REG - Triple Point Energy - Results for year ended 31 March 2023
19/06/2023 07:00
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RNS Number : 0666D Triple Point Energy Transition PLC 19 June 2023
19 June 2023
Triple Point Energy Transition plc
("TENT" or the "Company" or, together with its subsidiaries, the "Group")
RESULTS FOR THE YEAR ENDED 31 MARCH 2023
Transformative year; our new mandate is delivering compelling opportunities;
full capital commitment
9.2% NAV Total Return, full capital commitment, 1.1x cash dividend cover
The Board of Triple Point Energy Transition plc (ticker: TENT), the London
listed infrastructure investment company supporting the energy transition, is
pleased to announce its audited results for the year ended 31 March 2023.
The Company's focus this year was on building on its new investment mandate,
launched in August 2022, to seek opportunities in niche and exciting areas of
the energy transition, which offer superior risk adjusted returns and
diversification of revenue sources. TENT has now fully committed its existing
capital, delivered a 9.2% NAV total return and full cash dividend cover.
31 March 2023 31 March 2022
Net asset value ("NAV") £99.4 million £96.1 million
NAV per share 99.44 pence 96.12 pence
Dividend declared per share 5.50 pence 5.50 pence
Total NAV return(2) 9.2% 4.9%
Cash dividend cover ratio(1) (2) 1.1x 0.14x
Capital committed awaiting deployment(2 3) £44.4 million £44.9 million
Fully invested portfolio valuation £132.1 million £123.6 million
(including commitment at cost)(1)
(1) representative of total cash income, expenditure and financing costs for
the Company and TENT Holdings (the Company's wholly owned subsidiary), divided
by dividends paid in the financial year to 31 March 2023
(2) alternative performance measure
(3) portfolio commitments will be largely funded by the Group's undrawn £40
million Revolving Credit Facility ("RCF")
Financial Highlights
· Total NAV return of 9.2% for year ended 31 March 2023 (31 March
2022: 4.9%)
· Dividends declared in respect of the year ended 31 March 2023 total
of 5.50 pence per Ordinary Share, fully covered by operating cashflow 1.1x
(net of expenses and finance costs for TENT and TENT Holdings, the Company's
wholly owned subsidiary)
o Equivalent to a dividend yield of 9% on the share price at 31 March 2023
o Future period earnings will benefit from the deployment of the outstanding
commitment of £39.6m into the Battery Energy Storage Systems ("BESS")
portfolio.
· The Company's strategic focus on investing across the spectrum of the
energy transition has delivered a diversified set of income streams across the
portfolio, and the Company was unaffected by the Electricity Generator Levy.
· Weighted average project life remaining of 32 years, driven by the
long project life of the Hydroelectric Portfolio and debt investments
providing long term contractual cashflows, with 92% of projected underlying
income contractually underpinned over a 10-year period and 47% of income
linked to inflation.
· TENT announced on 14 March 2023 that it had completed, via its wholly
owned subsidiary TENT Holdings Limited ("TENT Holdings") a 12-month extension
of its fixed rate £40 million Revolving Credit Facility (RCF) with TP Leasing
Limited, extending it to 28 March 2025.
Operational highlights
· Fully committed capital across a diversified portfolio of
opportunities in the energy transition sector including, hydroelectric, CHP,
BESS and LED.
· Excellent portfolio performance with all asset classes contributing
positively to the strong financial performance.
· New technologies added to the portfolio, increasing portfolio
diversification, including:
o BESS;
o LED lighting; and
o post-period end, an investment in a renewables development company, Innova
Renewables.
· The Hydroelectric Portfolio performed marginally below expectations,
however there was good availability during the financial year taking full
advantage of the rainfall in Scotland.
· The deployment of the BESS portfolio has progressed well leading to
the accession of two assets in the security of the loan facility:
o The 20MW site at Oldham is now operational;
o Gerrards Cross is under construction and is anticipated to be operational
in 2023; and
o Two further BESS assets scheduled to become operational in 2024.
· The CHP portfolio continues to benefit from the volatile gas and
electricity wholesale market, illustrating the resilience of the economic
model of these assets throughout the cycle.
Pipeline Highlights
· Strong long-term pipeline of potential investment opportunities worth
£545 million including both debt and equity investments.
· Diverse range of technologies and sectors under consideration,
including solar, wind, battery storage, onsite generation, energy efficiency,
and hydrogen.
