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GCP sees impact from tax and power prices

GCP Infrastructure Investments has announced interim results covering the six months ended 31 March 2021. Highlights are:

  • NAV at 31 March 2021 of 100.78p (31 March 2020: 109.83p)
  • Total shareholder return for the period of -8.8% (31 March 2020: -8.1%) and total shareholder return since IPO in 2010 of 100.3%
  • Dividends of 3.5p per share paid for the six month period to 31 March 2021 (31 March 2020: 3.8p)
  • Profit for the period of £3.8m (31 March 2020: £17.2m), reflecting the impact on valuations of: an increase in the corporation tax rate from 2023, reduced long-term electricity price forecasts and lower OBR inflation forecasts.
  • New revolving credit arrangements for an aggregate amount of £165m, replacing the previous revolving credit facility
  • Loans advanced totalling £46.4m, secured against UK renewable energy, social housing and PFI projects
  • Post period end, further advances of £10.4m and repayments of £28.5m

As with JLEN Environmental, which announced its results this morning, the hit to GCP’s NAV has largely been driven by corporation tax increases and falling long term power prices. These are factors that will have repercussions for many other funds.

Conservative assumptions

GCP believes that the assumptions that it factors into its NAV calculations are conservative. Based on these, it has decided to make provisions against loans that it has made to some renewable energy projects. Its chairman says “The Board is aware that independent advisers currently have sharply diverging views on the likely trajectory of UK power prices over the coming decade. The Board has always taken a conservative approach in this regard. However, it should be noted that if power prices follow the upper prediction, what has in recent years been a headwind to valuations of the Company’s assets would become a potentially significant tailwind.”

Overall, the portfolio performed well during the period. GCP had previously taken control of some assets where the loans had run into trouble – in the biomass and anaerobic digestion sectors – it says that the interventions it has made resulted in positive performance during the period for these assets.

The report provides a comprehensive analysis of the factors affecting the portfolio and the outlook for the company. We’ll look to publish a note updating investors shortly.

GCP : GCP sees impact from tax and power prices

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