The UK-focused renewable energy investor has stakes in 33 offshore and onshore wind farms and these make money by how much electricity they generate, so having the wind blow at the right speed is critical.
Too low and it won’t produce any, even if the blades are turning. Too fast and the turbine will shut down to avoid damage.
Wind speed also has a geometric relationship with the power generated so it is critical to understand how a turbine performs at different speeds to run at its optimum.
Greencoat has been sensible in its approach to developing the portfolio.
For instance, it spends a great deal of time measuring the output from the assets before they are acquired as it knows even minor under-performance can be costly over the long-term if you own a lot of wind turbines.
A simple thing, but not everyone is this rigorous.
Similarly, its hands-on approach means Greencoat has fewer outages than many of its rivals.
All of this has created a company that delivers a steady dividend stream.
Greencoat has already forecast a 6.76p payout for 2018, a 4.1% increase to match December’s RPI inflation number, which is one of its targets.
That gives a forward yield of yield of 5.25% at 124p.
The industry fundamentals, meanwhile, remain very supportive.
Green subsidies are here for the long-term and the regulatory environment is better understood by investors than it was at the time of Greencoat’s flotation.
But Greencoat’s latest acquisitions highlight it is already preparing for life without subsidies.
The group is spending £126mln on a 13-turbine wind farm in northern Scotland.
It is acquiring Belltown Power’s 75% stake in Tom nan Clach, in Nairnshire.
Currently under development, the operation will be formally handed over to Greencoat next July, a month after its completion.
The Vestas V112 turbines are capable of generating 39.1 megawatts of electricity, while the load factor is expected to be 48%.
What is different is this deal is that rather than renewable obligation certifiates (ROCs) a 15-year contract for difference (CFD) will fix the price.
If the price of electricity fall below the set, inflation-linked price of £91.14 per Mwh, Green coats gets paid the difference under the CFD and if it rises above, the company pays back the surplus.
Stephen Lilley, Greencoat’s chief executive, says it effectively mirrors the ROC arrangement where half of price is fixed by the ROC while the other half is variable.
Capacity now 910Mw
The purpose of CFD is to incentivise investments in new low-carbon electricity generation by providing predictability of future revenue streams.
“We are starting to see attractive CFD and subsidy-free investment opportunities, of which Tom nan Clach is our first.
These opportunities will complement our core ROC investments and simple, low risk fund structure,” said Lilley.
In December, Greencoat also acquired the unbuilt Douglas West wind farm near Lanark in Scotland.
Construction is scheduled to start next year with a planned capacity of 45Mw when finished.
Douglas West will be subsidy free and cost £45mln to construct, which will be paid out of UK Wind’s cash flow.
Once up and running Douglas West will increase Greencoat UK Wind’s generating capacity to 910Mw.
“Reflecting the overall shape of the market, we expect the majority of future investments will continue to be made from the £50bn pool of UK wind farms accredited under the ROC regime," said Lilley.