GCP Infrastructure Investments (GCP)

GCP Infrastructure Investments (GCP) occupies a distinctive niche among listed infrastructure trusts, focussing on debt instruments in UK social and economic infrastructure projects. Just over half of the portfolio is in senior debt, with the balance in subordinated debt and a very small number of equity positions. The portfolio splits into three broad sectors, with c. 57% in renewables projects, another quarter in PPP projects, and the balance in supported living.

GCP’s mature and fully operational portfolio consists of 47 investments and, at a more granular level, is highly diversified across sub-sectors. Examples include projects in commercial and rooftop solar, biomass, onshore wind, anaerobic digestion, as well as supported living, healthcare, education, and waste disposal. All of these are backed by long-term, public-sector revenues. Half the portfolio has some form of inflation protection.

GCP returns come primarily through Dividends, and the current yield of c. 9.6% is both a function of the investment strategy and the current Discount to NAV, c. 29%. GCP’s NAV total return over the last five years, 37%, is ahead of the Morningstar Infrastructure peer group’s average of 26%, driven by its high yield and broadly stable NAV. Since IPO in 2010, GCP has returned more than the initial IPO price in dividends.

In response to the wide discount, GCP’s board has implemented a capital allocation policy targeting the elimination of gearing and a share buyback programme, funded by disposals. Gearing is now almost repaid, clearing the way for an increase in the pace of share buybacks once further disposals are completed.