REG - Triple Point Energy - Results for the six months ended 30 September 2023
13/12/2023 07:15
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RNS Number : 5610W Triple Point Energy Transition PLC 13 December 2023
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE INFORMATION FOR THE
PURPOSES OF ARTICLE 7OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 (AS IT
FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWL) ACT
2018).
13 December 2023
Triple Point Energy Transition plc
("TENT" or the "Company" or, together with its subsidiaries, the "Group")
RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2023
Diversified strategy and portfolio of niche investments delivers a fully cash
covered dividend
Orderly realisation planned to deliver value to shareholders.
Triple Point Energy Transition plc (ticker: TENT), the London Stock Exchange
listed investment company focused on building a portfolio of infrastructure
investments in niche areas that support the energy transition, announces its
unaudited results for the six months ended 30 September 2023.
30 September 31 March 30 September 2022
2023 2023
unaudited audited unaudited
Net Asset Value ("NAV") £95.1m £99.4m £100.3m
NAV per share 95.09p 99.44p 100.26p
Value of the portfolio £92.4m £90.1m £84.1m
Dividend declared per share 2.75p 5.50p 2.75p
Capital committed awaiting deployment(1) £26.9m £44.4m £44.9m
(1) Alternative performance measures
Financial Update
The key drivers of the movement in NAV pence per share are summarised below
with further details following:
NAV as at 31 March 2023 (pence per share) 99.44
Dividends paid (2.75)
Valuation adjustments:
- Power prices (1.27)
- Discount rate (3.92)
- Inflation 2.06
- Other (0.53)
Other movement (including actual performance) 2.07
NAV as at 30 September 2023 95.10
Valuation adjustments
The change in valuation for the six month period to 30 September 2023 is
primarily attributed to a 90 bps increase in the unlevered discount rate of
the Hydroelectric Portfolio from 5.6% to 6.5%, coupled with the downward
revisions in power price forecasts by external power market consultants. The
90 bps increase in the discount rate for the Hydroelectric Portfolio reflects
the ongoing trend of rising interest rates and higher UK long-term gilt
yields. This is partially offset by a higher inflation outlook than was
previously forecast, which positively impacts revenue assumptions given the
inflation-linked nature of the underlying contracts.
The weighted average unlevered discount rate in respect of investments
deployed as at 30 September 2023 has increased to 7.3% (31 March 2023: 6.6%).
Highlights
· Resilient cashflow performance, despite fluctuating power prices,
delivering cash dividend cover of 1.0x from a diverse portfolio focussed on
overlooked areas of the energy transition which offer contractually
underpinned revenues.
· The Company has declared an interim dividend for the period from 1
July to 30 September 2023 of 1.375 pence per Ordinary Share, payable on or
around 12 January 2024 to holders of Ordinary Shares on the register on 22
December 2023.
· Highly diversified strategy, which benefits from significant
inflation protection, with 51% inflation-linked revenues, not driven by
subsidies, offering resilience and predictability of shareholder returns in a
volatile macro environment.
· Revenue generated was 100% underpinned by contract during the
period, which was delivered through the portfolio's debt investments,
generation subsidy payments and Purchase Price Agreements ("PPA").
· The build-out of the BESS Portfolio remains on track, with the
Gerrards Cross project energised and the remaining two BESS assets continuing
to proceed in line with previous updates and set to become operational in
2024.
· The Hydroelectric Portfolio experienced lower than forecast
generation (-16%) due to rainfall being lower than anticipated in the period
and short-term unavailability at three of the schemes due to mechanical
breakdowns.
Strategic Update:
· Despite the Company delivering performance in line with the goals
set out at the time of its initial public offering ("IPO"), including in
relation to earnings and a fully cash covered dividend, the Company's share
price remains at a c.40% discount to NAV. Although this is not dissimilar to
the discounts to NAV exhibited by many other infrastructure investment trusts,
the Board believes that the discount undermines the Company's ability to raise
further equity and grow to an economically efficient size in the medium term.
There can be no certainty on when market conditions are likely to improve, and
having taken on board feedback from a number of shareholders, the Board has
undertaken a review of the Group and its prospects, drawing on independent
advice, with a view to determining the future strategic direction of the
Company.
· Accordingly, the Company has today announced that the Board
has determined that an orderly realisation of assets, and return of associated
realised capital, is the most viable option to maximise shareholder value in
the short to medium term. The Board also remains open to the possibility of
other strategic options. The separate Stock Exchange announcement issued by
the Company today provides further context and rationale.
· The Company also announces that it has received an offer in
relation to the sale of the Group's debt facility provided to a subsidiary of
Virmati Energy Ltd (trading as "Field") for the purposes of building out a
portfolio of BESS assets in the UK, completion of which would allow the Group
to deleverage and cancel its Revolving Credit Facility ("RCF").
· The Company will therefore be seeking approval from its
shareholders for various proposals to agree to the necessary changes to effect
an orderly disposal of the portfolio.
· In the light of these plans, the Company will not be making
any further uncommitted investments.
John Roberts, the Company's Chair, commented:
"This period, which has seen continued geo-political and macroeconomic
volatility, has demonstrated the robustness of our investment strategy, which
focusses on niche areas of the energy transition. 100% of the income was
underpinned by contract and this enabled the Company to pay a fully cash
covered dividend in the period.
Despite our resilient performance, it is disappointing to see that the Company
remains at an entrenched and persistent discount to NAV and, whilst our
situation is not dissimilar to that of many other infrastructure investment
trusts, the Board believes that the discount undermines the Company's ability
to raise further equity and grow to an economically efficient size in the
medium term. The Board does not believe that market conditions are likely
improve in the near future and, having heard feedback from a number of
shareholders and analysed all options, has concluded that it is in the best
interests of shareholders to move towards an orderly realisation of assets."
For further information, please contact:
Triple Point Investment Management LLP +44 (0) 20 7201 8989
Jonathan Hick
Christophe Arnoult
Chloe Smith
PricewaterhouseCoopers LLP (Corporate Financial Adviser) +44 (0) 20 7583 5000
Matt Denmark
Nitin Premchandani
Jon Raggett
J.P. Morgan Cazenove (Corporate Broker) +44 (0) 20 3493 8000
William Simmonds
Jérémie Birnbaum
Akur Limited (Financial Adviser) +44 (0) 20 7493 3631
Tom Frost
Anthony Richardson
Siobhan Sergeant
Buchanan (Financial PR) +44 (0) 20 7466 5111
Helen Tarbet
Henry Wilson
Verity Parker
+44 (0) 20 7466 5111
LEI: 213800UDP142E67X9X28
Further information on the Company can be found on its
website: http://www.tpenergytransition.com/
(https://eur03.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.tpenergytransition.com%2F&data=05%7C01%7CRebecca.Lillington%40triplepoint.co.uk%7C5d7dc58447154d71da6108da8a648af1%7Ccde8812e0dbd4dc3b4463655beb81efb%7C0%7C0%7C637974461674664827%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=Qxux6XDdRNrDI2LBUqkiVrj0UyfH30KOouLRCg%2FPxmY%3D&reserved=0)
NOTES:
The Company is an investment trust which aims to invest in assets that support
the transition to a lower carbon, more efficient energy system and help the UK
achieve Net Zero.
Since its IPO in October 2020, the Company has made the following investments
and commitments:
· Harvest and Glasshouse: provision of £21 million of senior debt
finance to two established combined heat and power ("CHP") assets, located on
the Isle of Wight, supplying heat, electricity and carbon dioxide to the UK's
largest tomato grower, APS Salads ("APS") - March 2021
· Spark Steam: provision of £8 million of senior debt finance to an
established CHP asset in Teesside supplying APS, as well as a further power
purchase agreement through a private wire arrangement with another food
manufacturer - June 2021
· Hydroelectric Portfolio (1): acquisition of six operational, Feed in
Tariff ("FiT") accredited, "run of the river" hydroelectric power projects in
Scotland, with total installed capacity of 4.1MW, for an aggregate
consideration of £26.6 million (excluding costs) - November 2021
· Hydroelectric Portfolio (2): acquisition of a further three
operational, FiT accredited, "run of the river" hydroelectric power projects
in Scotland, with total installed capacity of 2.5MW, for an aggregate
consideration of £19.6 million (excluding costs) - December 2021
· BESS Portfolio: commitment to provide a debt facility of £37 million
to a subsidiary of Virmati Energy Ltd (trading as "Field"), for the purposes
of building a portfolio of four geographically diverse Battery Energy Storage
System ("BESS") assets in the UK with a total capacity of 110MW - March 2022
· Energy Efficient Lighting: funding of c.£2.2 million to a lighting
solutions provider to install efficient lighting and controls at a leading
logistics company - March 2023
· Innova: provision of a £5 million short term development financing
facility to Innova Renewables, building out a portfolio of Solar and BESS
assets across the UK - March 2023
· Energy Efficient Lighting: funding of c.£2.3 million to refinance
efficient lighting and controls installed at Places for People Homes Limited -
September 2023
The Investment Manager is Triple Point Investment Management LLP ("Triple
Point") which is authorised and regulated by the Financial Conduct Authority.
