GCP INFRASTRUCTURE
INVESTMENTS LIMITED
31 March 2021 Interim Results presentation
June 2021
IMPORTANT NOTICE
This presentation (the "Presentation") has been prepared by Gravis Capital Management Limited (the "Investment Adviser“ or “Gravis”) and is for information purposes only.
This Presentation is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients of this presentation outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction, and are treated as having represented that they are able to receive this Presentation without contravention of any law or regulation in the jurisdiction in which they reside or conduct business.
This Presentation is not intended to provide the basis for any credit or other evaluation of any securities of GCP Infrastructure Investments Limited (the "Company") (or any other current or future investment vehicle managed or advised by the Investment Adviser or any of its affiliates) and should not be considered as a recommendation, invitation or inducement that any investor should subscribe for, dispose of or purchase any such securities or enter into any other transaction with the Company or any other person. The merits and suitability of any investment action in relation to securities should be considered carefully and involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of such securities.
Any recipient of this document will be taken to have warranted, represented and undertaken to the Investment Adviser and the Company that its has read, agrees to and will comply with the terms of this notice; and will conduct its own analyses or other verification of the data set out in this document and will bear the
responsibility for all or any costs incurred in doing so.
The Investment Adviser acts only for the Company and will not be responsible to any third party for providing the protections afforded to clients of the Investment Adviser and will not be advising a third party on investing in the Company.
No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Company or the Investment Adviser or any of their respective directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained in this Presentation and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions,
misstatements, negligence or otherwise for any other communication written or otherwise. In addition, neither the Company nor the Investment Adviser undertake any obligation to update or to correct any inaccuracies which may become apparent in these slides. The information in this Presentation is subject to updating,
completion, revision, further verification and amendment without notice.
In considering the performance information contained herein, recipients should bear in mind that past performance is not necessarily indicative of future results, and there can be no assurance that return projections will be met. Certain of the past performance information presented herein may not be representative of all transactions of a given type. Any forward-looking statements have not been independently audited, examined or otherwise reviewed or verified and nothing in this Presentation should be construed as a profit forecast.
Certain information contained herein (including forward-looking statements and economic and market information) has been obtained from published sources and/or prepared by third parties and in certain cases has not been updated to the date hereof. While such sources are believed to be reliable for the purpose used herein, none of the Investment Adviser or any of its directors, officers, employees, partners, members, shareholders or affiliates, or any other person assumes any responsibility for the accuracy or completeness of such information.
This is a financial promotion and is not intended to be investment advice. The content of this Presentation has been prepared by, is the sole responsibility of and has been approved as a financial promotion, solely for the purpose of section 21(2)(b) of the Financial Services and Markets Act 2000 (as amended), by Gravis, authorised and regulated by the Financial Conduct Authority. Gravis is registered in England and Wales No: 10471852 and its principal place of business is at 24 Savile Row, London W1S 2ES.
AGENDA
Strategic Update
Portfolio Update
Finance Update
Q&A
Strategic Update
Portfolio Update
Finance Update
Q&A
STRATEGIC UPDATE
Company objectives
DIVIDEND INCOME
To provide shareholders with regular,
sustained, long-term dividends.
DIVERSIFICATION
To create a diversified portfolio of
debt and similar assets secured
against UK infrastructure projects
benefiting from public-sector backed
revenues.
CAPITAL PRESERVATION
To preserve the capital value of its
investment assets over the long term.
7.0p
Dividend target for FY 2020-21
7.1%
Dividend target yield on March
2021 share price
48
Holdings
11.6%
Size of largest investment*
100.78p
NAV per share at 31 March 2021
102.80p
AN ATTRACTIVE RISK-ADJUSTED EXPOSURE TO INFRASTRUCTURE
The current share price represents an attractive entry point to invest into a mature, diverse portfolio with strong
fundamentals
Renewable
valuations
Interest rates
Energy transition
Debt focus
Pipeline
Theme / Trend
•
Exposure to a diverse range of renewable assets, maximising the potential to benefit from all aspects of
the energy transition (electricity, heat, transport, sequestration) and mitigates risk against any single
asset class (e.g. wind resource, price cannibalisation).
