GCP Infrastructure NAV slips on power price fall – GCP Infrastructure says that its NAV fell by 2.08p or 1.86% over the final quarter of 2019. The valuation agent, Mazars LLP carries out a fair market valuation of GCP’s investments on a quarterly basis. NAVs are based on a discounted cash flow methodology (estimating future cash flows and applying a risk-adjusted discount rate to them).
A number of investments rely on projected future UK electricity market prices for a proportion of their revenues. Changes in electricity prices may therefore impact on a borrower’s ability to service debt or, in cases where the company has stepped into projects and/or has direct exposure through its investment structure, impact on overall returns. During the quarter ended 31 December 2019, medium-term electricity price forecasts declined by about 5%, and have declined by almost 10% in total in the calendar year 2019. The impact of changes in electricity forecasts reduced the NAV by about 1.4 pence.
Furthermore, the impact of the postponement of the proposed reduction in UK Corporation Tax from 19% to 17% reduced the NAV by about.0.5 pence.
[These are things outside the adviser’s control and these factors will affect other companies with similar exposures.]
GCP : GCP Infrastructure NAV slips on power price fall