18821 GreencoatAnnual Report:Layout1 19/02/2016 10:57 Page FC1 GREENCOAT UKWIND Greencoat UK Wind PLC Annual Report For the year ended 31 December 2015 18821 GreencoatAnnual Report:Layout1 19/02/2016 10:57 Page 1 GREENCOAT UKWIND Contents Company Information 01 Statement of Directors’ Responsibilities 29 Summary 02 Corporate Governance 30 Chairman’s Statement 03 Audit Committee Report 33 Strategic Report 05 Independent Auditor’s Report 36 Investment Manager’s Report 10 Financial Statements 40 Board of Directors 20 Notes to the Consolidated Financial Statements 46 Report of the Directors 23 Defined Terms 69 Directors’ Remuneration Report 26 Cautionary Statement 71 Company Information Directors (all non-executive) Registered Company Number Tim Ingram (Chairman) 08318092 Shonaid Jemmett-Page William Rickett C.B. Registered Office Dan Badger 27-28 Eastcastle Street Martin McAdam (from 1 March 2015) London W1W 8DH Investment Manager Registered Auditor Greencoat Capital LLP BDO LLP 3rd Floor, Burdett House 55 Baker Street 15-16 Buckingham Street London W1U 7EU London WC2N 6DU Legal Adviser Administrator and Company Secretary Norton Rose Fulbright LLP Heritage Administration Services Limited 3 More London Riverside The Innovation Centre London SE1 2AQ Northern Ireland Science Park Queen’s Road Brokers Belfast BT3 9DT RBC Capital Markets Riverbank House Depositary 2 Swan Lane Heritage Depositary Company (UK) Limited London EC4R 3BF The Innovation Centre Northern Ireland Science Park Winterflood Securities Limited Queen’s Road The Atrium Building Belfast BT3 9DT Cannon Bridge House 25 Dowgate Hill Registrar London EC4R 2GA Capita Registrars Limited The Registry Account Bank 34 Beckenham Road The Royal Bank of Scotland PLC Beckenham 280 Bishopsgate Kent BR3 4TU London EC2M 4RB All capitalised terms are defined in the list of defined terms on pages 69 and 70 unless separately defined. 01 18821 GreencoatAnnual Report:Layout1 19/02/2016 10:57 Page 2 Greencoat UK Wind PLC Annual Report for the year ended 31 December 2015 Summary Greencoat UK Wind PLC is the leading listed renewable infrastructure fund, solely and fully invested in operating UK wind farms. The Company’s aim is to provide investors with an annual dividend that increases in line with RPI inflation while preserving the capital value of its investment portfolio in the long term on a real basis through reinvestment of excess cash flow and the prudent use of portfolio leverage. Highlights • The Group’s investments generated 799.3GWh of electricity, 8 per cent. above budget, owing to high wind resource. • Net cash generation (Group and wind farm SPVs) was £48.3 million. • Acquisition of Stroupster wind farm using the Group’s debt facilities has increased the portfolio to seventeen wind farms, net generating capacity to 301.4MW and GAV to £664.8 million as at 31 December 2015. • Issuance of further shares in a significantly oversubscribed placing raising £48.3 million in November 2015. • The Company declared total dividends of 6.26 pence per share in relation to the year and is targeting a dividend of 6.34 pence per share for 2016 (increased by 1.2 per cent., in line with RPI). • NAV growth of 0.5 pence per share (adjusting for dividends). • £135 million outstanding borrowings at 31 December 2015, equivalent to 20 per cent. of GAV. Key Metrics As at As at 31 December 2015 31 December 2014 Market capitalisation £546.7 million £511.4 million Share price 107.9 pence 111.0 pence Dividends with respect to the year £29.6 million £24.8 million Dividends with respect to the year per share 6.26 pence 6.16 pence GAV £664.8 million £591.2 million NAV £529.8 million £486.2 million NAV per share 104.5 pence 105.5 pence NAV growth per share (adjusting for dividends) 0.5 pence 2.5 pence Total return (NAV) 6.6 per cent. 8.7 per cent. TSR 4.2 per cent. 13.7 per cent. Defining Characteristics Greencoat UK Wind PLC was designed for investors from first principles to be simple, transparent and low risk. • The Group is invested solely in operating UK wind farms. • Wind is the most mature and largest scale renewable technology. • The UK has a long established regulatory regime, high wind resource and £60 billion of wind farms in operation in the short to medium term. • The Group is wholly independent and thus avoids conflicts of interests in its investment decisions. • The UK-based, independent Board is actively involved in key investment decisions and in monitoring the efficient operation of the assets, and works in conjunction with the most experienced investment management team in the sector. • The Group only invests in wind farms that have an appropriate operational track record (or price adjustment mechanism as disclosed in note 14 to the financial statements). • Low leverage (including no asset level leverage) is important to ensure a high level of cash flow stability and higher tolerance to downside sensitivities. • The Group invests in sterling assets and thus does not incur currency risk. 02 18821 GreencoatAnnual Report:Layout1 19/02/2016 10:57 Page 3 GREENCOAT UKWIND Chairman’s Statement I am pleased to present the Annual Report of Greencoat UK Wind PLC for the year ended 31 December 2015. Performance During the year, portfolio power generation was 8 per cent. above budget at 799.3GWh owing to high wind resource. However, the average power price during the year was below budget (40 per cent. of revenues are subject to floating power prices) with the result that the net cash generated by the Group and wind farm SPVs was in line with budget at £48.3 million (2014: £32.4 million). Dividend cover was 1.7x (adjusted to reflect quarterly dividends). In 2015, the UK generated 11 per cent. of its electricity As explained in the half-year statement, the Group’s from wind, up from 9.5 per cent. in 2014, with wind structure was simplified and the investment turbines providing enough electricity to power 10 million management arrangements were amended, creating homes, approximately one third of UK households. value for the Group as explained in note 3 to the Financial Statements, and the Group’s acquisition Power prices were lower than forecast in 2015 owing financing package was refreshed. In July 2015, the to lower gas prices. Our quarterly NAV figures always Company also entered into a longer term loan. All take into account the latest power price forecasts debt facilities are now at the Company level and rank obtained from a leading independent market pari passu with each other. The Board expects term consultant. financing to be an increasing feature of the Group’s capital structure and is pleased with the attractive Dividends and Returns rates available to the Group, given the senior nature of The Company’s aim is to provide investors with an all facilities. attractive and sustainable dividend that increases in line with RPI inflation while preserving capital on a real Acquisitions and Equity Raising basis. The Company declared dividends of 6.26 pence During the year, the Group made one additional high per share for the year. The Company paid dividends of quality investment, increasing our net generating £35.9 million during the year, reflecting the switch to capacity to 301.4MW, through the acquisition of quarterly dividends at the beginning of the year and Stroupster in December at a cost of £84.8 million the payment for five quarters in 2015. Dividends paid, (excluding cash balances). Stroupster is our fourth wind adjusted to remove the quarterly hangover from 2014, farm from BayWa. This acquisition was the first the were £28.8 million. Company has made for fifteen months, a result of our selective approach of only acquiring assets when we In addition, NAV per share increased from 102.4 pence are confident that they bring value to shareholders. (ex-dividend) on 31 December 2014 to 102.9 (ex- dividend) pence on 31 December 2015, an increase in In November, the Company raised gross proceeds of NAV per share of 0.5 pence, whilst RPI increased by £48.3 million through the placing of 44.9 million new 1.2 per cent. over the year. The full year return to shares at an issue price of 107.5 pence per share. The investors was thus 6.6 per cent., being dividends Board was delighted that this placing was significantly declared plus NAV growth per share. Since listing, the oversubscribed. growth of the NAV per share has exceeded RPI growth. The Board believes that growth of the Company benefits shareholders through increasing liquidity of its Group Structure and Financing shares, increasing its competitive position and The Group’s policy is to have no gearing at the providing economies of scale. individual asset level and to keep overall Group level borrowings at a prudent level (the maximum is 40 per Outlook cent. of GAV) to reduce risk while ensuring that the Wind remains the most mature and widely deployed Group is at least fully invested thus always using capital renewable technology available in the UK and the efficiently. As at 31 December 2015, the Group’s Company is in a good position to benefit as electricity borrowings were £135 million, equivalent to 20 per production from wind is becoming an increasingly cent. of GAV. Over the medium term, we would expect important part of the UK’s generation mix. gearing to be between 20 per cent. and 30 per cent.. 03 18821 GreencoatAnnual Report:Layout1 19/02/2016 10:57 Page 4 Greencoat UK Wind PLC Annual Report for the year ended 31 December 2015 Chairman’s Statement continued Outlook continued 21 years and, as stated above, only 40 per cent.