Triple Point manages private, institutional, and public capital, and has a
proven track record of investment in Energy Efficiency and decentralised
energy projects.
Following its IPO on 19 October 2020, the Company was admitted to trading on
the Premium Segment of the Main Market of the London Stock Exchange on 28
October 2022. The Company was also awarded the London Stock Exchange's Green
Economy Mark.
CHAIR'S STATEMENT
Introduction
The global investment landscape is in a state of continuous flux and change.
As we navigate through geo-political conflict, energy crises and oil price
volatility, the importance of a robust understanding of energy market dynamics
has been paramount. By focusing on contracted revenues, we have demonstrated
adaptability and resilience in the face of market instability. We are pleased
to have maintained a positive cash dividend cover of 1.0x despite fluctuating
power prices, highlighting the lasting value of contracted earnings in these
times of uncertainty.
Despite these achievements, however, a notable gap continues to exist between
the Company's NAV and its market valuation. The Board does not believe this
accurately reflects the strength of the Company's investment strategy and
performance, but instead is the result of wider economic volatility weighing
on the investment trust sector as a whole.
The Board is acutely aware of the frustration this must cause for shareholders
and, following feedback from a number of large shareholders and in
collaboration with the Investment Manager, has been pursuing initiatives aimed
at reducing the discount, including, intensifying our engagement with
investors and analysts to articulate our intrinsic value, and executing our
distinct, contracted, and multifaceted strategy.
Even though considerable effort has been invested into these key initiatives,
we must confront the ongoing challenges arising from broader economic factors.
The sustained discount to NAV and the resulting lack of liquidity in the
Company's shares, continue to restrict the Company's ability to grow.
Recognising these conditions and committed to protecting our shareholders'
interests, the Board commissioned a third-party review of the possible
approaches to realise value for shareholders in current market conditions.
After careful consideration of the findings, the Board has concluded that the
optimal course of action is to undertake an orderly realisation of assets. The
change of strategy will be subject to approval of shareholders in a general
meeting.
Orderly Realisation
Assuming shareholder approval, the Company will be committed to an orderly
realisation of assets, geared towards maximising shareholder value. The
essence of this plan is to conduct a systematic, phased disposal of the
Group's assets, while maintaining our commitment to transparency and
shareholder communication. We intend to provide regular updates on the
progress of the asset sales, keeping our shareholders informed at every stage.
The process will be underpinned by a robust risk management strategy.
An announcement regarding the orderly realisation strategy has been released,
separately, today and further details will be set out in a circular to be sent
to Shareholders in Q1 2024, together with a notice convening the general
meeting.
Investment Activity
During the period, following its holistic strategy, the Group continued to
expand its portfolio into areas of the energy transition, focusing on
overlooked technologies with growth opportunities and attractive risk-adjusted
returns.
The Group made a £5 million debt investment in Innova Renewables, part of the
Innova group, one of the UK's leading solar, battery and energy storage
systems developers and operators. The facility, provided to Innova's
development arm, is funding its pipeline of UK distribution connected
renewable projects, which is currently over 1.5GW and expected to increase to
over 2GW by 2026. The facility has a 12-month term and delivers contractual
returns to the Group that are materially higher than the Company's target
return of 7-8%.
During the period, the Group also reduced the size of its BESS loan commitment
to Field, from £45.6 million to £37.0 million, following Field's successful
equity raise from DIF Capital Partners.
Lastly, the Group has provided a £2.3 million receivables financing facility
for the refinancing of efficient LED lights and controls at sites owned by,
one of the UK's leading social property enterprises, Places for People. This
facility covers 54 sites and provides the Group with a fixed rate of interest
from Places for People, an investment-grade counterparty.
These investments complement the Group's existing portfolio of assets which
provide stable and predictable cash flows through long-term contracts. Their
alignment with sectors poised for growth, combined with the security of
long-term contracted revenues, enhances their appeal in the market. The
strategic composition of the Group's portfolio not only bolsters its
resilience in fluctuating market conditions, but also ensures it is
well-placed to secure favourable returns for shareholders during the asset
disposal.
Financing
The Group, via its wholly owned subsidiary, TENT Holdings Limited ("TENT
Holdings"), has a £40 million RCF with TP Leasing Limited which expires in
March 2025. The interest rate charged is a fixed rate coupon of 6% pa on drawn
amounts.
The Group has engaged in conversations with lenders regarding the replacement
or extension of the current RCF. It has become apparent that renewing the
facility could lead to a higher interest rate, making the utilisation of a RCF
less appealing. The proposed disposal of the Field loan commitment, as noted
below, would enable the Group to deleverage and cancel its RCF, and return
capital to shareholders, as appropriate. Nonetheless, the discussions with
lenders have indicated that, in the event the proposed disposal did not
complete, that the Group would be able to extend its existing RCF on
acceptable terms.
As at 30 September 2023, the RCF drawn balance was £2.4 million.
Financial Results
The six months ended 30 September 2023 saw a high level of market volatility,
with gilt and bond yields remaining high, continued high levels of inflation,
and a growing concern around the depth and length of a possible recession.
This has been reflected in bond markets through inverted yield curves and in
the equity markets through continuing share price weakness.
The Net Asset Value ("NAV") of the Company at 30 September 2023 was £95.1
million (31 March 2023: £99.4 million) representing a decrease of 4% since
the year end. The decrease in NAV is predominately driven by the fair value
decline of £3.7 million during the six month period. This fair value
adjustment is mainly driven by the increase in the discount rate associated
with the Hydroelectric Portfolio, which has increased by 90 bps during the
period.
During the six months ended September 2023, the Group received a dividend of
£0.9 million from the Hydroelectric Portfolio, which is a decrease compared
to £1.1 million received during the same period ended 30 September 2022. The
reduction is mainly attributed to lower rainfall in the corresponding six
month period. As a result of the £3.7 million reduction in the fair value of
the portfolio, TENT recorded a loss, for the period, of £1.6 million (30
September 2022: profit £6.9 million).
Distributions
The cash dividend cover to 30 September 2023 was 1.0x (30 September 2022:
0.98x). This represents the cash income, net of expenses and finance costs,
for the Company and its wholly owned subsidiary TENT Holdings Limited.
The Company has declared an interim dividend in respect of the period from 1
July 2023 to 30 September 2023 of 1.375 pence per Ordinary share, payable on
or around 12 January 2024 to holders of Ordinary shares on the register on 22
December 2023. The ex-dividend date will be 21 December 2023.
As stated previously, the Board is targeting total dividends of 5.50 pence per
share(2) for the year ending 31 March 2024.
Notes:
(2) The dividend and return targets stated are Pound Sterling denominated
returns targets only and not a profit forecast. There can be no assurance that
these targets will be met, and they should not be taken as an indication of
the Company's expected future results.
Environmental, Social and Governance ("ESG")
We continue to hold the Investment Manager accountable on Environmental,
Social and Governance matters. Our focus remains on ensuring that the
Investment Manager takes appropriate account of climate change risk and
opportunity as detailed in the disclosure under the Task Force on Climate
related Financial Disclosure ("TCFD") framework provided in the annual report
year ending 31 March 2023. We are also reassured that the Investment Manager
is preparing appropriately to respond to new natural capital disclosure
requirements (in the form of the TNFD - Taskforce on Nature-related Financial
Disclosure) and future Sustainability Disclosure requirements from the FCA (in
the form of the SDR - Sustainable Disclosure Regulation).
Post Balance Sheet
The Company has received an offer in relation to the sale of the Group's debt
facility provided to a subsidiary of Virmati Energy Ltd (trading as "Field")
for the purposes of building out a portfolio of BESS assets in the UK. The
offer, if progressed to completion, would pay the Group the full carrying
value of the loan. Should this progress to a binding offer and subsequent
sale, this would enable the Group to deleverage and cancel its RCF.
The Company has announced that the Board has determined that an orderly
realisation of assets, and return of associated realised capital, is the most
viable option to maximise shareholder value in the short to medium term. The
Company will be seeking approval by shareholders of various proposals to this
effect in Q1 2024.
The Company has declared an interim dividend in respect of the period from 1
July 2023 to 30 September 2023 of 1.375 pence per Ordinary share, payable on
or around 12 January 2024 to holders of Ordinary shares on the register on 22
December 2023. The ex-dividend date will be 21 December 2023.
John Roberts
Chair
12 December 2023
INVESTMENT MANAGER'S REPORT
Market Review
Our focus during the period was not only on the long-term market outlook, but
also on optimising the value of the Group's assets in the current economic
landscape. The recent volatility in the energy sector, characterized by
fluctuating oil and gas prices due to geopolitical conflicts and supply chain
disruptions, has created a uniquely difficult set of market conditions. While
these have posed challenges across various sectors, they have also highlighted
the strengths and resilience of the Group's diversified portfolio of energy
transition assets.