•
Third-party valuation of renewable assets. Prudent approach rooted in day one approach to risk /
return.
•
Partially inflation-linked portfolio (42%) that stands to benefit from higher inflation.
•
44% of the portfolio is senior ranking debt secured against real assets. Original focus at IPO on
subordinated debt.
•
Attractive pipeline of investments in existing portfolio and in existing and new sectors at returns that
supports the dividend target.
Income
•
11-year track record of attractive income: 7.1% income yield on current share price with a focus on
capital preservation as part of assessing dividend coverage.
UK INFRASTRUCTURE MARKET
National Infrastructure Strategy and Energy White Paper provide directions of travel with evolving detail on revenue
support mechanisms
Primarily central government funding (e.g. £4bn levelling-up fund,
central government expenditure).
•
CfD
•
Green Gas Support
Scheme
•
UK emissions trading
scheme
•
Other??
UK’s National Infrastructure Strategy
(November 2020)
Economic Recovery
Levelling up regions
Net zero emissions
•
Roads
•
Housing
•
Healthcare
•
Education
•
Decarbonisation (energy,
industry, transport,
agriculture)
•
Sequestration
•
Transport /
interconnectivity
•
Urban regeneration
•
Broadband
Future private sector infrastructure funding opportunities likely to be focused on the net zero agenda
Strategy ‘pillar’
Infrastructure
type
Funding /
support
models
PIPELINE
The Company maintains an attractive pipeline of investment opportunities in existing and new sectors
Sector Description Amount (£m) Return
New opportunities
Renewables - AD Portfolio of biomass and anaerobic digestion assets seeking senior loans to finance capital works.
£5m 7.5%
Renewables - AD Acquisition funding for the purchase of two operational anaerobic digestion projects in Scotland and Northern Ireland
£5m 7.0%
Renewables - AD Acquisition funding for the purchase of a portfolio of four farm-based anaerobic digestion projects by the management team.
£6m 7.5%
Renewables - AD / District Heating
Acquisition funding for the purchase of two operational anaerobic digestion projects in England
£20m 7.5%
Forestry Project seeking to benefit from the government’s new Woodland Carbon Guarantee scheme.
£30m 9.0%
Renewables - biomass Debt support for a bid for an operational waste wood biomass project. £35m 7.0%
Total £101m
Portfolio follow-on opportunities
Renewables – biomass Purchase of senior loans and restructure of capital structure in an existing waste wood biomass project.
£25m 7.25%
Renewables – biomass Capital investment in existing waste wood biomass project. £3m 7.0% Renewables – biomass Purchase of senior loans and restructure of capital structure in an existing waste wood
biomass project.
£45m 7.5%
PFI / PPP Acquisition finance for a number of PPP projects where the Fund has existing subordinated debt.
£0.5m 7.0%
Strategic Update
Portfolio Update
Finance Update
Q&A
PORTFOLIO UPDATE
Investment Portfolio at a glance
48
Infrastructure loans in the
portfolio
13
years
Weighted average life of loans
in the portfolio
8.0%
Average annualised portfolio
yield
1%
Construction exposure
(as % of
total assets)
60%
Renewable energy project
exposure
(as % of total asset
valuation)
42%
Loans benefit from inflation
protection
(as % of total asset valuation)
£1.03
bn
PORTFOLIO UPDATE
The Company maintains a disciplined approach to the valuation of renewable assets, meaning the risk embedded in
valuations has not changed over time
LONG-TERM ELECTRICITY PRICE FORECASTS
The Company revised its approach in the period to more accurately reflect prices being captured by Projects
Q4 2020 valuation curve Q1 2021 valuation curve Q1 forecast Average - ICE Average - 4Q Ja n-24 Ja n-21 Ja n-39 Ja n-22 Ja n-33 Ja n-25 Ja n-32 Ja n-23 Ja n-26 Ja n-37 Ja n-27 Ja n-35 Ja n-28 Ja n-40 Ja n-29 Ja n-30 Ja n-31 Ja n-41 Ja n-34 Ja n-36 Ja n-38 +33%
Replacement of 4Q
average with ICE
futures
Maintain long-term 4Q average from
single price provider
GB market electricity price forecasts (real 2019)
•
Company is exploring options to hedge its financial exposure to electricity prices through a contract-for-difference product.
