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GCP Infrastructure sells wind farm loan notes at 6.4% premium

GCP Infrastructure (GCP) has sold its interest in loan notes secured against Blackcraig Wind Farm at a 6.4% premium to the valuation of the project as at 31 March 2024. The disposal has generated net cash proceeds of around £31m and these will be used to prepay drawings under GCP’s revolving credit facility. GCP says that, following the prepayment, its net debt position will be around £45m.

Blackcraig Wind Farm is a 52.9MW onshore wind farm located in Dumfries and Galloway, Scotland. The Project benefits from Renewable Obligation Certificate (ROC) subsidy support and has been operational since May 2018. GCP originally acquired the senior secured loan notes in 2017 from the UK Green Investment Bank. As an alternative to receiving repayment in full on the senior loan notes, GCP rolled over its senior secured loan notes into an equity-like interest in Blackcraig in July 2018. GCP points out that the sale has reduced its exposure to equity-like interests in the onshore wind sector, which has been an aim of its capital allocation policy (see below).

Update on GCP’s capital allocation policy

GCP’s Board explicitly adopted a capital allocation policy as part of the trust’s 2023 annual report and accounts, reconfirming its intentions to prioritise a material reduction in leverage, as well as reducing equity-like exposures and exposures in certain sectors, as well as facilitating the return of capital to shareholders. The Board set a conditional target of releasing £150m (approximately 15% of the portfolio) from disposals or refinancings, to materially reduce leverage and return at least £50m to shareholders before the end of the calendar year 2024.

GCP says that the disposal of the Blackcraig Wind Farm loan notes represents a positive first step in facilitating the Company’s execution on its capital allocation policy, materially reducing leverage while decreasing equity exposure across the portfolio. Furthermore, the Board and investment adviser continue to focus on additional opportunities for refinancings or disposals within the portfolio, in order to achieve the targets, set out in the capital allocation policy.

Comments from Andrew Didham, chair of GCP Infrastructure

“This disposal reinforces the Company’s commitment to its capital allocation policy, prioritising the reduction of leverage in the first instance, through a significant repayment of revolving credit facilities. It will further benefit the risk adjusted return of the portfolio, reducing equity-like exposure and exposure to electricity price movements.”

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