Gcp Infrastructure Inves... Share Discussion Threads

[someuwin] 02/11/2023 08:12

Divi confirmed.

[ghhghh] 01/11/2023 19:06

erstwhile

Thanks but why haven't you raised these concerns directly with GCP?

It's just a couple of easy to answer questions and they are happy to talk to PI's?

[chucko1] 01/11/2023 18:15

Yes, Specto, although some were brought to operation and STILL went for a low valuation. Mind you, the buyer knew they were in essence a forced seller. They also had 46% of this entire "debt" fund in these ADs - which had zero pure equity.

[mwj1959] 01/11/2023 18:07

I wonder if the Board actually understand all this!

[chinahere] 01/11/2023 18:06

It is an interesting concept - if you are right and there is no equity behind these investments, then who benefits if they succeed? Not GCP as they are on a fixed income return aren't they?

[spectoacc] 01/11/2023 16:57

SLFR's were development assets really - some of which never got going. Presume GCP's are operating?

[chucko1] 01/11/2023 16:56

The link to the legal matter regarding Kelly Green is long and I have not read it before. No matter, brief inspection attributes a fraudulent representation to the party advising GCP, and no explicit blame to GCP (I can be corrected in part on that if anyone knows better).

Also, Kelly Green is a performing asset within the current portfolio, so I presume the case for it was resubmitted to OFGEM with new and honest information. But I have nothing further, so if anyone can add to our total sun of knowledge, that would be most appreciated!

[chucko1] 01/11/2023 16:50

0.38 is cited in the most recent report. A mixture of 0.25s and 0.5s. The average for the whole portfolio is 7.82% (unsure if weighted or unweighted, but likely not material). Shore Capital should focus on comparables, rather than its movement although an analysis of both is optimal.

FYI

22% PPP
65% Renewables
13% Social Housing

Of the renewables, 9% is AD which blew SLFR up royally - that truly was equity masquerading as debt. On a previous call, I asked GCP about the strength or otherwise of the AD positions they had and they were confident that they were operated well - and the strength/capability of the operator was front and centre of what mattered in these assets.

[ghhghh] 01/11/2023 16:24

Chucko

My reason for talking to GCP was to query a note by Shore Cap claiming that GCP have only increased the discount rate by .5 over the last year. In fact Mazers have increased by 0.71

GCP claim actual asset valuations are currently holding up well but sellers think these may fall to catch up with gilts. However imo that lack of new investment should reduce future supply

[ghhghh] 01/11/2023 16:01

Yes, senior and mezzanine loans to connected and controlled parties with no equity in them. Thats the point. they tell you its debt, but you own the whole economics of the whole enterprise, ie you are net long equity performance of the collateral. I guess I can lead you to water....

How can a loan be senior unless something underneath it?

I've copied your posts to the investment team so will be interested in their response.

It's just you appear to have an agenda. The Solar case is no big deal (£1 bn portfolio) and to accuse Mazars of grossly and presumably fraudulently over valuing the assets is daft.

[ghhghh] 01/11/2023 15:51

True NAV? lol no number, but of course enormously lower than where Mazars mark it for GCP. Mazars fingers are in a lot of these sorts of funds, DGI9, TENT, GABI etc etc. And they did Donald Trump for a bit. Usually a warning flag for me.

Mazars dodgy! LOL

[chucko1] 01/11/2023 15:47

GCP does take "equity risks". However, they do at least publish the sensitivity to both CPI/RPI and to power prices. If I recall, and I have not attempted to reread it, they do also make reference to the sensitivity to interest rates, but in terms of the basis to inflation (implying they are largely hedged).

The sensitivity to inflation and power prices is material (again by memory), but is somewhat smaller than what can be explained by current risk avoidance (citing discount to NAV). In other words, fear rules OK.

In the matter of the GABI bad loan, that was a loan relating to one of their student accommodation line items. They state in the most recent update that they expect to become current on this loan in due course (we shall see) and the total portfolio exposure is in the order of 5%, although the LGD would be much lower than this absent fraud.

Finally, I do like it when there are "issues" cited relating to NAV on loan funds which are trading at significant discounts. Often, market participants fail to see the wood for the trees and in that respect, GABI may be a lot more interesting as an investment than GCP, or at least this will become the case as the loan maturities occur.

[williamcooper104] 01/11/2023 14:39

When GCP was set up it was mainly PFI sub debt So the cash equity cushion was £1 - someone's £10 or even £100 I've not looked too closely into it's renewables but a mostly senior debt fund that has such a NAV exposure to power pieces suggests that it is indeed taking equity risks There were always rumours that Gravis was also lending money to related party entities - now confirmed with GABI admitting that one of their bad loans is a related party borrower Always were too many red flags here

[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.