In this environment, the strategic investments made by the Group in niche,
high-impact, and high-yield sectors within the renewable energy landscape
become particularly significant. These assets, with their stability and
predictable cash flows through long-term contracts, will, we believe, be seen
as attractive in the current market.
Portfolio Performance
As at 30 September 2023, the Group had committed capital into 19 different
assets spread across combined heat and power ("CHP"), hydroelectric power,
BESS, development finance and LED lighting. During the period, the Group
invested in two new assets; providing a facility for a UK renewable energy
developer, Innova Renewables Limited, and refinancing a portfolio of LED
lighting facilities owned by a housing association.
Combined Heat and Power:
The companies operating the CHP plants reported operational and power
generation performances in line with forecast on the heat export side and
slightly below forecast on the power export side due to a temporary power
export curtailment at Harvest. As a lender, rather than an equity investor,
the Group is well protected from performance variance against budget.
During the period, the maintenance contractor completed the remainder of the
engine overhaul at Harvest and Glasshouse, meaning that these assets are fit
for operation for the next eight years.
Gas and electricity prices are normalising slowly but the spread - the net
margin between the costs of generation and the revenues - remains positive,
meaning that the companies that we have lent to are trading at a profit
independently from the sale of heat to the tomato grower on the sites.
The trading environment for the tomato growing industry has remained
challenging with retailers trying to cap the costs of production passed down
to end customers.
Hydroelectric:
Generation over the period has been mixed, with very low rainfall in the first
quarter followed by strong performances in the second quarter of the year. At
the end of September, the generation for the first six months of the year was
4,773 MWh, which is 16% behind the volume forecast.
This is mainly attributable to lower than expected rainfall during the period
but also due to three breakdowns preventing generation at full capacity on
some of the sites, two of which were resolved at the end of the reporting
period. The three events affected the turbine-generator of three different
sites leading to a period of unavailability. Two of the events will be covered
by insurance claims as the period of unavailability was longer than the
insurance excess. These breakdowns are not related to the design or age of the
machines and are therefore unlikely to reoccur on the affected sites or on the
rest of the portfolio in the near future.
We note that the six month period ended 30 September 2023 represents circa one
third of forecast annual generation, with the key generation period being the
six month period ending March 2024.
In the period, the Investment Manager completed a review of the Power Purchase
Agreement for the nine sites and decided to take the opportunity to fix the
power purchase price to the end of FY25.
BESS:
Following the period end, two further BESS assets, at Newport and Auchteraw,
are in the process to accede into the facility following the debt resizing
exercise referenced in the Chair's statement. These assets are expected to be
operational in 2024 as previously communicated. The Gerrards Cross asset
remains under construction, with all equipment having been delivered and
installed on site during the period. Post balance sheet the site was
energised, in November, in line with the timescale previously communicated and
is undergoing the contractual testing.
LED:
The £1.1m receivable finance facility provided to the logistics company for
the installation of LEDs at three of their sites is being repaid on a monthly
basis.
During the period, a £2.3 million receivables financing facility was
provided to Boxed Light Services Limited ("Boxed"). Boxed installs efficient
Light Emitting Diode ("LED") lights and controls at sites belonging to Places
for People, one of the UK's leading social property enterprises. The
facility permitted the refinancing of an existing portfolio of 54 LED
projects.
Development finance:
The Group has lent £5 million to Innova Renewables Limited ("Innova"), a
developer of renewable energy projects. The debt is secured against a
portfolio of solar and BESS assets across the UK in various stages of
development ranging from early development stage up to ready to build. The
main covenant is a confirmation of the Loan to Value percentage, with the
value being assigned to the projects on a pre-agreed scale depending on their
development stage and the project rights owned by the developers. This is
carried out on a quarterly basis. Interest payments are received on a
quarterly basis and principal will be returned as a bullet payment at the term
of the facility in April 2024. The Group's loan is subordinated to a new and
increased lending facility of £40 million provided by an entity managed by
the Investment Manager.
Deployed and Committed Portfolio as at 30 September 2023
Gearing
The Group, via its wholly owned subsidiary, TENT Holdings Limited ("TENT
Holdings"), has a £40 million RCF with TP Leasing Limited which expires in
March 2025. The interest rate charged is a fixed rate coupon of 6% pa on drawn
amounts. As at 30 September 2023, the Group had drawn £2.4 million of the
RCF.
The RCF matures in March 2025 and the Group has engaged in conversations with
prospective lenders regarding the replacement or extension of the current RCF.
It has become apparent that renewing the facility would lead to a higher
interest rate, making the utilisation of a RCF less appealing. The proposed
disposal of the BESS loan commitment, as noted above, would enable the Group
to deleverage, cancel the RCF and return capital to shareholders, as
appropriate. Nonetheless, the discussions with lenders have indicated that, in
the event the proposed disposal did not complete, that the Group would be able
to extend its existing RCF on acceptable terms.
As at 30 September 2023, the undrawn RCF and group cash balances totalled
£40.8 million with remaining investment commitments of £26.9 million. If the
proposed disposal of the Field loan commitment is complete, the investment
commitments will be zero.
Portfolio Valuation
The Investment Manager is responsible for carrying out the fair market
valuation of the Group's investments. The Company has engaged Mazars as an
external, independent, and qualified valuer to assess the valuation determined
by the Investment Manager. Portfolio valuations are currently carried out on a
quarterly basis as at 30 June, 30 September, 31 December and 31 March each
year.
For non-market traded investments (being all of the investments in the current
portfolio), the valuation is based on a discounted cash flow methodology and
adjusted in accordance with the International Private Equity Valuation
("IPEV") Guidelines, where appropriate, to comply with IFRS 13 and IFRS 10,
given the specialist nature of portfolio investments.
The valuation for each investment in the portfolio is derived from the
application of an appropriate discount rate to reflect the perceived risk to
the investment's future cash flows to give the present value of those cash
flows. The Investment Manager exercises its judgement in assessing the
expected future cash flows from each investment based on its expected life and
the financial model produced by each project entity. In determining the
appropriate discount rate to apply to a given investment the Investment
Manager considers the relative risks associated with the revenues.
For the six months ended 30 September 2023, the discount rates for different
investments in the portfolio ranged from 6.5% to 10% (31 March 2023: 5.6% to
8.3%) and the weighted average portfolio discount rate was 7.3% (31 March
2023: 6.6%).
The valuation of the portfolio by the Investment Manager and reviewed and
supported by the Directors as at 30 September 2023 was £92.4 million (31
March 2023: £90.1 million).
Valuation movements
Throughout the six month financial period, the economic market experienced
ongoing volatility, characterised by a persistent increase in gilt rates and
sustained uncertainty regarding the peak of UK interest rates.
Despite the increase in UK gilt rates, the CHP Portfolio valuation has been
maintained at par. This is justified by the underlying trading performance
aligning with expectations, and the on-site customers of the borrowers
receiving a cash injection and balance sheet restructuring less than 12 months
ago. The counterparty risk has somewhat counterbalanced the heightened
fluctuations in the risk-free rate, and the discount rate is in line with
market pricing for investments of this nature.
During the financial period, the Group continued to deploy committed proceeds
into the BESS portfolio, and it is expected that the remaining commitment will
draw before 31 March 2024. The BESS debt exposure continues to be held at par,
which is deemed reasonable, following the equity injection into the
counterparty during the period.
Debt financing for receivables from the energy-efficient lighting portfolio
has increased during the period, with an additional deployment of £2.3
million to a new counterparty under similar terms. The robust credit rating of
the involved counterparties imparts stability and is reflected in the
appropriate risk-return ratio, and consequently, the exposure continues to be
valued at near to par.
Given that debt investments are valued at or near par, the fair value
fluctuations observed in the financial period primarily arise from the equity
investment in the Hydroelectric Portfolio. A detailed breakdown of the
movement is provided below for clarification.
Valuation Movement in the six months ended 30 September 2023 (£m)
The opening valuation as at 31 March 2023 was £90.1 million. When considering
the in-period cash investments through the Company's wholly owned subsidiary,
the rebased valuation was £96.1 million. Each movement between the valuation
at the start of the financial year and the rebased valuation is considered in
turn below:
Inflation
The Company continues to use a consistent methodology for inflation
assumptions. The methodology adopted for RPI, CPI and power curve indexation,
follows the latest available (November 2023) Office for Budget Responsibility
("OBR") forecast for the 12 months from the September 2023 valuation date.
Thereafter, a long-term 3.25% assumption is made in relation to RPI, dropping
to 2.65% in 2031 to reflect the phase out of RPI. In relation to power curve
indexation, a long-term 3.25% assumption is made, dropping to 3.00% as
wholesale power prices are not intrinsically linked to consumer prices. The
Company's long-term assumption for CPI remains at 2.25%. During the period,
the Group recognised a valuation uplift of £2.1m in respect of inflation
assumptions, which is mainly driven by the higher than expected OBR forecast
for the next 12 months.