· The pipeline investments currently yield an average return of 9% and
cover UK and European markets.
Post Period Highlights
· The Group committed a £5 million fixed rate debt investment to
Innova Renewables, to help fund its development pipeline of solar, battery and
energy storage systems across the UK. The facility was fully drawn on 3 April
2023.
· In June 2023, the Group deployed a further £3.9 million into the
BESS portfolio, resulting in a total deployment to date of 22%.
· The Group successfully undertook the first drawdown under the RCF,
partly funding the BESS deployment.
John Roberts, the Company's Chair, commented:
"The year was a transformative period for TENT. In focusing wholly on niche,
but highly attractive, areas of the energy transition, we believe we have an
investment strategy which will deliver robust shareholder returns throughout
the cycle. The results we are announcing today amply bear out our confidence.
The Company's portfolio now includes 19 investments across attractive and key
energy transition technologies comprising hydroelectric, battery storage,
renewable power, solar and BESS development and LED lighting. This portfolio
has proven its earnings power with full dividend cover attained on delivering
the Company's dividend target of 5.50 pence per share (equating to a 9% yield
on the share price as at 31 March 2023). This has all been achieved whilst
avoiding any adverse impact from the Government's electricity generator levy.
Further, the Company's long term revenue cash flows, of which 92% are
contractually underpinned, provide strong visibility on the sustainability of
the portfolio's earnings.
In addition, the Company's significant pipeline of attractive opportunities
currently yield a high return, while further adding to the high level of
diversification already apparent in the Company's portfolio.
Whilst our share price has been impacted by the same equity market turbulence
that has affected all infrastructure investment companies, we do not believe
that our share price discount to NAV is an accurate reflection of the clear
attractions of the Company's differentiated strategy. The portfolio enjoys a
high level of underlying committed revenue and we believe this comprises a
highly attractive value opportunity for investors wishing to benefit from the
global energy transition."
For further information, please contact:
Triple Point Investment Management LLP +44 (0) 20 7201 8989
Jonathan Hick
Christophe Arnoult
J.P. Morgan Cazenove (Corporate Broker) +44 (0) 20 7742 4000
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
Hannah Ratcliff
Verity Parker
LEI: 213800UDP142E67X9X28
Further information on the Company can be found on its
website: http://www.tpenergytransition.com/
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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 £21m 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 £8m 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 £26.6m (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 £19.6m (excluding costs) - December 2021
· BESS Portfolio: commitment to provide a debt facility of £45.6m 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.£2.2m to a lighting
solutions provider to install efficient lighting and controls at a leading
logistics company - March 2023
· Innova: Provision of a £5m short term development financing facility
to Innova Renewables, building out a portfolio of Solar and BESS assets across
the UK - March 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.
You may view the Annual Report in due course on the Company's website.
http://www.tpenergytransition.com/
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Please note that page numbers in this announcement are in reference to the
Annual Report.
Strategic Report
Chair's Statement
Dear Shareholder,
I am pleased to present the results for Triple Point Energy Transition plc
("TENT" or the "Company") for the year ended 31 March 2023. This is our first
set of annual results reported under our new mandate and name, announced in
August 2022, which consolidated the Company's focus on investing across the
energy sector to support the transition to Net Zero.
Our investment mandate covers three thematic areas:
· distributed energy generation
· energy storage and distribution
· onsite energy generation and lower carbon consumption
This strategy reflects our conviction that a holistic, system-wide approach to
reducing emissions across every part of the energy sector is vital to
supporting the transition to Net Zero and to delivering attractive returns for
our investors. We also believe that this approach gives us a highly
differentiated position in our sector, offering shareholders exposure to a
diversified portfolio of attractive investments in sectors and investment
classes which are not typically targeted by many other investment trusts.
The past year has been marked by unprecedented challenges and opportunities in
the global energy sector. The devastating war in Ukraine, which has now
entered its second year, and the resulting energy crisis have exposed the
vulnerabilities and risks of relying on fossil fuels, especially imported gas,
for meeting our energy needs. This has also led to a cost-of-living crisis and
inflation increases, putting pressure on consumers and businesses. At the same
time, the events have triggered a wave of policy and market developments which
are designed to accelerate the energy transition. The EU's REPowerEU plan, the
US Inflation Reduction Act, China's 14th Five-Year Plan, and other initiatives
by major economies have created a huge investment potential for clean energy
technologies globally, through a strong regulatory framework and incentives
for deployment. Moreover, global investment in clean energy technologies
matched that of fossil fuels for the first time in 2022, signalling a shift in
investor preferences and expectations.