•
Currently experiencing high prices for Winter 2021/22 in GB market.
PORTFOLIO UPDATE
Portfolio enhancements / challenges and impact over the 6 months ending 31 March 2021
R
ene
wa
bl
es
Onshore Wind
Offshore Wind
Solar
Biomass
Anaerobic Digestion
Hydro
PFI / PPP
Social Housing
Enhancements
Challenges
BCCS *
Expansion /
switching
In
flati
on
(
£8.
7m)
**
Refinance
Electricity
pricing
(£12m)
C
or
po
rati
on
tax
/
o
th
er
tax
(
£17
.4m)
Ofgem audit findings
(£3.8m)
Life
extensions
•
Technical
review
•
Land
•
Planning
Technical
enhance-ments
Di
sc
ou
nt
rate
r
edu
cti
on
s
£5.
8m
* Mentioned in the recent Energy White Paper / Infrastructure Strategy
** net of benefits from index linked senior loans
Co
ntr
ac
t o
pti
m
is
ati
on
s:
£4.
1m
He
dgi
ng
(F
utu
re
T
BC
)
PORTFOLIO UPDATE
Portfolio Risk Summary
Renewables
SH
PFI / PPP
W
in
d (o
ns
ho
re
)
S
ola
r
B
io
m
as
s
AD
W
in
d (o
ffs
ho
re
)
H
yd
ro
S
uppo
rt
ed
Liv
in
g
H
ea
lth
ca
re
Le
isu
re
Ed
uc
ati
on
W
as
te
Market risks
Credit risks
Operational risks
Legal / regulatory
A
ss
et
C
ha
rac
te
ris
tic
s
Overall score
High
Medium
Low
Likelihood
Impact
Sector exposure (by value at 31 March)
13% 5% 20% 11% 8% 2% 15% 25%Periodic change (12 months)
Increased clarity on alternative incomes / costs that support
potential life extensions
Ge
ot
he
rm
al
1%Strategic Update
Portfolio Update
Finance Update
Q&A
FINANCIAL UPDATE
Results Summary
Balance Sheet: as at 31 March 2021 (£ 000)
Comprehensive Income: 12 months to 31 March 2021
NAV per ordinary share = 100.78 (Sept 2020: 103.99)
[£ 000] unless stated 31 March 2021 31 March 2020
Income
Net income / gains on financial assets
at fair value through profit and loss 10,742 25,387
Other income 451 8
Total income 11,193 25,395
Expenses
Investment advisory fees (3,963) (4,306)
Operating expenses (1,526) (1,366)
Total expenses (5,489) (5,672)
Total operating profit before finance costs
5,704 19,723
Finance costs
Finance expenses (1,867) (2,513)
Total profit (loss) and comprehensive income for the period
3,837 17,210
Basic and diluted earnings per share
(pence) [pence] 0.44 1.96
Ongoing charges ratio = 1.1% **
Dividends for the six month period = 3.5 pence per share
[£ 000] unless stated 31 March 2021 30 Sept 2020
Assets
Cash and cash equivalents 17,724 24,354
Other receivables and prepayments 136 134
Financial assets at fair value through
profit and loss 1,033,435 1,031,106
Total assets 1,051,295 1,055,594
Liabilities
Other payables and accrued income (3,083) (3,114)
Interest bearing loans and borrowings (160,644) (137,702)
Total liabilities (163,727) (140,816)
Net assets 887,568 914,778
Equity
Share capital 8,807 8,796
Share premium 898,170 929,228
Capital redemption reserve 101 101
Retained earnings (19,510) (23,347)
FINANCIAL UPDATE
Income Breakdown – 6 months ending 31 March 2021
36,362 11,193 -28,285 16,585 42,205 Income (£ 000)
Interest accruals Unrealised gains
0 Principal indexation Unrealised losses 451
Other income Total Income Operating costs
1,867 Finance expenses Dividends 3,837 Profit and comprehensive income 32,122 Net contribution to earnings 5,489 10,440 -25,620 Net unrealised movement Other unrealised movements (timing of debt service payments) Upward movements in valuation 42,205 Downward movements in valuation 6,145
