GCP Infrastructure – Substantive progress
- 06 August 2025
- QuotedData
Substantive progress
Since interest rates began to rise to tackle inflation, GCP Infrastructure (GCP) has, like many similar investment companies, been afflicted by a wide share price discount to net asset value (NAV). The board and the investment adviser have been working to tackle this through a policy of capital recycling. This aims to free up £150m to materially reduce the drawn balance on the revolving credit facility (RCF), return at least £50m to shareholders, and rebalance the portfolio to improve its risk adjusted returns.
As we discuss in this report, share buybacks have stepped up a gear, the discount is narrowing, the RCF has been reduced to just £10m, and the portfolio’s sensitivity to electricity prices has been cut significantly.
There is more to do, but – perhaps attracted by the high dividend yield and improving outlook – investors appear to be waking up to GCP’s attractions once again.
Public-sector-backed, long-term cashflows
GCP aims to provide shareholders with sustained, long-term distributions and to preserve capital by generating exposure primarily to UK infrastructure debt or similar assets with predictable long-term cashflows.
| Domicile | Jersey |
|---|---|
| Inception date | 22 July 2010 |
| Manager | Philip Kent |
| Market cap | 657.4m |
| Shares outstanding (exc. treasury shares) | 842.783m |
| Daily vol. (1-yr. avg.) | 1.343m shares |
| Net gearing | 1.2% |
At a glance
Share price and discount
GCP’s discount has narrowed somewhat since helped by share buybacks and a capital recycling programme aimed at providing solid evidence of the validity of the NAV; improving the overall quality of the portfolio (in particular, reducing the sensitivity to power price fluctuations); and providing cash to both fund returns to investors and to reduce its floating rate debt. We believe that the discount ought to narrow further from here.
Performance over five years
Despite the many headwinds facing the company in recent years, GCP’s NAV total return has remained positive and has held up fairly well, relative to the return from sterling corporate bonds.
It is encouraging to see the impact of a narrower discount on GCP’s share price returns, but there is hopefully even more to come.
| 12 months ended | Share price total return (%) | NAV total return (%) | Earnings1 per share (pence) | Adjusted2 EPS (pence) | Dividend per share (pence) |
| 30/09/2020 | (2.0) | (0.2) | (0.08) | 7.65 | 7.6 |
| 30/09/2021 | (7.9) | 7.2 | 7.08 | 7.90 | 7.0 |
| 30/09/2022 | 3.8 | 15.7 | 15.88 | 8.30 | 7.0 |
| 30/09/2023 | (25.2) | 3.6 | 3.50 | 8.58 | 7.0 |
| 30/09/2024 | 28.2 | 4.6 | 2.25 | 7.09 | 7.0 |
Source: Morningstar, Marten & Co. Note 1) EPS figures taken from 30 September each year. Note 2) Adjusted earnings per share removes the impact of unrealised movements in fair value through profit and loss
Company profile
Regular, sustainable, long-term income
GCP Infrastructure Investments Limited (GCP) is a Jersey-incorporated, closed-ended investment company whose shares are traded on the main market of the London Stock Exchange. GCP aims to generate a regular, sustainable, long-term income while preserving investors’ capital. The company’s income is derived from loaning money, predominantly at fixed rates, to entities which derive their revenue – or a substantial portion of it – from UK public-sector-backed cashflows. Wherever it can, it tries to secure an element of inflation protection.
In practice, GCP is diversified across a range of different infrastructure subsectors, although its focus has shifted more towards renewable energy infrastructure over the last few years. It has exposure to renewable energy projects (where revenue is partly subsidy and partly linked to sales of power), PFI/PPP-type assets (whose revenue is predominantly based on the availability of the asset), and specialist supported social housing (where local authorities are renting specially-adapted residential accommodation for tenants with special needs).
The board is targeting a full-year dividend of 7.0p per share for the financial year ended 30 September 2025. At the half-year mark, the trust was on track to achieve this, having declared dividends totalling 3.5p per share.
GCP had driven down the RCF balance to £41m by the end of March…
As we highlighted on the front page, GCP is working on a £150m capital cycling programme as part of its efforts to tackle its discount. Money freed up is being used to reduce GCP’s leverage. Drawings on the revolving credit facility (RCF) totalled £43m at end June 2025, down from £57m at end September 2024.
In its latest NAV announcement, GCP revealed that it had reached a settlement agreement in respect of the contractual claim relating to the accreditation of a portfolio of solar projects under the Renewables Obligation scheme (there was a question mark over whether some solar projects were eligible to receive government subsidies). This has been rumbling on for some time – we flagged it in our January 2021 note, for example.
…but with an influx of money from the settlement of a claim, GCP’s net debt is now just £10m
GCP had accrued an amount in the NAV for the anticipated settlement, and so this did not have much impact on the NAV. However, following receipt of the money, GCP’s net debt has fallen to about £10m, equivalent to gearing of just 1.2%.
