Even with the stock market near all-time highs, there are still plenty of cheap stocks to be found. And nowhere is the discount more striking right now than in the renewable energy investment trust sector.
Three names in particular stand out:
- Greencoat UK Wind (LSE:UKW).
- The Renewables Infrastructure Group (LSE:TRIG).
- Bluefield Solar Income Fund (LSE:BSIF).
All three trade at discounts of more than 20% to their net asset value (NAV). All three offer dividend yields approaching 10%. And all three have been ruthlessly sold off by investors in recent years.
What’s going on? And is this secretly a screaming buying opportunity?
Why are the yields so high?
As a quick introduction, this trio of trusts essentially do the same thing. They own portfolios of renewable energy assets like wind farms, solar parks, and battery storage facilities, and generate income by selling the clean electricity those assets produce.
Today, the investment case should be compelling. Energy prices are expected to rise in the coming months, governments across Europe remain committed to expanding renewable capacity, and all three funds boast a long track record of dividend growth.
But sentiment’s completely collapsed and the culprit’s interest rates.
As rates climbed sharply from 2022, the discount rates used to value long-duration assets like wind farms and solar parks rose with them, eroding NAVs and making these income trusts appear less attractive relative to risk-free bonds.
Meanwhile, the government’s decision to index the Renewables Obligation scheme to CPI rather than the higher RPI measure knocked a meaningful chunk off subsidy cash flows.
The result? Greencoat UK Wind now trades at a 22.6% discount to NAV with a 10.2% yield. TRIG trades at a similar discount. Bluefield Solar trades at a 22.5% discount and offers a yield approaching 10% at 9.84%.
Cheap stocks or value traps?
On paper, these look like extraordinary income opportunities. But investors should be cautious about assuming that rising electricity prices will quickly solve the problem. A significant proportion of each trust’s revenue is locked in through long-term power purchase agreements at pre-agreed prices.
This provides income stability and predictability, which is why these businesses sign them. But it also means when power prices suddenly spike, they don’t get to benefit until these agreements expire. In other words, all three have their generating profits effectively capped for most of their asset portfolios.
There is also a more fundamental issue at Bluefield Solar. Management warned shareholders late last year that “business as usual” is no longer an option, with a potential merger with its fund manager and a significant dividend cut being actively considered.
Renewables Infrastructure Group is potentially at risk of a similar situation, with assets being sold off to pay down debt. And Greencoat’s dividend coverage is also starting to look quite thin.
The bottom line
Out of all three, Greencoat appears to be in a relatively stronger position in 2026. However, while each company owns genuinely valuable energy infrastructure, the risk and uncertainty surrounding these businesses is pretty substantial.
That’s why, despite the prospect of a 10% yield and a dirt cheap discount, I’m not rushing to buy any of the shares right now. Instead, I’m focused on other more promising income opportunities.
Should you invest £5,000 in Bluefield Solar Income Fund right now?
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Zaven Boyrazian owns shares in Greencoat UK Wind.