Downward movements in valuation from:
- Corporation tax / other tax assumptions
(£17.4m);
- Power price assumptions (£12m);
- Inflation (£8.7m);
- Ofgem audit provision (£3.8m);
Upward movements in valuation from:
- Discount rate reductions (£5.8m);
- PPA price fixing (£2.2m);
FINANCIAL UPDATE
Investment breakdown – 6 months ending 31 March 2021 (including post period-end movements)
25,925 10,159 30,888 12,935 33,719 Cash flow (£ 000)
New investments Further advances Scheduled repayments Unscheduled repayments Net position
Hydro Anaerobic digestion Rooftop solar Commercial solar Cash flow (£ 000)
Biomass Offshore wind Onshore wind PFI Social housing Geothermal
4,041 8,736 4,183 -564 -1,090 7,799 347 -26,688 571 12,824 R ep ayme nt Inv es tme nt
- Main transaction in
period was the
financing of a portfolio
of 14 hydro projects in
Scotland;
- Further investments in
biomass, AD, solar and
geothermal;
- Refinance of PPP
asset;
FINANCIAL UPDATE
Financing breakdown – 6 months ending 31 March 2021 (including post period-end movements)
10,159
Net investment in period Equity raise (net of issuance costs)
26
Credit facility repayment (drawdown) Funded out of (to) cash resources
22,600
12,467
Size Margin Expiry Balance
Period End
Short-term tranche £25m 200 bps June 2021 £25m Long-term tranche £140m 200 bps March 2024 £137m
£162m
- Net drawdown of £23m of credit facility:
£162m drawn at period end;
- Repayment of short-term tranche in June
2021 will be made from cash resources;
- Ongoing discussions to extend long-term
FINANCIAL UPDATE
Approach to dividend coverage
GCP approach to dividend coverage
Alternative approach
Revenues
(Operating costs and taxes)
(Capex)
Cash flows to service investors
Interest accrued on GCP loans
Principal repayment on GCP
loans
GCP Dividend comparator
Revenues
(Operating costs and taxes)
(Capex)
Cash flows to service investors
Alternative dividend comparator
(Fund level costs)
(Fund level costs)
GCP’s approach to dividend coverage has the core assumption that the principal value must be preserved. It therefore considers
dividend coverage against interest accrued, on the basis principal is fully repaid from cash flows.
Accrued interest is paid or PIK’d. Key quarterly check is that any PIK’d interest (added to the principal balance) is repaid over the
life of an investment.
FINANCIAL UPDATE
Dividend coverage
3,837
-32,122 Total profit / (loss) Dividends
-111.9%
Earnings (as per SOCI)
Adjusted earnings
Cash
- Includes ‘pull-to-par’ and upward /
downward revaluations;
41,587 34,234 32,122 7,353 Expenses and finance costs Other income Loan interest accrued Adjusted net earnings Dividend 0 +6.6%- 1.07x covered in period
- Removes pull to par and impact of
revaluations;
- Based on interest accruals;
- This is a key metric reviewed by the
Board when determining dividends;
16,281 34,706 32,122 7,353 Operating and finance costs 23,634 Loan interest (cash) Total cash flows Operating cash flow 18,425 Repayments received Dividends -49.3% +8.0%
