Waste not, want not: investing in rubbish we can’t recycle

6 minute read

Katia Brisson

Associate Director

GCP Infrastructure Investments (“the Company”) is a FTSE 250 listed closed-ended investment company, offering investors exposure to infrastructure debt and/or similar assets. It aims to generate income through the coupon on its debt instruments, which are ultimately passed on by way of dividends to shareholders. The Company is currently invested in a diversified, partially inflation-protected portfolio of investments primarily in the renewable energy, social housing and PPP/PFI sectors.

Here, Katia Brisson, Associate Director at Gravis, the Investment Adviser to the Company, tells us more about the Gloucestershire Energy from Waste facility, an underlying investment in the portfolio.

Gloucestershire Energy from Waste facility

Diversification is a key competitive strength of GCP Infrastructure Investments Limited. The fact that it’s invested across a number of different asset classes means it has been able to pick what we think are the most attractive assets on a risk-adjusted basis and make the most of the evolution of the infrastructure sector over the past 10-15 years.

Another key strength of the Company is that infrastructure, by its nature, is defensive. On top of that, it’s investing in real assets that have a fundamental environmental or social purpose. In the case of the Gloucestershire Energy from Waste facility, it's to dispose of Gloucestershire’s residual waste.

The Gloucestershire Energy from Waste facility processes the proportion of waste which remains after the residents of Gloucestershire have separated out as much of the recyclable and green waste fractions as they can – waste that would otherwise go to landfill. The facility is largely automated and combusts up to 190,000 tonnes of waste each year (approximitely 75% of which is provided by Gloucestershire County Council). Heat generated from the combustion process is then converted into electricity through the application of a steam turbine. Generating more than 14.6MW, the facility can produce sufficient electricity to power the equivalent of approximately 25,000 homes each year.

Construction of the facility began in August 2016 and reached completion in October 2019. GCP Infrastructure Investments Limited first invested £48m via senior secured debt in the middle of 2017. The loan is amortising, with the interest rate set at 7.92% and the final repayment date in 2042.

As a lender, the Company monitored the technical aspects of the build through monthly construction reports, supported by the lenders’ technical advisor, who attended the site regularly, alongside an owner's engineer. From a financial point of view, the Company reviewed monthly cash drawdown requests during construction and transferred the necessary amounts in a timely manner, facilitating a steady use of the Company’s commitment and avoiding any funding shortfall.

Revenues from the project come from a number of sources and are highly contracted. A significant amount comes from ‘gate fees’ for processing waste (at a fixed price, index linked through a contract for difference agreement with Gloucestershire County Council over a 25-year concession period).

The headroom capacity that remains after Gloucestershire County Council has delivered all residual household waste generated within the county is serviced by processing additional waste from nearby third party commercial and industrial parties, which presents an opportunity for the Gloucestershire Energy from Waste facility to earn additional gate fees.

Another significant source of revenue comes from the electricity generated by the facility, which is sold directly into the grid via a PPA agreement at a fixed price.

As an investment, the Gloucestershire Energy from Waste facility has a number of defensive characteristics. Barriers to entry in terms of construction are extremely high, it’s a real asset providing a service and, because the Company is invested in its debt, there's the added benefit of capital structure protection.

Important Information 

This article has been prepared by Gravis Capital Management Limited (the "Investment Adviser“ or “Gravis”) and is for information purposes only.  It 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 article 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 24 Savile Row, London W1S 2ES.​ 


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