Power Prices
The valuation as at 30 September 2023 applies long-term, forward looking power
prices from a leading third-party consultant. A blend of the last two
quarters' central case forecasts is taken and applied, which is consistent
with prior reporting periods. Where fixed price arrangements are in place, the
financial model reflects this price for the relevant time and subsequently
reverts to the power price forecast using the methodology described. The
updated power price forecast has decreased the valuation but is partially
mitigated by the recently established Purchase Price Agreement ("PPA")
finalised in the last six months. The valuation movement associated with power
prices is a decline of £1.3 million. The power price forecast for the
Hydroelectric Portfolio is underpinned by the Feed-in Tariff export rate.
Discount Rates
The £3.9 million reduction in the valuation of the portfolio is attributable
to movement in discount rates. As at 30 September 2023 the weighted average
discount rate of the portfolio was 7.3% (31 March 2023: 6.6%). The increase in
the discount rate has been driven by a combination of a review of discount
rates on recently completed comparable transactions and Mazar's proprietary
information derived from participation in market transactions.
Other
This refers to the other valuation movements in the six months ended 30
September 2023 which has decreased the valuations by £0.5 million. The
decrease in valuation was a result of lower profitability of the Hydroelectric
Portfolio during the six month period, following lower rainfall and a period
of unavailability at three sites caused by a mechanical breakdown. Two of the
three breakdowns had been resolved at the end of the reporting period.
Investment Commitments
As at 30 September 2023, the Company has an outstanding investment commitment
in relation to the BESS Portfolio which has a total capacity of 110 MW.
The committed investment into the BESS Portfolio totals £37.0 million, via a
fixed rate debt facility, of which
£10.1 million has been drawn at 30 September 2023, and £26.9 million remains
committed and is scheduled to be drawn before 31 March 2024.
BESS asset Battery hour duration Location Size in MW Deployment/ Committed
1(st) BESS asset One hour North of England 20 MW Deployed
2(nd) BESS asset Two hours Scotland 50 MW Committed
3(rd) BESS asset Two hours Wales 20 MW Committed
4(th) BESS asset One hour South-East England 20 MW Deployed
Fully Invested Portfolio Valuation
The valuation of the portfolio on a fully invested basis can be derived by
adding the valuation of the underlying investment portfolio held in TENT
Holdings at 30 September 2023 to the expected outstanding commitments, as
follows:
£'m
Portfolio valuation as at 30 September 2023 94.0
Future investment commitments at cost 26.9
Portfolio valuation once fully invested 120.9
If the proposed disposal of the Field loan is completed, the portfolio
valuations to 30 September 2023 would be £83.9 million.
Key Sensitivities
The following chart illustrates the sensitivity of the Company's NAV per share
to changes in key input assumptions (with labels indicating the impact on the
NAV in pence per share of the sensitivities). The total portfolio is affected
by changes in the discount rate, whereas the other sensitivities pertain only
to the Hydroelectric Portfolio.
For each of the sensitivities, it is assumed that potential changes occur
independently of each other with no effect on any other base case assumption,
and that the number of investments in the portfolio remains static throughout
the modelled life.
Financial Review
The Company applies IFRS 10 and qualifies as an investment entity. IFRS 10
requires that investment entities measure investments, including subsidiaries
that are themselves investment entities, at fair value except for subsidiaries
that provide investment services which are required to be consolidated.
The Company's single, direct subsidiary, TENT Holdings, is the ultimate
holding company for all the Company's investments.
It is, itself, an investment entity and is therefore measured at fair value.
NAV
The Company's NAV as well as the valuation of the investment portfolio are
calculated quarterly. Valuations are provided by the Investment Manager and
are subject to review by Mazars.
The NAV is reviewed and approved by the Board. All variables relating to the
performance of the underlying assets are reviewed and incorporated in the
process of identifying relevant drivers of the discounted cash flow valuation.
NAV Bridge for the six months ended 30 September 2023
Operating Results
During the six month period to 30 September 2023, the Company NAV declined by
4% and the Company reported a loss of £1.6 million, primarily due to a £3.7
million reduction in the fair value of the investment portfolio.
Operating Expense and Ongoing Charges
The operating expenses for the six months ended 30 September 2023 amounted to
£1.0 million (30 September 2022: £0.9 million). The Company's annualised
ongoing charges ratio ("OCR") for the period is 2.09% (30 September 2022:
1.89%). The increase in OCR is due to the decrease in NAV and an increase in
underlying expenditure during the period relating to audit and professional
fees.
Cash Dividend Cover(1)
The Company measures dividend cover on a look-through basis to include the
income and operating expenses of TENT Holdings, which is its wholly owned
subsidiary. Summarised below are the cash income, cash expenses and finance
costs incurred by the Company and TENT Holdings in the six months ended 30
September 2023.
Six months ended
30 September 2023(1)
Consolidated operating cash income £3.82m
Consolidated operating cash expenses and finance costs (2) £1.00m
Net operating Cashflows £2.82m
Dividends paid per Statement of Changes in Equity £2.75m
Cash Dividend Cover 1.0x
(1)Alternative performance measure
(2) Finance cost includes RCF related expenditure
The Company's dividends paid in the six months ended 30 September 2023 of
£2.75 million (2.750 pence per share) are covered by cash flows generated in
the portfolio net of expenses and finance costs at Company and direct
subsidiary level.
Sustainability and the approach to Environmental, Social and Governance
Triple Point, as Investment Manager provides a responsible and sustainable
approach to investment management.
Sustainability Disclosures
A disclosure for the Company in line with the European Union's Sustainable
Financial Disclosure Regulation ("SFDR") requirements for Article 6 and
Article 8 is publicly available on our website
https://www.tpenergytransition.com/.
TENT reports against the Task Force on Climate-related Financial Disclosure
(TCFD) framework on an annual basis. The most recent report is available in
the Company's annual report for the year ending 31 March 2023. Although not
required to publish these disclosures, we believe it is important to provide
transparency on our sustainability approach wherever possible.
TENT's approach and alignment to sustainable practices
To demonstrate alignment to the energy transition, TENT tracks asset selection
against the UK Climate Change Committee ("CCC") 6th carbon budget balanced
pathway. Avoided carbon and renewable energy generated are reported annually
to further support this position.
Asset type* TENT universe alignment UK CCC balanced pathway alignment
CHP Portfolio Onsite energy generation & efficient consumption Improved efficiency
Hydroelectric Portfolio Distributed energy generation Low carbon & decentralised
BESS Portfolio Energy storage & distribution A more flexible electricity system
Lighting solutions Onsite energy generation & efficient consumption Improved efficiency
* Based on current portfolio asset exposure
Operational quality through ESG analysis and asset optimisation
Operational ESG risks and opportunities associated with each asset continue to
be assessed and monitored using a combination of in-house expertise and
materiality-based sustainability frameworks. Where weaker behaviours may be
identified, these results feed into asset optimisation activity, where the
Investment Manager will look to use its investor influence to improve
behaviours and outcomes (for example improving the avoided carbon, improving
health & safety approaches and outcomes, improving community relations,
identifying opportunities to benefit a just transition). Strong portfolio
asset management is also expected to further increase the quality of the data
available to evidence the outcomes of the assets in relation to the energy
efficiency and transition theme and engagement work. Energy transition
outcomes (such as avoided carbon) are reported annually, in addition to asset
specific outcomes including alignment to the Sustainable Development Goals.
Climate analysis
Possible impacts of climate change on the investments are considered through
scenario analysis in order to quantify the possible physical and financial
impacts on an asset and establish a sensible path of mitigation.
The Investment Manager reports the outcomes of this analysis annually. This
includes a review of relevant legislation and possible transitional impacts,
alongside physical impact analysis. The most recent details are available in
the report against the TCFD provided in the annual report for the year ending
31 March 2023.
Conclusion
As we reflect on the progress of the Company to date, it is evident that the
Company has achieved the objectives set out during its IPO, investing in a
high quality, diversified portfolio of assets in niche areas of the energy
transition that provide a blend of risk and returns characteristics. The focus
on long term contracted income has enabled the Company to pay a covered
dividend since being fully deployed and in the most recent full year results
to 31 March 2023, the Group exceeded the NAV return targets indicated at IPO.
Despite achieving these objectives, the prevailing market conditions following
increases to interest rates and the small size of the Company have impacted
the Company's share price and in particular the liquidity in respect of the
Company's shares.
Should shareholders vote in favour of the proposed orderly realisation of
assets, we believe the high-quality assets in the portfolio are likely to
deliver significantly higher value for shareholders than the current share
price.
Jonathan Hick
TENT Fund Manager
Triple Point Investment Management LLP
12 December 2023
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties for the Company continue to be those
outlined on pages 77-81 of the Annual Report for the year ended 31 March 2023
and the Board expects those to remain valid for the remainder of the year.
There have been a number of changes to the risk profile since the publication
of the Annual Report, which are captured below.
· The valuation of investments is subject to uncertainties - the
volatility in the discount rate created increased uncertainty in the Q1 FY24;
and whilst recent market commentary indicates some stabilisation in discount
rates, the proposal to conduct an orderly realisation of assets may counter
the impact on valuations. As such we have raised the likelihood from moderate,
to moderate-to-high, although the risk remains within Board Risk Appetite.
