Gcp Infrastructure Inves... Share Discussion Threads

[chinahere] 01/11/2023 13:50

Very interesting erstwhile2. I read that Thurrock overpaid about 40% for their solar investments and are trying to sell them. Have you got any links to the Gravis related Ofgem cases?

Have you an estimate for the true NAV here?

[donald pond] 01/11/2023 11:51

The impact of Orsted is minimal. GCP funds projects, which are structured as special purpose vehicles. So they lend say £10m to ABC Wind Co, who have equity from elsewhere, and they engage a contractor to construct an asset. For wind farms, Orsted will often be the manufacturer. But Phil confirmed in an interview last week that less than 1% of the GCP portfolio is in construction, so there is no direct risk. In theory, if GCP had funded a pre-construction asset and they had paid Orsted for a turbine and Orsted had gone bankrupt, that could be an issue, but that isn't a risk.
The only aspect that might cause issues is that one of the ways GCP maximises value is by working with the operators of the scheme to improve productivity. That can often be dependent upon software upgrades or physical tweaks, so that wind turbines can operate within a wider band of wind speeds. If Orsted were to stop providing that support it could limit the improvements in the future, but I very much doubt it.
Also, those improvements are never factored into the NAV until they have taken place. So they are upside only, and we never see them as such, its just part of what goes on behind the scenes.

[mwj1959] 01/11/2023 11:23

Orsted's problems in the US have been well flagged, albeit the scale of the impairment charge was much larger than previously indicated (hence the scale of the share price drop today). Similar problems are also evident in the UK offshore space. GCP's exposure (just over 20% of total assets) is all onshore and already developed (as far as I am aware).

[cc2014] 01/11/2023 10:51

I think what it's kind of telling us is what we already knew in that with interest rates where they are the cost of capital has made the build out of new renewables uneconomic in some cases.

[wskill] 01/11/2023 10:45

Challenged US portfolio seems to be the problem for Orsted GCP is UK based only.

[wshak] 01/11/2023 10:12

Orsted (now a $16bn company) has crashed 20% today.

Is this of relevance to GCP's assets?

[donald pond] 31/10/2023 08:09

The board meeting must be this week. So we would normally expect a dividend RNS on the day of the board. Interesting comment from Phil about any pressure on dividend likely to be upwards. I doubt we will see any change in dividend for a while, but if inflation and energy offtake costs remain elevated but interest rates are seen as having peaked that should support GCP. The whole point was to have a good degree of inflation protection.

[mesb48] 30/10/2023 20:56

So we know there’s a webinar on Friday. Will be interesting to see if the board decide to send Gravis in to bat with something new on the dividend/buy back front. Have to assume there will be news one way or another before Friday.

[spectoacc] 30/10/2023 06:58

I was tongue-in-cheek on @wskill's fear of councils going bust, when so many already have and so many are lined up to join them. Mainly due to dodgy Comm Prop investment, which (to mix metaphors) is the elephant in the room that's yet to come home to roost.

S.114's are indeed very well-trodden, and something's going to have to give eventually. Several councils have already been through them several times.

[chucko1] 29/10/2023 19:12

They issue a Section 114, which is a form of bankruptcy. But all 114s have seen Governments take control as that is what a 114 means. So it tends to end up with cuts to various services but with legal obligations such as PWLB loans and LOBOs remaining current.

Since a LOBO (lender option, buyer option - complex debt with various imbedded options) would not be any more senior than obligations to pay rents on care homes and such like, and the latter being an essential service, I would not see much risk in these assets. But this is more to do with a 114 than what happens in a default.

But in theory, they "could" actually default. In practise, they do not. I think the case prior to Birmingham was Northampton. Section 114 is a moderately well-trodden path.

[donald pond] 29/10/2023 18:16

They can go bankrupt but central government is liable for their debts still is my understanding

[chinahere] 29/10/2023 18:04

That is a good point about local government bankruptcies. The Guardian (not everyone's favourite!) reckons at least 26 councils will go bust:



Thurrock blew all their (and other's!) money on over-inflated solar deals didn't they.

How much of the GCP portfolio depends on local government income?

Do we know that GCP paid a rational price for it all?

[spectoacc] 29/10/2023 16:09

@wskill - many councils have gone bankrupt already ;-)

[donald pond] 29/10/2023 14:25

Portfolio historically very reliable. The U.K. government has never reneged on its obligations and do the government backed aspect of the debt is as good as gilts. There is no construction risk and everything is availability, rather than demand based. The biggest risk is probably in biomass and availability of the right silage, but that is the nature of biomass

[wskill] 29/10/2023 13:30

Solar wind hydro ,health centres,care homes social housing public buildings looks like a decent enough portfolio unless we have less a complete break down in society councils going bankrupt ect I am not that pessimistic .

[chinahere] 29/10/2023 13:05

I see that GCP offer a useful line by line breakdown of their holdings:



Even with this detail I find it difficult to understand the risks of default in the holdings. PPP/PFI - are these reliable?

I guess my fear is that a significant amount end up defaulting and the rest don't return above inflation. Pessimistic I'm sure!

Anyone got any comments on the reliability of the GCP portfolio?

[donald pond] 25/10/2023 17:07

I imagine board meeting is tomorrow but could be wrong. Divi gets announced when it is declared at the meeting

[spoole5] 25/10/2023 16:36

Has one been declared?

[someuwin] 25/10/2023 13:45

Ex divi date next week I presume?

[catabrit] 25/10/2023 13:25

Bought some of this as part of my high yield basket. Feels cheap and pretty safe.

[donald pond] 25/10/2023 09:28

Very good interview, well spotted

[jimjamthe2nd] 24/10/2023 19:17

Phil Kent(lead adviser to GCP) is on this podcast I listen to and he says "there should be upward pressure on the dividend, if the portfolio continues to perform" which sounds very reassuring to me.

[donald pond] 24/10/2023 10:54

Yes, that too. The economy doesn't work at this level of inflation