These global developments have a direct impact on the UK and EU markets, which
are the focus of our mandate. The UK and the EU are both committed to
achieving Net Zero emissions by 2050 and have set ambitious targets and
policies to accelerate the decarbonisation of their energy systems. The UK's
Powering Up Britain, the EU's Green Deal, and the Glasgow Climate Pact are
some of the key initiatives that demonstrate this commitment and provide a
clear direction for our investment strategy. The UK and the EU are also facing
increasing energy security concerns and rising energy costs, which create an
urgent need for more domestic, diversified, and reliable sources of energy.
This is where our investment portfolio can provide solutions and value for our
shareholders and society.
By investing holistically across the energy sector, in assets that generate,
distribute or conserve electricity or heat, we are able to capture the
opportunities and mitigate the risks arising from these developments. Our
three thematic areas of focus are complementary and synergistic, as they
enable a lower-carbon, more resilient, and more flexible energy system. They
also generate stable and predictable income for our investors, from long-term
contracts with high-quality counterparties or from wholesale or merchant
markets.
Investment Activity
I am delighted to report that the Company's remaining capital has been fully
committed to a portfolio of broadly diversified opportunities across the
energy transition sector. This achievement reflects our ability to discern and
execute attractive deals in a competitive market. We have strategically
utilised the funds to invest in multiple asset classes and capital structures,
providing a solid defence against risks and challenges. Importantly we balance
both debt and equity investments to ensure a consistent income stream, capital
preservation, and capital growth.
The Group has continued to advance funds under the £45.6 million debt
facility to a subsidiary of Virmati Energy Ltd, to fund a 110MW portfolio of
four BESS assets (the "BESS Portfolio"). During the period, £6.2 million of
the facility was utilised, with commitment fees being received in respect of
the undrawn balance. Post the balance sheet date, a further £3.9 million was
drawn.
The Group has also invested in new asset classes - LED lighting and solar
project development - through debt financing. This further enhances our
diversification, resilience to negative trends, and participation in
innovative technologies.
The Group's £2.2 million investment in the installation of new Light Emitting
Diodes ("LEDs") in several warehouses of an investment-grade global logistics
company, has led to a c.58% reduction in the warehouses' energy consumption.
These investments not only showcase our commitment to advancing this important
energy transition industry but also enable us to leverage the stability of
debt financing to support projects which reduce energy waste and drive
sustainability.
Portfolio Performance
The portfolio continued to deliver a strong performance with all asset classes
contributing positively to the financial performance of the Company.
The Hydroelectric Portfolio performed marginally below expectations. The
annual generation performance was c.5% lower than forecast, due to a local
grid curtailment of some of the schemes in March 2023. One scheme has
commenced development of water storage capacity and is progressing to the next
stage. This provides the opportunity to increase the annual generation
capacity by 1,250 MWh and allows the scheme to target periods of peak load
generation through a controlled release of the flow.
The deployment of the BESS Portfolio has progressed during the year, with the
asset located in Oldham now operational and the asset located in Gerrards
Cross under construction and expected to reach commercial operations in late
2023. The third and fourth projects are expected to be operational during
2024. Once fully deployed, the BESS assets will contribute to reduce grid
constraints and allow the inclusion of more renewable energy generators to the
energy mix.
The CHP Portfolio continues to benefit from the volatile gas and electricity
wholesale market which illustrates the resilience of the economic model of
these assets, as they benefit from dual revenue sources (wholesale market and
private offtake of heat and power).
Financing
The Group, via its wholly owned subsidiary, TENT Holdings Limited ("TENT
Holdings"), has a £40 million Revolving Credit Facility ("RCF") with TP
Leasing Limited, and in March 2023, we completed a 12-month extension of the
RCF to 28 March 2025. The interest rate charged is a fixed rate coupon of 6%
pa on drawn amounts.
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 extension to the RCF was
deemed to be a "smaller related party transaction" for the purposes of
LR11.1.10R and, therefore, was undertaken in accordance with the relevant
requirements of the Listing Rules.
