Introducing GCP Infrastructure Investments

10 minute read

Philip Kent

CEO, Member of the Investment Committee

Video with Phil Kent

Below is a transcript of the video, modified for your reading pleasure. Please check the corresponding audio before quoting in print, as it may contain small errors.

I started my career almost 20 years ago, working for a consultancy focused on the energy sector, and that was mostly focused on valuing power stations across the world and working for an energy company. That prompted me to go and work for an energy company itself, where I had lots of different roles across different commodities in different markets, before which I moved to foresight, and that was really my introduction to investing in the clean energy, environmental sector more broadly. We were looking after funds on behalf of the UK Green Investment Bank at the time, investing in sectors such as waste or energy, biomass, and anaerobic digestion. I moved to Gravis about eight years ago, and for the last six or so of those years, I've managed our main infrastructure fund, GCP Infrastructure Investments. That's involved investing in a number of different asset classes such as renewables, social infrastructure, social housing, but also managing the portfolio of assets that we have, interacting with our independent board of directors and the wide pool of investors that we have. In my role as CEO today, I'm responsible for the overall strategy of the business, looking across all of our different funds, but retaining close involvement in the direct investment business and also closely working with our shareholders in Orix.

We have a really diverse team here at Gravis, and that really is to support investing in the different areas that we invest, the different asset classes that we cover. And within each of those asset classes, there's lots of different aspects of those assets we need to understand, whether it's the technical aspects, the legal aspects, the commercial aspects of those projects, all of which require different skill sets. And whilst we work closely, we're looking at any investment with party advisors, we do have a broad range of experience within the team here. That's within the investment team itself, the portfolio asset management team, but also the essential support functions that we require as an asset manager to perform our services such as finance, compliance, risk, operations, marketing, distribution, all of which is a team that comes together really effectively to manage assets, look after shareholders' capital, and invest in some really exciting and interesting areas.

I think one of GCP's key differentiators is that it's focused on a diversified range of asset classes. The fact that historically we've always targeted a range of different sectors means that we've not had to live or die or evolve the fund in response to a particular asset class. And actually within infrastructure over the last 15 years, we've seen certain asset classes like solar and wind, develop fairly significantly as those assets have become deployed, the risks of those assets have become better understood, but also there's more competition for those assets as other investors have moved into those sectors. So the fact that GCP's response to that can be to not have to continue to invest in those areas, but look for new interesting areas of public sector support, I think has been a key reason that it's been able to sustain the dividend that it has without materially changing the risk profile or the leverage or the geography that it targets. I think another differentiator within the wider infrastructure, renewables peer group is its focus on debt. Infrastructure, by its nature, is a defensive asset class. Benefits from the downside protection associated with having the intrinsic value of physical assets, the services that are provided by those assets and long term cash flows associated with those services. The fact that we also focus on debt, so in an investment process, we're very focused on getting our cash back rather than valuing that asset on the basis of future assumptions about life extensions or equity upside means that we're naturally a conservative investor, very focused on income, and in delivering that income, absolutely focused on capital preservation. And that extends to how we as a fund think about dividend coverage and present our dividend coverage metrics to the market.

So GCP's portfolio is roughly two-thirds within renewable energy projects. And within that, we have diversification across multiple asset classes of solar, wind, geothermal, anaerobic digestion, biomass, hydro. Around a quarter of the portfolio is made up of PFI PPP assets. So that's social infrastructure contracted under a government public private finance procurement initiative. And then the final 11 % or so is supported social housing. That portfolio has really evolved in response to the evolution of public sector support over the last 13 years or so. We've seen the world where PFI was a seed asset portfolio for the fund back in 2010. PFI has fallen away as a mechanism for procuring private sector finance and infrastructure since then. But we saw the growth of a number of renewable subsidies to promote the UK's decarbonisation agenda.

I think infrastructure remains a compelling investment opportunity overall, but perhaps the most exciting areas that we see today are, in my view, associated with the infrastructure that's going to be associated with the journey that this country has to go on to decarbonisation. And there's a huge investment requirement associated with that. A lot of that investment will be in infrastructure, so the concrete and the buildings associated with delivering that transition. And most particularly within that, we're going to need lots more of the stuff that we have today and understand well, solar and wind, and perhaps variants of that in terms of how perhaps those asset classes are co-located together to make sure we're getting the most efficient use of grid connections, but also perhaps co-locating wind or solar and battery storage or other forms of flexible generation to make the best use of those existing assets, but also managing issues such as intermittency. Perhaps look into other areas, we see lots of opportunities in biomethane and anaerobic digestion. That's a sector we know well. There's an investor we have around 80 million of anaerobic digestion operating across the UK and operating really well. And I think there are many investors in the UK that can say They have a portfolio made up of those characteristics. But if we look at the opportunities in those asset classes moving forward, AD can deliver a green gas that can be used to decarbonise the electricity system, but also increasingly to displace natural gas in the gas grid, or perhaps looking more further forward to produce hydrogen as a green fuel to be used in either transport or other applications. So in those, we see opportunities for additional revenue streams, potentially life extensions of assets, the opportunity to provide baseload power to complement intermittent power from renewables elsewhere. If we step away from decarbonising electricity for a moment, I think there's also lots of opportunities in perhaps underserved sectors, such as how we decarbonise our heating system. That's a massive challenge for this country over the next 30 for years or so. And within that is how we improve the energy efficiency of our homes, look at how we use our energy, both electricity and heat, but also how we decarbonise transport, electric vehicle fleets or green gas fleets, how we ensure the charging infrastructure or refuelling infrastructure is in place to enable that transition. Decarbonising agriculture and decarbonising our heavy industries is another area where we're going to require a huge investment and we've seen some really attractive investment opportunities. And finally, taking carbon out the atmosphere and storing it on the path to Net Zero is core to the UK's plan. And we're seeing opportunities both naturally through sequestration or industrially through carbon capture and storage to support that transition.

Important Information

This information has been prepared by Gravis Capital Management Limited (the "Investment Adviser“ or “Gravis”) and is for information purposes only.

This information 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 article 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 article without contravention of any law or regulation in the jurisdiction in which they reside or conduct business.​

This information 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 in the GCP Infrastructure Investments Ltd (the “Company”) or any other fund affiliated with Gravis.  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.​

No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Company, 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 article 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 or the Investment Adviser undertake any obligation to update or to correct any inaccuracies which may become apparent. The information in this article is subject to updating, completion, revision, further verification and amendment without notice.​

Past performance is no guarantee of future performance.

Gravis Capital Management Ltd is authorised and regulated by the Financial Conduct Authority; registered in England and Wales No: 10471852 and its principal place of business is at 24 Savile Row, London W1S 2ES.​


Keep up to-date

Select the funds you’d like to stay up to date with.


Due to regulatory requirements, we are only able to share updates with professional investors in those jursidictions dictated in the terms and conditions for each fund. If you enter a personal email address into the form, it is likely that you will not recieve updates, so please, where possible, provide your work email. If you only have a personal email address but qualify as a Self-Certified Sophisticated Investor, or High Net Worth Investor, please get in touch with us directly, by emailing [email protected].

We only send emails when we have something to say. We'll never share your information. By submitting, you agree to Sparkpost's Privacy Policy and Terms. You can unsubscribe at any time.