· Counterparties' ability to make contractual payments - we have
increased the likelihood from moderate to moderate-to-high, as a consequence
of an adverse change in our counterparties aged debtor profile. Although
current payment obligations are up to date, we continue to monitor aged debtor
and cash profiles of key counterparties. Recognising the timeframe for which
the next payment obligation is due (summer 2024), it is considered prudent to
adjust the likelihood. This remains outside of Board Risk Appetite.
· Target returns not met - we have increased the likelihood of this
occurring from moderate, to moderate- to-high, as a result of the likely
increased cost in debt on maturity/extension of the current RCF facility which
would have a direct impact on returns. This moves the risk to 'outside' of
Board Risk Appetite. The Board intends to repay and cancel the RCF, as noted
above.
· Supply chain - we have amended the likelihood from moderate, to
low-to-moderate due to key material/stocks now being held on site or within
the EU supply chain. The overall risks profile is low and within Board Risk
Appetite. Consequently, this is no longer considered to be a principal risk or
uncertainty.
· Ability to raise debt on acceptable terms - the likelihood has moved
from low-to-moderate, to moderate-to-high as a result of changes in SONIA
rates since year end reporting. This has a direct correlation to the above
risk regarding target returns not being met. This risk is currently outside of
Board Risk Appetite. The successful repayment and cancellation of the RCF, as
per the Board's intention will mitigate this risk.
In light of the announcement made to move towards an orderly realisation of
assets, the risk of 'ability to raise additional equity' no longer features as
a material risk or uncertainty. This would remain as a principal risk if the
Board had not decided to proceed with an orderly realisation of assets.
Emerging risks
The emerging risks identified on page 82 of the Annual Report for the year
ended 31 March 2023, continue to be closely monitored.
At that time, the Board continued to consider Climate Change as an emerging
risk, given the continued uncertainty which exists on the severity of physical
climate change and the scale and nature of political action to counter it.
Climate change continues to be actively managed, monitored and reported to the
Board. The Investment Manager undertakes horizon scanning activities to
identify applicable legislative change, that may impact the strategic
direction or future reporting.
The 'Sustainability and the approach to
Environmental, Social and Governance' section above provides more
information.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge this condensed set
of financial statements which have been prepared in accordance with IAS 34 as
adopted by the UK, give a true and fair view of the assets, labilities,
financial position and profit or loss of the Company. The operating and
financial review includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8 of the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority namely: an indication of
important events that have occurred during the period and their impact on the
condensed financial statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and material
related party transactions in the period as disclosed in Note 10.
The Directors, all of whom are independent and non-executive, are:
· Dr John Roberts (Chair)
· Rosemary Boot (Senior Independent Director)
· Sonia McCorquodale
· Dr Anthony White
Shareholder information is as disclosed on the Triple Point Energy Transition
plc website.
Approval
This Directors' responsibilities statement was approved by the Board of
Directors and signed on its behalf by:
John Roberts
Chair
12 December 2023
Interim Condensed Statement of Comprehensive Income
For the six months ended 30 September 2023 (unaudited)
For the six months ended For the six months ended
30 September 2023 30 September 2022
Unaudited Unaudited
Note Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment income 3 3,123 - 3,123 2,793 - 2,793
Unrealised (loss)/gain from revaluation of investments at the period end 8 - (3,679) (3,679) - 5,016 5,016
Investment return 3,123 (3,679) (556) 2,793 5,016 7,809
Investment management fees 333 111 444 326 109 435
Other expenses 588 10 598 482 10 492
921 121 1,042 808 119 927
(Loss)/profit before taxation 2,202 (3,800) (1,598) 1,985 4,897 6,882
Taxation 4 - - - - - -
(Loss)/profit after taxation 2,202 (3,800) (1,598) 1,985 4,897 6,882
Other comprehensive income - - - - - -
Total comprehensive (Loss)/income 2,202 (3,800) (1,598) 1,985 4,897 6,882
Basic & diluted (loss)/earnings per share 5 2.20p (3.80p) (1.60p) 1.99p 4.90p 6.88p
The total column of this statement is the Income Statement of the Company
prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the UK. The supplementary revenue return and capital
columns have been prepared in accordance with the Association of Investment
Companies Statement of Recommended Practice (AIC SORP).
Interim Condensed Statement of Financial Position
As at 30 September 2023 (unaudited)
As at 30 September 2023 As at 31 March 2023
Unaudited Audited
Note £'000 £'000
Non-current assets
Investments at fair value through profit or loss 8 92,447 90,060
Current assets
Trade and other receivables 842 374
Cash and cash equivalents 2,359 9,257
3,201 9,631
Total assets 95,648 99,691
Current liabilities
Trade and other payables (547) (242)
(547) (242)
Net assets 95,101 99,449
Equity attributable to equity holders
Share capital 9 1,000 1,000
Share premium 13 13
Special distributable reserve 90,287 91,037
Capital reserve 3,293 7,093
Revenue reserve 508 306
Total equity 95,101 99,449
Shareholders' funds
Net asset value per Ordinary Share 7 95.09p 99.44p
The statements were approved by the Directors and authorised for
issue on 12 December 2023 and are signed on behalf of the Board by:
Dr John Roberts
Chair
Company registration number: 12693305
Interim Condensed Statement of Changes in Equity
For the six months ended 30 September 2023 (unaudited)
Issued Capital Share Premium Special Distributable Reserve Capital Reserve Revenue Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2023 1,000 13 91,037 7,093 306 99,449
Distributions to / Contributions from owners
Dividends paid - - (750) - (2,000) (2,750)
Sub-total - - (750) - (2,000) (2,750)
Total comprehensive (loss)/income for the period - - - (3,800) 2,202 (1,598)
As at 30 September 2023 1,000 13 90,287 3,293 508 95,101
For the six months ended 30 September 2022 (unaudited)
Issued Capital Share Premium Special Distributable Reserve Capital Reserve Revenue Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2022 1,000 13 91,444 3,319 361 96,137
Distributions to / Contributions from owners
Dividends paid - - (1,254) - (1,496) (2,750)
Sub-total - - (1,254) - (1,496) (2,750)
Total comprehensive income for the period - - - 4,897 1,985 6,882
As at 30 September 2022 1,000 13 90,190 8,216 850 100,269
The Company's distributable reserves consist of the Special distributable
reserve, Capital reserve attributable to realised gains and Revenue reserve.
There have been no realised gains or losses at the reporting date.
Interim Condensed Statement of Cash Flows
For the six months ended 30 September 2023
For the six months ended 30 September 2023 (Unaudited) For the six months ended 30 September 2022 (Unaudited)
Note £'000 £'000
Cash flows from operating activities
(Loss)/profit before taxation (1,598) 6,882
Loss/(gain) arising on the revaluation of investments at the period end 8 3,679 (5,016)
Cash flows from operations 2,081 1,866
Interest income (2,190) (1,644)
Interest received 1,337 1,640
Dividend income (933) (1,148)
Dividend received 933 1,148
Decrease/(increase) in receivables 32 (9)
Increase in payables 306 5
Net cash flows from operating activities 1,566 1,858
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss 8 (8,499) (1,469)
Loan Principal repaid 2,785 565
Net cash flows (used in) investing activities (5,714) (904)
Cash flows from financing activities
Dividends paid (2,750) (2,750)
Net cash flows from financing activities (2,750) (2,750)
Net (decrease) in cash and cash equivalents (6,898) (1,796)
Reconciliation of net cash flow to movements in cash and cash equivalents
Cash and cash equivalents at beginning of period 9,257 17,144
Net (decrease) in cash and cash equivalents (6,898) (1,796)
Cash and cash equivalents at end of the period 2,359 15,348
Notes to the Interim Financial Statements
For the six months ended 30 September 2023
1. General Information
The Company is incorporated and domiciled in the United Kingdom and
registered in England and Wales under number 12693305 pursuant to the
Act. The address of its registered office, which is also its principal
place of business, is 1 King William Street, London EC4N 7AF.
On 28 October 2022, the ordinary shares of the Company were admitted to the
premium listing segment of the Official List of the Financial Conduct
Authority and were admitted to the Premium Segment of the Main Market of the
London Stock Exchange. Prior to which, with effect from IPO, the Company's
ordinary shares traded on the Specialist Fund Segment of the Main Market of
the London Stock Exchange.
The financial statements comprise only the results of the Company, as its
investment in TENT Holdings is included at fair value through profit or
loss as detailed in the key accounting policies below.
The Company has appointed Triple Point Investment Management LLP as its
Investment Manager (the "Investment Manager") pursuant to the Investment
Management Agreement dated 25 August 2020. The Investment Manager is
registered in England and Wales under number OC321250 pursuant to the Act.
The Investment Manager is regulated by the FCA, number 456597.
The Company intends to achieve its Investment Objective by investing in a
diversified portfolio of energy transition investments mostly in the United
Kingdom. The Company, through TENT Holdings, will invest in a range of
energy transition assets which will contribute, or are already
contributing, to energy transition.