The Group will make use of the RCF to fund its committed portfolio. The Group
will follow a prudent approach to gearing with a target medium-term gearing of
up to 40% of Gross Asset Value ("GAV") and a maximum gearing that will not
exceed 45% of GAV at the time of drawdown, in line with the Company's
borrowing policy.
As at 31 March 2023, the RCF had not been drawn, however it is expected that
the RCF will be fully utilised during 2024.
Financial Results
During the year, TENT achieved a total profit and comprehensive income of
£8.8 million (31 March 2022: £4.8 million), which is reflective of the
growing investment portfolio that has increased in value by 14% in the
financial year. Further information on profitability and financial performance
can be found on pages 128 to 153.
The Company generated a total NAV return for shareholders of 9.2%, in excess
of the Company's target. The NAV per share is 99.44 pence per share as at 31
March 2023 (31 March 2022: 96.12 pence per share), an annual growth rate of
3.5%, which was made possible through a combination of robust contractual
revenues and the revaluation of the investment portfolio.
TENT has delivered a dividend of 5.5 pence per share for the year, which was
cash covered 1.1x (31 March 2022: 0.14x). The enhancement in coverage reflects
the full deployment of the IPO proceeds in the financial year. As a result,
cash income generation has increased approximately 300% to £9.0 million (31
March 2022: £2.2 million).
Share Price
During the year, as part of a number of actions to improve the share price
liquidity and attract new investors, the Board decided to migrate to the
Premium Segment of the Main Market of the London Stock Exchange, having been
listed on the Specialist Fund Segment since the IPO in October 2020. The
Company commenced trading on the Premium Segment on 28 October 2022.
The Board continues to monitor the Company's share price, which has suffered
following the mini budget in September 2022 and in the higher interest rate
environment. At the financial year end, the Company's share price was 62.5
pence, representing a 37% discount to NAV (31 March 2022: 84.5 pence,
representing a 12% discount to NAV). The Board believes that the discount to
NAV is unwarranted, is driven in large part by illiquidity of the shares and
does not reflect the quality of the Group's portfolio, the robust nature of
contractual earnings, and the future potential of its strategy.
The Board is concerned by the continuing level of share price discount to NAV
and continues to consider ways to address the discount.
The Investment Manager has been actively engaging with stock market analysts,
existing and potential new shareholders and has an active investor relations
programme planned for the remainder of 2023.
In accordance with the Investment Management Agreement, the Investment Manager
has used 20% of the annual investment management fee (net of relevant taxes)
to acquire Ordinary Shares in the Company. The Investment Manager purchased
the following Ordinary Shares during the financial year:
- 28 September 2022 - 41,550 Ordinary Shares at an average price of
80.86 pence per share
- 22 December 2022 - 57,616 Ordinary Shares at an average price of
80.00 pence per share
As at 31 March 2023, including other shares purchased in the year, the
Investment Manager held a total of 1,042,157 Ordinary Shares in the Company,
representing approximately 1.0% of the total issued share capital.
Dividends
The Board is pleased to confirm the dividend in respect of the quarter to 31
March 2023 of 1.375 pence per share, payable on or around 14 July 2023 to
holders of Ordinary Shares on the register on 30 June 2023, bringing the total
annual dividend to the target of 5.50 pence per share. Cash received in the
Company's wholly owned subsidiary TENT Holdings, from the investee companies
by way of distributions, which includes interest and dividends, was £9.0
million. After operating and finance costs, the cash flow within the Company
and TENT Holdings was £5.9 million, cash covering the dividends paid during
the year of 5.50 pence per share by 1.1x.
The Company has set a dividend target of 5.50 pence per share for the year
ending 31 March 2024(1).The Company notes that the deployment of the loans to
the BESS Portfolio and Innova is expected to provide further income with which
to cover dividends over the course of FY24.
Notes:
(1) The dividend and return targets stated are Pounds 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")
The Company has adopted an approach to ESG which reflects the importance of
sustainability to the investment policy and to maximise the potential for our
ESG considerations to add value to the portfolio.
Throughout the year there has been a focus on developing relationships with
asset owners (where we have debt investments) and O&M contractors (where
we own the asset) to improve data collection and identify where discussion may
lead to improved action and ESG management of our portfolio. Climate and Net
Zero analysis are also a key priority with significant time allocated to the
evolution of these activities, which have been captured in our voluntary
reporting against the TCFD framework. The Board continues to engage fully to
support and seek progress on these fast evolving and important areas. The
Sustainability Report contains full details on the approach including
reporting aligned with a range of relevant industry frameworks and best
practice.
