DAVY VIEW

Greencoat UK Wind’s (UKW) capital markets event highlighted the continued relevancy of its existing model despite the much changed economic and capital markets backdrop. We share its view that the sector still has a vital role to play in the energy transition. So with the current set of cyclical and structural challenges likely to result in a much changed (and likely less populated) operator landscape, the event focused on its superior historic performance, strong market position and key investor topics of debate (debt, power prices). Its relative premium to others in the sector – the stock trades at a 12% discount to last reported NAV versus a 24% sector average – validates its recommitment to the current strategy. If anything, we expect to see greater divergence in equity valuations going forward as the relative returns potential of each operator becomes a greater focus (even when adjusting for its higher equity rating, its portfolio discount rate equates to a net equity risk premium of 7.2% versus a sector average of 6.6%).