Gcp Infrastructure Inves... Share Discussion Threads

[williamcooper104] 16/6/2021 10:41

I am well out of practise alas I was comparing GCPs duration to a long bond not a bond with the same average life - perhaps a little apples and pears What's the fund with the 350 short - is it listed

[panshanger1] 16/6/2021 10:26

Market thinks dividend is going to be cut

[chucko1] 15/6/2021 19:33

Are you out of practise? It's 7.65 for 13 years at 8.50% annual coupons and 8.50% discounting. Falls to 6.9 with yields 100bps higher, so average is 7.27 - so 7.27% loss for the first 100bps move and then 6.57% (as it happens) loss for the next 100bps.

By comparison, 13 year Gilts (assuming a coupon of 1%) would fall by 11.35% for a 100bps shift higher in yields.

I have a fund which has a 350% short position in 30-50yr Gilts. I calculated that a 1bps move in rates moved the fund value by roughly 1%. It's a hedge for almost everything I own that is sensitive to rates!!

[williamcooper104] 15/6/2021 14:39

In a good proper sell off the unlevered beta of everything tends to one GCP sold of in March last year and it will do so again on a good market correction The sensitivity to interest rates isn't so bad - 8.5 yield with a 13 year average life is going to have a duration of about 4 to 5 years (that's a guess) so if rates more out by 100bps then you would see a c5 percent fall in capital value (again I highlight that I've not modelled that - but it's the right ball park IMO) Against this a long dated gilt on a 100bps move might lose c30-40 percent of capital value Interest rates aren't really the risk here - it's that many of the loans are really equity (fine on PFI less so on other things)

[cc2014] 15/6/2021 14:13

I have arrived at this thread upon casting around for anywhere to put my money which offers a safe (rofl) return. The chart attracts of course as does the discount to NAV.

The NAV seems to be drifting down due to two things 1. Some biomass projects where the equity buffer has got eaten up and 2. the DCF of future revenue streams is struggling due to energy prices, partly due to technology leading to lower cost of renewables

I've read the last 150 or so posts and I'm left with a conumdrum. Rising interest rates aren't going to help but this should be in the price, alhtough presonally I perceive not all of if is.

But what's probably of more importance to me right now is what happens if the DOW/FTSE pulls back 5%. Will GCP pull back 5% with it? or more likely some lower percentage. Or will money flood into "safer" havens meaning the share price would actually go up.

So, I'll sit on the sidelines. I don't see a compelling reason to buy but GCP is of sufficient interest to add to my many watchlists.

[speedsgh] 15/6/2021 12:09

Includes reference to GCP...

James Carthew: Navigating the NAV declines in renewables -

[stewart64] 15/6/2021 09:35

Share price is not the same as performance either. We have gone from a circa 20% premium to a 3% discount. I think the 25% price fall is overdone even if the 10% of the portfolio in Biomass loans were worthless ( with leverage that would warrant a 13% price correction).
At the same time an 8.5% fixed loan portfolio should have steeply risen in value against zero interest rates a' la gilts. That should have offset any hit on Corp tax rises.
I'm in it big just now because it appears to be trying to find its regular quarterly nadir which I have alluded to at length in previous posts. I can be wrong though.

[brwo349] 14/6/2021 15:09

The Company's approach should not, however, be taken as an indication that any value associated with a recovery in long-term forecasts, or the long-term optimisation of its renewable portfolio, is not possible and/or will not ultimately benefit the Company.

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.

The Board remains confident that both: (i) the current asset valuations are prudent and the risks embedded in such valuations are aligned to the original investment cases; and (ii) future optimisation opportunities will be available to benefit the Company and will be recognised at the appropriate time. Further detail of the Company's valuation approach, including an estimate of the value of optimisation opportunities, can be found below.

The Investment Adviser is actively reviewing options to mitigate the Company's financial exposure to electricity prices through hedging structures and, subject to attractive terms, anticipates the completion of certain such arrangements shortly.

[brwo349] 14/6/2021 15:02

I'm buying for the high yield.