Summary & Outlook
The energy market is undergoing a seismic transformation, driven by the urgent
need for decarbonisation and a growing emphasis on energy security and
independence. The Company's broader investment mandate positions it for
success in this rapidly evolving landscape by diversifying its portfolio
across three thematic areas: distributed energy generation, onsite energy
generation and lower carbon consumption, and energy storage and distribution.
This approach not only mitigates risk and enhances resilience but also
supports the Net Zero pathway, presenting a favourable outlook for the
Company's investment prospects.
The Company is well-positioned to capitalise on the immense potential arising
from the ambitious renewable energy targets and various legislative
initiatives in the UK and EU markets, such as Powering Up Britain and
REPowerEU. These programmes aim to unlock a vast amount of investments and
create a favourable environment for the growth of clean energy technologies,
opening up a market worth $5.3 trillion across Europe(2). By investing in
innovative solutions for the decarbonisation of buildings and transport and
leveraging its expertise in cutting-edge sectors such as battery storage,
green hydrogen, and LED lighting, the Company aims to drive transformative
change and contribute to the global shift towards a low-carbon economy. The
Company also intends to pursue market-driven unsubsidised projects that can
offer higher returns with lower risks, as they are less exposed to policy
changes and provide increased flexibility. These projects further diversify
the Group's portfolio compared to other peers in the space and differentiate
the risk profile.
On behalf of the Board, I remain confident in the Company's ability to
continue generating sustainable income and capital growth for our
shareholders. We would like to extend the Board's thanks to shareholders for
their ongoing support and belief in our differentiated investment case.
Notes:
(2) Europe's Path to Clean Energy: A $5.3 Trillion Investment Opportunity |
BloombergNEF (bnef.com)
John Roberts
Chair
16 June 2023
Strategy and Business Model
The Company's purpose is to invest into infrastructure assets that contribute
to the energy transition and generate a stable and growing long-term income
stream for investors.
Originate Invest Operate and optimise Hold
TENT originates across the spectrum of the energy transition. TENT invests across the capital structure of an energy transition investment. TENT operate and optimise assets based on a two pronged approach. TENT's strategy is to hold investments to maturity.
Overview
In certain technologies such as CHP or BESS, investing in debt may enable TENT
to achieve better risk adjusted returns than equity.
This enables the Company to identify the most attractive risk and return
Firstly, TENT seeks to have exposure to strong management teams in an energy
characteristics of opportunities across the energy transition space. sub sector. For example, it has backed one of the leading renewables
developers in the UK, Innova Renewables. This long-term stewardship approach enables TENT to more successfully
In others, inflation protected contracts in more established technologies,
originate opportunities, with a view to aligning interests with project
such as hydro-electric power, may offer more attractive equity opportunities. counterparties over the investment period.
This typically means that TENT invests in more niche areas of the transition
Competitive Advantage and avoids areas with elevated valuations, such as subsidised large scale UK Working with a diverse range of specialist management. teams across a range of
solar and wind generation. energy sub sectors provides further diversification to investors.
TENT seeks to build long-term partnerships with developers and partners to Secondly, the Investment Manager's inhouse portfolio management team actively
secure repeat deal flow. manages the investments, identifying opportunities to enhance performance and
mitigate risks.
Risk Management read more about our rigorous approach to risk management on page 76
Governance read about our approach to governance on page 88
Changes to the Company's Investment Policy
Following approval at the Company's AGM on 25 August 2022, the Company revised
its Investment Policy, shifting focus from solely Energy Efficiency
investments in the United Kingdom towards a broader spectrum of Energy
Transition Assets in both the UK and Europe. This revision to the Investment
Policy reflects a strategic adaptation to the evolving energy market and
global trends. By focusing on Energy Transition Assets and expanding its
geographical scope, the Company is positioning itself to capitalise on the
growing demand for sustainable and renewable energy solutions. This is in line
with global efforts to combat climate change and transition towards a
low-carbon economy. It allows the Group to invest in innovative businesses
that are contributing to the energy transition, thereby potentially enhancing
the Company's portfolio and returns.
