enjoy a price lower than the current market
level without volatility.

 

Depending on take up, we estimate that this could reduce consumer bills by
£30 per annum for an average UK household - substantially more than the
proposed changes to RO indexation. It could also be delivered relatively
quickly.  Investors could expect such an arrangement to be value neutral.

 

We will continue to engage with Government on this, and other ways, so that
the sector and Government can work together to reduce bills whilst maintaining
investor confidence.

 

Market Backdrop and Capital Allocation Update

 

Notwithstanding the impact of the RO Consultation on sentiment towards the
listed renewables market, the Board and the Investment Manager are fully
engaged and actively working to improve the Company's overall attractiveness
for shareholders.

 

The fees for the Investment Manager are already fully aligned with
shareholders by reference to market capitalisation, which continues to be
unmatched by peers, and disciplined capital allocation remains a key priority,
in particular:

 

·    UKW reiterates its 10.35p dividend target for 2025, representing an
annual distribution to shareholders of approximately £225m;

·    In the past 12 months, UKW has completed £222m of assets disposals
at NAV with proceeds allocated to debt repayment and share buybacks;

·    As at 10 November 2025, UKW had completed £198m of share buybacks
from its announced £200m total buyback programme. Share buybacks completed to
date have added 1.7p per share to NAV.

 

As the Company approaches completion of its £200m total buyback programme, it
is working towards further asset disposals, with a range of potential buyers.
Furthermore, underlying asset cashflows are expected to increase as we enter
the seasonally higher winter cash generation period and UKW continues to
benefit from structurally high forecast dividend cover.

 

The Board and Investment Manager remain confident in their ability to allocate
excess capital across further buybacks and de-gearing whilst maintaining
strategic flexibility for the Company. This puts the Company in a position of
strength from which to assess future capital allocation priorities.

 

Lucinda Riches, Chairman of UKW, said:

"The Board and the Investment Manager recognise the complexity of the market
and are committed to enhancing the Company's long-term attractiveness for our
shareholders.

 

We will continue to navigate this market backdrop through strong sector
leadership and disciplined capital allocation. Our attractive proposition and
track record since IPO positions us well and we are resolutely focused on
doing the right thing for shareholders."

 

 

For further information, please contact:

 

Greencoat UK Wind PLC

Stephen Packwood

Matt Ridley

John Musk (Investor Relations)
  020 7832 9425

john.musk@schrodersgreencoat.com

 

Headland
        020 3805 4822

Stephen Malthouse

Charlie Twigg

ukwind@headlandconsultancy.com (mailto:ukwind@headlandconsultancy.com)

 

Ocorian Administration (UK) Limited Company Secretary

Josh
Finlay
        028 9693 0219

 

 

 1  (#_ednref1) Greencoat UK Wind PLC, The Renewables Infrastructure Group,
Bluefield Solar Income Fund Limited, Foresight Solar Fund Limited, Next Energy
Solar Fund Limited and Octopus Renewables Infrastructure Trust PLC

 

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