[apollocreed1] 14/6/2021 01:14

Well GCPs track record has been very good and all the Gravis funds have performed well over the years, so I wouldn't write them off yet.

[williamcooper104] 12/6/2021 13:13

It was a good company to own I'm glad I switched out of this and into SEQI - accepting a then lower divi yield

[swiss paul] 11/6/2021 21:39

EC2 - thanks you have just confirmed my reason to sell. that is not good practioce having NEDS in place for such a long time. That together with a lack of 'skin in the game' convinces me this is not a good company to own

[panshanger1] 11/6/2021 18:10

Fair point - you did !!

[stewart64] 11/6/2021 16:55

I did point out the post dividend drift in May. Bottoms have occured the following month...21st December 2020 103.8, 5th March 2021 97.0 and back there again mid June. May not be quite at the bottom yet, but the chart looks positive through to July.

[panshanger1] 11/6/2021 14:12

Relentless downward drift Getting close to 52 week low now

[ec2] 10/6/2021 23:22

First bought this stock back in 2014 and whilst I'm still up on a total return basis I'm starting to lose patience. The only ones making any real money are the non execs who, apart from one, own no shares and are very handsomely paid. The chairman has been on the board for eleven years, owns no shares and earned 78k. Another director also on the board for eleven years owning no shares and on £65k. Another two directors on the board for six years and another for seven, although he is the one with the shareholding (probably why he has the board seat). One final director on the board for two years. I think it is time some of these longstanding directors stand down unless they can clearly demonstrate why they are worth the high remuneration.

[williamcooper104] 10/6/2021 17:46

Higher tax rates shouldn't impact on the value of a loan (there are some restrictions now on tax deductibility of interest but that shouldn't bite here) However on a fixed life project there's only a maximum amount of cash available over the project life and that's reduced if tax rates are higher (you deduct the interest but not debt repayments) and thus the amount of debt supported is less

[williamcooper104] 10/6/2021 17:41

And the tax rise reduction in NAV confused me - until I remembered that a lot of their positions are very junior loans so the fixed life project company's lent to will have less cashflow to redeem debt with

[williamcooper104] 10/6/2021 17:38

Yes it does seem uniquely toxic

[apollocreed1] 10/6/2021 15:54

@swisspaul- The current NAV is reached by forecasting future cash flows and discounting them to the present (Google "discounted cash flow" for an understanding of the calculation). So higher corporation tax, for example, will mean the future cash flows are less than they were previously forecast to be, so the DCF calculation from last year has to be revised.

[apollocreed1] 10/6/2021 15:51

I suspect they "kitchen-sinked" this report and the NAV is reflecting the worst case scenario of declining long-term power prices and rising corporation tax. I'm still puzzled as to why a debt-company is exposed to declining power prices -don't the operators of renewable infrastructure have to repay their debts regardless of the price at which they sell their power?

[swiss paul] 10/6/2021 12:31

Have they started to stash the cash as a result of this?

It has been a challenging six months for the Company, principally driven by revisions to long-term valuation assumptions. The Company's income and net asset value have been impacted by reduced valuations resulting from the announcement of an increase in the corporation tax rate from 19% to 25% from 2023, reduced long-term electricity price forecasts and lower OBR inflation forecasts published in the period. As a result, the Company generated income of £11.2 million and profit of £3.8 million. The net asset value reduced by 3.2 pence per share and the Company's total shareholder return1 was -8.8% for the period.

How can a previous 6 months valuation be reduced due to something that is going to happen next year?
Can someone educate me please.

Yes I agree Biomass is not the answer - if domestic potentially but not commercially

[chucko1] 25/5/2021 22:09

There seems to be trouble almost wherever biomass is part of an investment portfolio.

[stewart64] 25/5/2021 22:06

Over the expensive cost of such projects and questionable green credentials . Tbh I was going to edit that out, as there is always noise around Biomass and stick to the point on the chart.

hxxps://news.sky.com/story/climate-change-contentious-plans-to-remove-emissions-could-actually-increase-them-report-warns-12316090

[chucko1] 25/5/2021 21:39

What was the story on biomass?