2. Basis of Preparation
The interim financial statements included in this report have been prepared in
accordance with IAS 34 Interim Financial Reporting. The interim financial
statements have been prepared under historical cost convention, as modified by
the revaluation of financial assets at fair value through profit or loss.
The interim financial statements have also been prepared as far as relevant
and applicable to the Company in accordance with the Statement of Recommended
Practice: Financial Statements of Investment Trust Companies and Venture
Capital Trusts ("SORP") issued in April 2021 by the Association of Investment
Companies ("AIC").
The interim financial statements are presented in sterling, which is the
Company's functional currency and rounded to the nearest thousand, unless
otherwise stated. The accounting policies, significant judgements, and key
assumptions are consistent with those used in the latest audited financial
statements to 31 March 2023 and should be read in conjunction with the
Company's annual audited financial statements for the year ended 31 March
2023.
The financial information contained in this Interim Report and Financial
Statements for the six months ended 30 September 2023 and the comparative
information for the year ended 31 March 2023 does not constitute statutory
accounts as defined in sections 435(1) and (2) of the Companies Act 2006.
Statutory Accounts for the year ended 31 March 2023 have been delivered to the
Registrar of Companies. The Auditor reported on those accounts. Its report was
unqualified and did not contain a statement s498(2) or (3) of the Companies
Act 2006
Basis of Consolidation
The objective of the Company through its wholly owned subsidiary TENT Holdings
Limited is to invest, via individual corporate entities for equity
investments, or through advancing proceeds to corporate entities for debt
investments, in Energy Transition Assets. TENT Holdings typically will issue
equity and will borrow to finance its investments.
The Directors have concluded that in accordance with IFRS 10, the Company
meets the definition of an investment entity having evaluated the criteria
that need to be satisfied. Under IFRS 10, investment entities are required to
hold subsidiaries at fair value through profit or loss rather than consolidate
them on a line-by-line basis, meaning TENT Holdings' cash and working capital
balances are included in the fair value of the investment rather than in the
Company's assets and liabilities. TENT Holdings has one investor which is the
Company. However, in substance, TENT Holdings is investing the funds of the
investors of the Company on its behalf and is effectively performing
investment management services on behalf of many unrelated ultimate
beneficiary investors.
Going Concern
The Directors have adopted the going concern basis in preparing the Interim
Report for the period to September 2023. In reaching this conclusion, the
Directors have considered the liquidity of the Company's portfolio of
investments as well as its cash position, income and expenditure commitments,
until March 2025.
As at 30 September 2023, the Company had net assets of £94.5 million
including cash balances of £2.4 million. The Company's sole wholly owned
subsidiary, TENT Holdings, has a £40 million RCF of which £2.4 million was
drawn at 30 September 2023 and a £0.9 million cash balance which on a Group
basis, offer sufficient cashflow to meet the Company's obligations, including
investment commitment of £26.9 million in BESS. The covenants of the RCF are
limited to gearing and interest cover and the Company is expecting to comply
with these covenants on drawdown and in future periods. The Company has
announced today that it is in receipt of an offer in relation to the sale of
the Field loan commitment for its carrying value. The transaction would be
expected to conclude in the quarter ending March 2024 and would enable the
Group to deleverage and cancel its RCF.
The Company's investment portfolio consists of fixed-rate debt investments,
with most of these investments having contractual maturities between 2031 and
2035. Additionally, the Company owns a portfolio of Hydroelectric assets,
which are fully operational and have an economic lifespan of over thirty
years. As a result, the Company benefits from long-term contractually
underpinned cash flows and a set of risks that can be identified and assessed.
The loan investments contribute a fixed return, and the Hydroelectric
Portfolio benefits from upward only RPI linked revenue flow under a UK
government scheme. The Hydroelectric Portfolio also benefits from fixed price
PPAs, with institutional counterparties, for the financial year. Forecast
revenues thereafter are subject to wholesale power prices, the levels of which
are based upon qualified independent forecasts.
The Company's cash outflows encompass operational expenses, debt servicing,
dividend payments, and costs associated with funding new assets. These
outflows are anticipated to be covered by the Company's current cash reserves
and cash generated from its operations. The Company actively monitors its cash
obligations on a regular basis to ensure it maintains adequate liquidity.
In the going concern assessment, the Investment Manager has performed a
downside risk assessment to March 2025 considering a decrease in income and
increase in operating expenditure and financing costs. Furthermore, an
assessment of a break case scenario has been performed considering further
revenue decreases and a substantial valuation write downs. The assessment
performed has confirmed that both the Company and the Group would remain
viable, fulfilling all obligations, while meeting the covenant conditions
associated with the RCF.
In response to the announcement that the Board intends to hold a General
Meeting in Q1 2024 to seek shareholder approval for matters associated with
the orderly realisation proposal, the Directors recognise that these
conditions indicate the existence of material uncertainty which may cast
significant doubt about the Company's ability to continue as a going concern.
The Directors acknowledge the recommendation from advisors to pursue an
orderly realisation of assets is currently the most favourable for
shareholders, however the Board does not exclude the possibility of exploring
other strategic options that may arise post-announcement. Due to the
uncertainty surrounding the company's path forward, the Directors have
determined that the financial statements of the Company should be prepared on
a going concern basis until clarity emerges following the shareholder vote.
The financial statements do not include the adjustments that would result if
the Group and the Company were unable to continue on a going concern basis.
Segmental reporting
The Chief Operating Decision Maker (the "CODM") being the Board of Directors,
is of the opinion that the Company is engaged in a single segment of business,
being investment in Energy Transition Assets.
The Company has no single major customer. The internal financial information
used by the CODM on a quarterly basis to allocate resources, assess
performance and manage the Company presents the business as a single segment
comprising the portfolio of investments in Energy Transition Assets.
Seasonal and cyclical variations
The Company's results do not vary significantly during reporting periods.
3. Investment Income
For the six months ended 30 For the six months ended 30
September 2023 (Unaudited) September 2022 (Unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on cash deposits 22 - 22 7 - 7
Interest income from investments 2,168 - 2,168 1,638 - 1,638
Dividend income from investments 933 - 933 1,148 - 1,148
3,123 - 3,123 2,793 - 2,793
4. Taxation
The tax for the period shown in the statement of Comprehensive Income is as
follows.
For the six months ended 30 September 2023 (Unaudited) For the six months ended 30 September 2022 (Unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit / (Loss) before taxation 2,202 (3,800) (1,598) 1,985 4,897 6,882
Corporation tax at 25% 551 (950) (399) 377 931 1,308
(2022-19%)
Effect of:
Tax relief for dividends designated as interest distributions (547) - (547) (312) - (312)
Dividend income not taxable (233) - (233) (218) - (218)
Capital losses / (gains) not deductible - 920 920 - (953) (953)
Surrendering of Tax losses to unconsolidated subsidiaries 229 30 259 153 22 175
UK Corporation Tax - - - - - -
5. Earnings Per Share
For the six months ended 30 September 2023 (Unaudited) For the six months ended 30 September 2022 (Unaudited)
Revenue Capital Total Revenue Capital Total
Profit / (Loss) attributable to the equity holders of the Company (£'000) 2,202 (3,800) (1,598) 1,985 4,897 6,882
Weighted average number of Ordinary Shares in issue ('000) 100,014 100,014 100,014 100,014 100,014 100,014
Profit / (Loss) per Ordinary Share - basic and diluted 2.20p (3.80p) (1.60p) 1.98p 4.90p 6.88p
There is no difference between the weighted average Ordinary or diluted number
of Shares.
6. Dividends
Interim dividends paid during the Dividend per share Total dividend
period ended 30 September 2023 Pence £'000
With respect to the quarter ended 1.375 1,375
31 March 2023 - paid 14 July 2023
With respect to the quarter ended 1.375 1,375
30 June 2023 - paid 29 September 2023
2.750 2,750
Interim dividends declared after Dividend per share Total dividend
30 September 2023 and not accrued in the period Pence £'000
With respect to the quarter ended 1.375 1,375
30 September 2023
1.375 1,375
Interim dividends paid during the Dividend per share Total dividend
period ended 30 September 2022 Pence £'000
With respect to the quarter ended 1.375 1,375
31 March 2022 - paid 8 July 2022
With respect to the quarter ended 1.375 1,375
30 June 2022 - paid 30 September 2022
2.750 2,750
On 13 December 2023, the Board declared an interim dividend of 1.375 pence per
share with respect to the period ended 30 September 2023. The dividend is
expected to be paid on or around 12 January 2024 to shareholders on the
register on 22 December 2023. The ex-dividend date is 21 December 2023.
7. Net assets per Ordinary share
The basic total assets per ordinary share is based on the total net assets
attributable to equity shareholders as at 30 September 2023 of £95.1 million
(31 March 2023: £99.4 million) and ordinary shares of 100 million in issue at
30 September 2023 (31 March 2023: 100 million).
There is no dilution effect and therefore no difference between the diluted
net assets per ordinary share and the basic total net assets per ordinary
share.
