GCP Infrastructure has announced results for the year ended 30 September 2015. They made a total return for the year of 9.5%. The NAV at 30 September 2015 was 107.47p. The dividend for the year was 7.6p. Earnings per share were 9.30 pence which is broadly in line with 2014.
They raised an additional £140m in the year and £20m since the year end, they also simplified the fund’s capital structure. The company is now large enough to qualify for inclusion in the FTSE Mid 250 Index.
Talking about the portfolio, the company said over 80% of its projects are fully operational. The remaining projects are either committed or under construction. The PFI and social housing projects that support the Company’s investments have experienced no material operational or construction issues.
Two macro–economic and political issues over the period have impacted the cash flow generation on certain renewable energy assets; the removal of the Climate Change Levy exemption and lower than forecast power prices. In the Summer Budget 2015 the Chancellor announced the removal of the Climate Change Levy exemption for renewable energy projects from 1 August 2015. The Investment Adviser conducted a review of the impact of this change on the assets of the Company and determined that a minority by value of the projects against which the Company has provided debt will see a modest reduction in the forecast net cash flows available to service such debt during the period to 2022. However, the cash flows expected to arise to the Company from such investments will be unaffected by the removal of the Climate Change Levy exemption. Wholesale power prices have fallen sharply during the last year. However only 4.6% of the Company’s current aggregate debt service receipts are expected to arise from cash flows exposed to fluctuations in power prices. As a result, whilst a number of projects to which the Company is exposed will experience net cash flows lower than originally forecast, the cash flows expected to arise to the Company from such projects are not currently expected to be affected by lower power prices.
With regard to asset–specific issues, the cash flows generated by two biomass projects have been lower than expected due primarily to delays in grid connection and slower than predicted operational ramp up. In one of these cases action has been taken to support the borrower and ensure that the Company’s investment is protected; as a result no material concerns have arisen in relation to the performance of the Company’s loan. In the second case, throughout the year the Investment Adviser and its technical adviser closely monitored the situation. Post year–end it was identified that some capital works may need to be carried out to ensure the project operates at optimal capacity. The board have considered the alternative actions available to address the performance issues including possible refinancing and additional capital works and have concluded that the value of this particular asset should be reduced as a result. The valuation of the loan has been reduced post year-end, resulting in a 0.35% reduction in the Company’s NAV at the end of November 2015.
GCP Infrastructure returns 9.5%