GCP Infrastructure Investments Offers 9% Yield on £850M Portfolio Amidst Market Discount
The UK-focused investment company aims to reduce its share price discount by selling assets and repurchasing stock, offering a significant yield backed by infrastructure debt.
GCP Infrastructure Investments, a company holding a portfolio of UK infrastructure assets valued at over £850 million across 47 investments, is currently trading at a 21% discount to its net asset value. This situation presents an opportunity for investors to acquire assets at approximately 79 pence on the pound while benefiting from a 9% income yield, according to market analysis.
The company primarily invests in debt for UK infrastructure projects that receive public sector support, such as those linked to schools, hospitals, social housing, and clean power through long-dated, inflation-linked subsidies. Its strategy focuses on debt rather than equity, with loans fully amortizing over their life from the cash flow generated by the underlying asset, without assuming residual value at the end of the project's working life.
The portfolio is diversified across three main sectors: legacy PFI contracts, renewable energy projects (including wind, solar, hydro, biomass, geothermal, and anaerobic digestion), and supported social housing. This diversification aims to mitigate risks common in pure-play green funds, like power price volatility and grid curtailment.
Discount Driven by Market Shift and Investor Exodus
The significant discount of 21% is a key aspect of the investment case. Historically, GCP Infrastructure Investments traded at a premium. However, rising interest rates have made long-dated, fixed-income offerings less attractive compared to cash, gilts, and bonds. Phil Kent, CEO of Gravis Capital, the company's manager, acknowledges the impact of interest rate changes but attributes a substantial portion of the discount to a broader