8. Investments at Fair Value through Profit or Loss
The Company designates its interest in its wholly owned direct subsidiary as
an investment at fair value through profit or loss.
Summary of the Company's valuation is below:
30 September 2023 31 March 2023
(Unaudited) (Audited)
£'000 £'000
Brought forward investment at fair value 90,060 78,952
through profit or loss
Loan advanced to TENT Holdings Limited 8,499 7,964
Shareholding in TENT Holdings Limited - 1,469
Capitalised interest 352 997
Loan principal repaid (2,785) (3,339)
Movement in fair value of investments (3,679) 4,017
Closing investment at fair value through 92,447 90,060
profit or loss
Loans advanced to TENT Holdings in the period totalled £8.5 million. The
advances were made at an interest rate of 7% to enable TENT Holdings to
complete the loan investment in BESS and for new investments in LEDs and
Innova.
The Company owns five shares in TENT Holdings Limited, representing 100% of
issued share capital, allotted for a consideration of £24.8 million. The fair
value of the Company's investments in TENT Holdings on 30 September 2023 is
£92.4 million (31 March 2023: £90.1 million).
Capitalised interest represents interest recognised in the income statement
but not paid. This is instead added to the loan balance on which interest for
future periods is computed. The loan from the Company to TENT Holdings, which
enabled TENT Holdings to complete investments into Harvest, Glasshouse and
Spark Steam, carry commensurate terms and repayment profiles. All payments
from the borrower and capitalised interest are in accordance and in line with
the contractual repayments with the respective underlying facility agreements
with Harvest, Glasshouse and Spark Steam as agreed at inception.
Reconciliation of Portfolio Valuation:
30 September 2023 31 March 2023
(Unaudited) (Audited)
£'000 £'000
Portfolio Valuation 94,046 86,042
Intermediate holding company cash 853 1,982
Intermediate holding company debt(1) (2,135) 329
Intermediate holding company net working capital (317) 1,707
Fair Value of Company's investments 92,447 90,060
at end of period
(1) At 30 September 2023 £2.4 million debt was drawn (31 March 2023: nil).
The debt balance represents the drawn balance and the arrangement fee which
are capitalised and expensed to profit or loss under amortised cost.
Fair Value measurements
The Company accounts for its interest in its wholly owned direct subsidiary,
TENT Holdings, as an investment at fair value through profit or loss.
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following 3 levels:
· level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
· level 2 - inputs other than quoted prices included within Level 1
that are observable for the assets or liabilities, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
· level 3 - inputs for assets or liabilities that are not based on
observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires significant
judgement by the Company. Observable data is considered to be market data that
is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market.
The financial instruments held at fair value are the instruments held by the
Group in the SPVs, which are fair valued at each reporting date. The
investments have been classified within level 3 as the investments are not
traded and contain certain unobservable inputs. The Company's investments in
TENT Holdings are also considered to be level 3 assets.
As the fair value of the Company's equity and loan investments in TENT
Holdings is ultimately determined by the underlying fair values of the equity
and loan investments, made by TENT Holdings, the Company's sensitivity
analysis of reasonably possible alternative input assumptions is the same as
for those investments.
There have been no transfers between levels during the period.
Valuations are derived using a discounted cashflow methodology in line with
IPEV Valuation Guidelines and consider, inter alia, the following:
i. due diligence findings where relevant;
ii. the terms of any material contracts including
PPAs;
iii. asset performance
iv. power price forecasts from leading consultants; and
v. the economic, taxation or regulatory environment
The DCF valuation of the Group's investments represents the largest component
of GAV, and the key sensitivities are considered to be the discount rate used
in the DCF valuation and assumptions relating to inflation, energy yield and
power prices.
The shareholder loan and equity investments in TENT Holdings are valued as a
single asset class at fair value in accordance with IFRS 13 Fair Value
Measurement.
Sensitivity
Sensitivity analysis is produced to show the impact of changes in key
assumptions adopted to arrive at the valuation. For each of the sensitivities,
it is assumed that potential changes occur independently of each other with no
effect on any other base case assumption, and that the number of investments
in the portfolio remains static throughout the modelled life.
The analysis below shows the sensitivity of the portfolio value (and its
impact on NAV) to changes in key assumptions as follows:
Discount rate
The weighted average valuation discount rate applied to calculate the
portfolio valuation is 7.3% (31 March 23: 6.6%).
An increase or decrease in this rate of 0.5% has the following effect on
valuation.
Discount Rate NAV per share impact -0.5% change Total portfolio value +0.5% change NAV per share impact
Pence £'000s £'000s £'000s Pence
Valuation - September 2023 2.93 95,381 92,447 89,805 (2.64)
Energy yield
The table below shows the sensitivity of the Hydroelectric Portfolio valuation
to a sustained decrease or increase of energy generation by minus or plus 5%
on the valuation, with all other variables held constant. The fair value of
the Hydroelectric Portfolio is assessed on a "P50" level of electricity
generation, representing the expected level of generation over the long term.
A change in the forecast energy yield assumptions by plus or minus 5% has the
following effect.
Energy Yield NAV per share impact -5% change Total portfolio value +5% change NAV per share impact
Pence £'000s £'000s £'000s Pence
Valuation - September 2023 (3.03) 89,414 92,447 95,459 3.01
Power Prices
The sensitivity considers a flat 10% movement in power prices for all years,
i.e. the effect of adjusting the forecast electricity price assumptions
applicable to the Hydroelectric Portfolio down by 10% and up by 10% from the
base case assumptions for each year throughout the operating life of the
Hydroelectric Portfolio.
A change in the forecast electricity price assumptions by plus or minus 10%
has the following effect.
Power Prices NAV per share impact -10% change Total portfolio value +10% change NAV per share impact
Pence £'000s £'000s £'000s Pence
Valuation - September 2023 (2.55) 89,893 92,447 94,914 2.47
Inflation
The Hydroelectric Portfolio's income streams are principally subsidy based,
which is amended each year with inflation and power prices, which the
sensitivity assumes will move with inflation. Operating expenses relating to
the Hydroelectric Portfolio typically move with inflation, but debt payments
on the shareholder loans are fixed. This results in the portfolio returns and
valuations being positively correlated to inflation. The methodology adopted
for RPI, CPI and power curve indexation follows the latest available (November
2023) Office for Budget Responsibility forecast for the 12 months from the
September 2023 valuation date. Thereafter, a long-term 3.25% assumption is
made in relation to RPI, dropping to 2.65% in 2031 to reflect the phase out of
RPI. In relation to power curve indexation, a long-term 3.25% assumption is
made, dropping to 3.00% as wholesale power prices are not intrinsically linked
to consumer prices. The Company's long-term assumption for CPI remains at
2.25%.
The sensitivity illustrates the effect of a 0.5% decrease and a 0.5% increase
from the assumed annual inflation rates in the financial model throughout the
operating life of the portfolio.
Inflation NAV per share impact -0.5% change Total portfolio value +0.5% change NAV per share impact
Pence £'000s £'000s £'000s Pence
Valuation - September 2023 (2.09) 90,358 92,447 94,654 2.21
9. Share Capital
For the six months ended 30 September 2023 (Unaudited)
Allotted, issued and fully paid: Number of shares Nominal value of shares (£)
Ordinary shares of 1 pence each
Opening balance at 1 April 2023 100,014,079 1,000,141
Ordinary Shares issued - -
Closing balance of Ordinary Shares at 100,014,079 1,000,141
30 September 2023
For the six months ended 30 September 2022 (Unaudited)
Allotted, issued and fully paid: Number of shares Nominal value of shares (£)
Ordinary shares of 1 pence each
Opening balance at 1 April 2022 100,014,079 1,000,141
Ordinary Shares issued - -
Closing balance of Ordinary Shares at 100,014,079 1,000,141
30 September 2022
Shareholders are entitled to all dividends paid by the Company and, on a
winding up, provided the Company has satisfied all its liabilities, the
shareholders are entitled to all of the residual assets of the Company.
10. Related Party Transactions
Directors' Fees
The amounts incurred in respect of Directors' fees during the period to 30
September 2023 totalled £100,000 (30 September 2022: £100,000). These
amounts have been fully paid at 30 September 2023. The amounts paid to
individual directors during the period were as follows:
For the six months ended 30 September 2023 For the six months ended 30 September 2022
Dr John Roberts (Chair) £37,500 £37,500
Rosemary Boot £22,500 £22,500
Sonia McCorquodale £20,000 £20,000
Dr Anthony White £20,000 £20,000
Directors' Expenses
The expenses claimed by the Directors during the period to 30 September 2023
were £256 (30 September 2022: £190). These amounts were fully paid at 30
September 2023. The amounts paid to individual directors during the period
were as follows:
For the six months ended For the six months ended 30 September 2022
30 September 2023
Dr John Roberts (Chair) £58 £28
Rosemary Boot £60 £61
Sonia McCorquodale - £75
Dr Anthony White £138 £26
Directors' interests
Details of the direct and indirect interest of the Directors and their close
families in the ordinary share of one pence each in the Company at 30
September 2023 were as follows:
Number of Shares % of Issued share Capital
Dr John Roberts (Chair) 40,000 0.04%
Rosemary Boot 40,000 0.04%
Sonia McCorquodale 10,000 0.01%
Dr Anthony White 40,000 0.04%
The Company and Subsidiaries
During the period, the Company advanced loans amounting to £8.5 million to
TENT Holdings Limited. These loans were at an interest rate of 7% and were
used by TENT Holdings to invest in loans to Innova, Field and Boxed.
