DAVY VIEW

While its peers’ portfolio valuations have been in ‘reset mode’ of late following stronger-than-expected net asset value (NAV) growth in 2021 and 2022, Greencoat Renewables (Greencoat) has created value along a steadier and more predictable trajectory. This is the case again in Q2, with NAV increasing by 0.5c/share to 112.1c/share. The portfolio continues to deliver as it is designed to do. The investment case looks strong for several other reasons. Firstly, NAV growth is supported by strong cash generation (2.4c/share on an underlying basis in the Q2 period). Secondly, its recent data centre power purchase agreement highlights the strategic value of the portfolio as demand growth for renewable power generation outstrips the growth in supply. Finally, at the current share price, it offers a sector-leading returns opportunity – its levered portfolio discount rate corresponds to an equity risk premium of 8.0% (sector average 6.5%).