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GCP continues to execute despite NAV pressure

GCP provided a second-quarter update for the period ended 30 June 2023, which highlighted a further 2% fall in NAV. The primary driver of this movement was the increase in discount rates, which was applied across the portfolio’s three sectors: supported living, PFI, and renewable energy. The increased discount rates reflect the current higher inflation and base rate environment, and recent market transactions that suggest the rising cost of debt has started to impact equity pricing. This has resulted in a c.40bps increase to the weighted average discount rate used by the company to value its portfolio, leading to a decrease of c.2.5 pence per ordinary share.

Further reductions in electricity prices also weighed on actual and forecast cash distributions to the company from its renewables investment portfolio, driven by decreases in short-term power prices. This was partially offset by an uplift in long-term forecast power prices and continued execution of the company’s hedging arrangements. In aggregate, movements in electricity price forecasts negatively contributed c.0.4 pence per ordinary share.

Despite this, operationally the fund has also continued to execute at a high level, with profit over the most recent financial year more than tripling from its pre-pandemic peak.

The company also announced that in the quarter to 30 June 2023, it had finalised a refinancing of a portfolio of biomass projects, which generated net cash proceeds of c.£50.0 million, including associated prepayment fees of c.£11.0 million, which were received by the company post period end. The proceeds were used to partially repay the RCF, reducing the outstanding balance to £104.0 million. This transaction demonstrates the company’s ability to realise the investment value of assets (underpinning the company’s NAV) and generate additional income, providing support to the company’s asset valuations.

GCP : GCP Infrastructure Investments continues to execute despite NAV pressure

2 thoughts on “GCP continues to execute despite NAV pressure”

  1. I complained to Gravis by email that they were solving the mess that GABI was in by the proposed merger with GCP, and that action was to their advantage rather than to the advantage of holders of GCP shares. What is your view on that point?

    1. It is down to the board of GCP Infrastructure to ensure that any lingering problems with GABI’s portfolio are reflected in the merger NAV. Then I think the plan is to run-off most of GABI’s portfolio and reinvest using GCP’s approach. There’s an opportunity to quiz someone from the Gravis team on this week’s show.

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