GCP also intends to return at least £50m of capital to shareholders. We show its recent share buyback activity on page 12.
Market backdrop
Markets are predicting a cut in UK base rates in August, but persistent inflation and low/negative growth numbers are weighing on sentiment
UK economic growth numbers have been weak, with a fall in GDP reported for May, following on from another monthly contraction in April. In such an environment, the predictable income provided by GCP might seem all the more attractive.
The Bank of England cut its base rate to 4.25% in May 2025, but inflation figures have been coming in higher than expected, with UK CPI running at 3.6% and RPI (which is still used to inflate renewable energy subsidies) coming in at 4.4% in June. We could still see another interest rate cut in August, but until inflation is looking better-controlled, more aggressive rate-cutting seems unlikely.
10-year gilt yields, which arguably have a bigger influence on the rating of funds such as GCP than short-term rates, have been fairly flat this year. A number of commentators are concerned about levels of UK government debt, which may be influencing long-term bond yields.
Figure 1: UK 10-year gilt yield
Source: Bloomberg
Figure 2: Median premium/(discount) on AIC infrastructure sector
Source: Morningstar, Marten & Co
BBGI bid underscored the attractive valuations on offer in the infrastructure sector
As illustrated in Figure 2, discounts on infrastructure trusts have narrowed from lows. One catalyst for this was the bid for BBGI Global Infrastructure (a portfolio of equity stakes in PFI/PPP-type infrastructure projects) at a premium to its NAV. GCP still has about 27% of its portfolio exposed to debt funding for PPP/PFI projects.
Plenty for GCP to do if it returns to making investments, but the discount will be fixed first
Talk is growing that a cash-constrained UK government will take a fresh look at PFI-type structures to fund much-needed infrastructure investment in areas such as schools, hospitals, and prisons. This could open up new opportunities for GCP, were it to return to making new investments. The GCP board has been quite clear that it will not consider doing do so until the discount has narrowed to a point where returns on new investments are higher than the return on investing in the existing portfolio through buybacks.
While we wait for decisions on the way forward for PFI, GCP has highlighted the considerable opportunity in financing the transition to a world of net zero greenhouse gas emissions. The UK government’s latest auction round for CfD finance for renewables projects – AR7 – is underway. In this auction round, more capital has been allocated, and fixed-price energy deals are available at higher prices and for longer periods.
The government’s review into electricity markets decided against adopting zonal pricing for electricity. The decision has been welcomed by most investors in generation assets, but it does mean that additional investment will be needed in energy storage and in grid infrastructure, as much of the UK’s energy generation is not in the same parts of the country as energy demand.
Portfolio
As of 30 June 2025, there were 48 investments in GCP’s portfolio (down from 50 when we last published). The average annualised portfolio yield was 7.9% (up from 7.8%), and the portfolio had a weighted average life of 11 years.
Recent investment activity
No new loans were made over H1 25, as the adviser was focused on GCP’s capital recycling programme. GCP does have commitments to advance loans to existing borrowers, however, and these totalled £13m over the first half of GCP’s financial year (H1 25), the six-month period ended 31 March 2025.
In terms of money coming back from the portfolio, the two big items were the sale of some rooftop solar assets for £6.8m in November 2024 (as referred to in our last note) and the sale of interests in two onshore wind farms in January 2025.
GCP had owned the windfarms since 2017. They fetched an initial £16.5m plus £1.3m of contingent proceeds and £1.0m of realised tax benefits. Although the proceeds were lower than the valuation in GCP’s end-September 2024 NAV, on average the company made a return of about 9.7% per annum on these assets.
Figure 3: Outflows (investments) in £m
Source: Gravis Capital Partners
Figure 4: Inflows (repayments) in £m
Source: Gravis Capital Partners
The disposals have had some effect on the split of GCP’s portfolio as shown in Figure 3, with the percentage exposure to onshore wind falling from 13% to 10% since we last published.
Figure 5: Split of the portfolio at 30 June 2025
Source: GCP Infrastructure Investments
In terms of the sector split shown in Figure 5, renewables have fallen in favour of the other two sectors (as the pie shrinks). The portfolio also has slightly more exposure to higher ranking senior loans and less exposure to equity or equity like positions (which typically carry higher risk and return potential but rank lower in repayment priority).
The missing piece of the capital recycling programme is the planned disinvestment from GCP’s social housing exposure. We still expect that to happen.
Figure 6: Sector allocation at 30 June 2025
Source: GCP Infrastructure Investments
Figure 7: Security allocation at 31 March 2025
Source: GCP Infrastructure Investments
There was no significant change to the breakdown of GCP’s sources of income.
Figure 8: GCP sources of income as at 31 March 2025
Source: GCP Infrastructure Investments
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