During the period interest totalling £2.2 million was earned on the
Company's long-term interest-bearing loan between the Company and its
subsidiary (30 September 2022: £1.6 million). At the period end, £0.7
million was outstanding (31 March 2022: £0.3 million).
The loans from the Company to TENT Holdings are unsecured; the underlying
loans from TENT Holdings to the investment portfolio are secured against the
assets of the borrowing companies by a fixed and floating charge.
On 30 June 2023, TENT Holdings paid a £0.6 million dividend to the Company.
On 29 September 2023, an additional dividend of £0.3 million was paid by TENT
Holdings to the Company. The dividends represent commensurate dividends
received by TENT Holdings from the Hydroelectric portfolio in the same period.
The AIFM and Investment Manager
The Company and Triple Point Investment Management LLP have entered into the
Investment Management Agreement pursuant to which the Investment Manager has
been given responsibility, subject to the overall supervision of the Board,
for active discretionary investment management of the Company's Portfolio in
accordance with the Company's Investment Objective and Policy.
As the entity appointed to be responsible for risk management and portfolio
management, the Investment Manager is the Company's AIFM. The Investment
Manager has full discretion under the Investment Management Agreement to make
investments in accordance with the Company's Investment Policy from time to
time.
This discretion is, however, subject to: (i) the Board's ability to give
instructions to the Investment Manager from time to time; and (ii) the
requirement of the Board to approve certain investments where the Investment
Manager has a conflict of interest in accordance with the terms of the
Investment Management Agreement.
Under the terms of the Investment Management Agreement, the Investment Manager
is entitled to a fee calculated at the rate of:
· 0.9 per cent, per annum of the adjusted NAV in respect of the Net
Asset Value of up to, and including, £650 million; and
· 0.8 per cent, per annum of the adjusted NAV in respect of the Net
Asset Value in excess of £650 million.
The management fee is calculated and accrues quarterly and is invoiced
quarterly in arrears. During the six months ended 30 September 2023,
management fees of £443,458 were incurred (30 September 2022: £434,840) of
which £220,308 (30 September 2022: £219,122) was payable at the period
end.
Investment Manager's Interest in shares of the Company
Pursuant to the Investment Management agreement, whereby the Investment
Manager is required to acquire shares in the company for a consideration equal
to 20% of the value of the management fee earned, net of taxes, on 23 August
2023 the Investment Manager purchased, on the secondary market, 79,338
ordinary shares of £0.01 each in the capital of the Company at an average
price of £0.599 per share.
In addition, on 17 April 2023 the Investment Manager made a market purchase of
324,675 shares at £0.611 per share.
Details of the interests of the Investment Manager, held by an entity within
the Wider Triple Point Group, in the ordinary shares of one pence each in the
Company as at 30 September 2023 were as follows:
Number of Shares % of Issued share Capital
Perihelion One Limited 1,296,170 1.30%
TP Nominees Limited 58,742 0.06%
Perihelion One Limited and TP Nominees are companies within the Wider Triple
Point Group.
Guarantees and other commitments
The Company is the guarantor of the £40 million RCF between its sole wholly
owned subsidiary TENT Holdings Limited and TP Leasing Limited. The RCF was
extended on 29 March 2023 by 12 months and at the balance sheet date 30
September 2023 £2.4 million had been drawn (31 March 2023: nil).
TP Leasing Limited is an established private credit and asset leasing business
which is managed by the Investment Manager and, as a result, is deemed to be a
related party as defined in the Listing Rules. The RCF is deemed to be a
"smaller related party transaction" for the purposes of LR11.1.10R. Prior to
entering into the Facility Agreement, (i) the RCF was approved by the
Directors and (ii) the Company obtained a fair and reasonable opinion from a
qualified, independent adviser. The Board was satisfied with the conflict
management procedures put in place, including team segregation within the
Investment Manager, and obtaining independent third-party pricing validation.
TENT Holdings has an investment commitment of £37 million, of which £26.9
million remains undrawn, to fund the build of a portfolio of four
geographically diverse BESS assets in the UK. The remaining undrawn balance of
£26.9 million is forecast to be deployed by 31 March 2024. The commitment is
expected to be funded via the RCF available to TENT Holdings. The Company has
announced today that it is in receipt of an offer to acquire the Field loan
commitment for its carrying value. The transaction would be expected to
conclude in the quarter ending March 2024 and would enable the Company to
repay and cancel the RCF.
11. Contingent Liabilities
In March 2022, the Company's wholly owned subsidiary, TENT Holdings Limited
entered into a Revolving Credit Facility ("RCF") agreement for £40 million.
The Company is a guarantor of this facility and as at 30 September 2023, the
total drawn balance of the RCF is £2.4 million (31 March 2023: Nil).
12. Events after the Reporting period
The Company has received an offer in relation to the sale of the Group's debt
facility provided to a subsidiary of Virmati Energy Ltd (trading as "Field")
for the purposes of building out a portfolio of BESS assets in the UK. The
offer, if progressed to completion, would pay the Group the full carrying
value of the loan. Should this progress to a binding offer and subsequent
sale, this would enable the Group to deleverage and cancel its Revolving
Credit Facility ("RCF").
The Company has announced that the Board have determined that an orderly
realisation of assets, and return of associated realised capital, is the most
viable option to maximise shareholder value in the short to medium term. The
Company will be seeking approval by shareholders of various proposals to this
effect in Q1 2024.
The Company has declared an interim dividend in respect of the period from 1
July 2023 to 30 September 2023 of 1.375 pence per Ordinary share, payable on
or around 12 January 2024 to holders of Ordinary shares on the register on 22
December 2023. The ex-dividend date will be 21 December 2023.
Glossary
The Act Companies Act 2006
AIC Code The AIC Code of Corporate Governance produced by the Association of Investment
Companies
AIFM The alternative investment fund manager of the Company, Triple Point
Investment Management LLP
AIFMD The EU Alternative Investment Fund Managers Directive 2011/61/EU
BESS Battery Energy Storage Systems
BESS Portfolio £37.0 million debt facility to a subsidiary of Virmati Energy Ltd (trading as
Field), to fund a portfolio of four Battery Energy Storage Systems assets in
the UK
CCC Climate Change Committee
CHP Combined heat and power
CHP Portfolio A total debt investment of £29 million into Harvest and Glasshouse and Spark
Steam
The Company Triple Point Energy Transition plc (company number 12693305)
DCF Discounted Cash Flow
Energy Transition Asset A project which falls within the parameters of the Company's investment
policy
ESG Environmental, Social and Governance
EU European Union
FCA Financial Conduct Authority
FRC Financial Reporting Council
GAV Gross Asset Value
Glasshouse Glasshouse Generation Limited
GHG Green House Gas
Group The Company and any subsidiary undertakings from time to time
Harvest Harvest Generation Services Limited
Hydroelectric Portfolio Elementary Energy Limited
Green Highland Allt Ladaidh (1148) Limited
Green Highland Allt Choire A Bhalachain (255) Limited
Green Highland Allt Phocachain (1015) Limited
Green Highland Allt Luaidhe (228) Limited
Achnacarry Hydro Limited
ITC Investment Trust Company
Investment Manager Triple Point Investment Management LLP
IPO The admission by the Company of 100 million Ordinary Shares to trading on the
Specialist Fund Segment of the Main Market, which were the subject of the
Company's initial public offering on 19 October 2020
IPO Prospectus The Company's Prospectus for its initial public offering, published on 25
August 2020
kWh Kilowatt-hour
LED Light-emitting Diode
Listing Rules Financial Conduct Authority Listing Rules
MW Megawatt
MWh Megawatt-hour
NAV The net asset value, as at any date, of the assets of the Company after
deduction of all liabilities determined in accordance with the accounting
policies adopted by the Company from time-to-time
Net Zero A target of completely negating the amount of greenhouse gases produced by
human activity, to be achieved by reducing emissions and implementing methods
of absorbing carbon dioxide from the atmosphere
OCR Ongoing charges ratio
PPA Power Purchase Agreement
PRI Principals for Responsible Investing
Project SPV Special Purpose Vehicle in which energy transition assets are held.
RCF Revolving Credit Facility
RES Renewable Energy Systems
SDG Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
SONIA Sterling Overnight Index Average
SORP Statement of Recommended Practice
Spark Steam Spark Steam Limited
TCFD Task Force on Climate-related Financial Disclosures.
TENT Holdings The wholly owned subsidiary of the Company: TENT Holdings Limited (company
number 12695849)
Wider Triple Point Group Triple Point LLP (company number OC310549) and any subsidiary undertakings
from time to time
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