Investment Objective
The Company's Investment Objective is to generate a total return for investors
comprising sustainable and growing income and capital growth.
Investment Policy
The Company intends to achieve its investment objective by investing in a
diversified portfolio of Energy Transition Assets typically via the
acquisition of equity in, or the provision of debt financing to, the relevant
Investee Company. The Company may invest in opportunities in the United
Kingdom (and the Crown Dependencies) and Europe.
The Group will invest in a range of Energy Transition Assets which meet the
following criteria:
· contribute towards the energy transition to lower, or zero, carbon
emissions
· are established technologies
· contribute to the generation of stable and predictable income across
the Company's portfolio, as a whole, arising from:
o long-term revenues based on availability, usage, consumption or energy
savings-based contracts with good quality industrial, governmental, and
corporate Counterparties or off-takers (as assessed by the Investment
Manager's due diligence processes), including Counterparties which represent
multiple end-users; or
o assets with income from wholesale or merchant sources (including, but not
limited to, battery energy storage, pumped storage or other power storage and
discharge systems and renewable power assets), typically where the Investee
Company benefits from an option to put in place a long term fixed contractual
price if it deems it necessary to do so and where operated by a reputable
operator; and
· entitle the Company to receive cash flows over the medium to
long-term in Developed Country Currencies. The Company may, but does not
intend to, enter into any currency hedging arrangements.
The Group's portfolio of Energy Transition Assets will predominantly comprise
operational Energy Transition Assets. It will invest in either single assets
or portfolios of multiple assets.
Subject to the investment restrictions set out below, the Group may, also
invest in assets that are in the Development Phase or the Construction Phase,
either directly or through funding of a third-party developer, where such
investments will deliver an attractive risk adjusted return.
In addition, the Company may invest in or acquire minority interests in
companies with a strategy that aligns with the Company's overarching
investment objective, such as developers, operators or managers of Energy
Transition Assets ("Other Related Companies").
The Group will seek to diversify its commercial exposure through contractual
relationships, directly or indirectly (through the Investee Company), with a
range of different Counterparties and off-takers, as appropriate to the
relevant investment.
Investments may be acquired from a single or a range of vendors and the Group
may also enter into joint venture arrangements alongside one or more
co-investors, where the Group retains control or has strong minority
protections. Recognising the different risk profiles and business models of
the various technologies, the Group can invest across both debt and equity
investments. Debt investments will include market standard downside
protections including, but not limited to, cash reserve accounts, security and
have robust contractual and covenant protections.
Investment restrictions
The Company will invest and manage its assets with the objective of spreading
risk and, in doing so, will maintain the following investment restrictions:
· no single debt commitment or debt investment to fund, via an Investee
Company, one or more Energy Transition Asset(s) will represent more than 20
per cent. of Adjusted Gross Asset Value. No single equity investment into an
Energy Transition Asset directly or via an Investee Company, will represent
more than 20 per cent. of Adjusted Gross Asset Value except, where the Group
has control over an Investee Company which holds multiple Energy Transition
Assets and such assets are standalone economic operations, between which risk
can be apportioned separately, this restriction shall apply to each individual
Energy Transition Asset;
· the aggregate maximum exposure to any Counterparty will not exceed 20
per cent. of Adjusted Gross Asset Value (and where an Energy Transition Asset
derives revenues from more than one source, the relevant Counterparty exposure
in each case shall be calculated by reference to the proportion of revenues
derived from payments received from the Counterparty, rather than any other
source). This restriction does not apply to circumstances where all, or
substantially all, of the revenue generated by an Energy Transition Asset is
derived through connection to the wholesale electricity market, for example,
transmission or distribution networks, where there are multiple potential
off-takers;
· the aggregate maximum exposure to assets in the Development Phase and
the Construction Phase will not exceed, 25 per cent. of Adjusted Gross Asset
Value, provided that, within this limit, the aggregate maximum exposure to
assets in the Development Phase will not exceed 5 per cent. of Adjusted Gross
Asset Value, and the aggregate exposure to any one Developer will not exceed
10 per cent. of Adjusted Gross Asset Value. The restriction on Construction
Phase assets will not apply to assets where on-site commissioning is expected
to be completed within a period of three months and any equipment on order is
sufficiently insurance wrapped;
· at least 70 per cent. of the value of the Group's portfolio of Energy
Transition Assets will comprise United Kingdom based investment;
· the Group will not invest more than 5 per cent. of Adjusted Gross
Asset Value, in aggregate, in the acquisition of minority stakes in Other
Related Companies, and at all times such investments will only be made with
appropriate minority protections in place;
· neither the Group nor any of the Investee Companies will invest in
any UK listed closed-ended investment companies; and
· the Company will not conduct any trading activities which are
significant in the context of the Group as a whole.
Compliance with the above investment limits will be measured at the time of
investment or in the case of commitment at the time of commitment, and
noncompliance resulting from changes in the price or value of assets following
investment will not be considered as a breach of the investment limits.
For the purposes of the foregoing, the term "Adjusted Gross Asset Value" shall
mean the aggregate value of the total assets of the Company as determined
using the accounting principles adopted by the Company from time to time as
adjusted to include any third-party debt funding drawn by, or available to,
any unconsolidated Holding Entity.
Borrowing Policy
The Directors intend to use gearing to enhance the potential for income
returns and long-term capital growth, and to provide capital flexibility.
However, the Company will always follow a prudent approach for the asset class
with regards to gearing, and the Group will maintain a conservative level of
aggregate borrowings.
Gearing will be employed either at the level of the Company, at the level of
any Holding Entity or at the level of the relevant Investee Company and any
limits set out in this document shall apply on a look-through basis. The
Company's target medium term gearing for the Wider Group will be up to 40 per
cent. of Gross Asset Value, calculated at the time of drawdown.
The Group may enter into borrowing facilities at a higher level of gearing at
the Investee Company or Holding Entity, provided that the aggregate borrowing
of the Wider Group shall not exceed a maximum of 45 per cent. of Gross Asset
Value, calculated at the time of drawdown.
Debt may be secured with or without a charge over some or all of the Wider
Group's assets, depending on the optimal structure for the Group and having
consideration to key metrics including lender diversity, cost of debt, debt
type and maturity profiles. Intra-group debt between the Company and (i)
Holding Entities and/or (ii) Investee Companies subsidiaries will not be
included in the definition of borrowings for these purposes.
Hedging and Derivatives
The Company will not employ derivatives for investment purposes. Derivatives
may however be used for efficient portfolio management.
The Wider Group will only enter into hedging contracts (in particular, in
respect of inflation, interest rate, currency, electricity price and commodity
price hedging) and other derivative contracts when they are available in a
timely manner and on acceptable terms. The Company reserves the right to
terminate any hedging arrangement in its absolute discretion. Any such hedging
transactions will not be undertaken for speculative purposes. The Company can,
but does not intend to, enter into any currency hedging.
Cash management
The Company may hold cash on deposit for working capital purposes and awaiting
investment and, as well as cash deposits, may invest in cash equivalent
investments, which may include government issued treasury bills, money market
collective investment schemes, other money market instruments and short-term
investments in money market type funds ("Cash and Cash Equivalents"). There is
no restriction on the amount of Cash and Cash Equivalents that the Company may
hold and there may be times when it is appropriate for the Company to have a
significant Cash and Cash Equivalents position.
Key Performance Indicators ("KPIs")
The Company sets out below its KPIs which it uses to track the performance of
the Company over time against the objectives as described in the Strategic
Report on pages 14 to 85.
The Board believes that the KPIs detailed below provide shareholders with
sufficient information to assess how effectively the Company is meeting its
objectives. The Board monitors these KPIs on an ongoing basis.
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
Dividends per share (share)(3) The dividend reflects the Company's ability to deliver a low-risk income The Company is paying a 5.50 pence per share dividend in respect of the year The Company's target was to pay a dividend of 5.50 pence per share in respect
stream from the portfolio. ended 31 March 2023 (5.50 pence per share for the period to 31 March 2022). of the year to 31 March 2023, which it achieved.
Dividends paid to shareholders and declared in relation to the year.
Total NAV return (%)(4) The total NAV return measure highlights the gross return to investors 9.2% (4.9% for the year to 31 March 2022). Total NAV return for the year ended 31 March 2023 is 1.2% above the target of
including dividends paid. 7% - 8%. NAV return was generated through dividends paid of 5.7% and capital
NAV growth and dividends paid per share in the year. growth of 3.5%.
NAV per share (pence) The NAV per share shows our ability to grow the portfolio and to add value to 99.44 pence per share. (96.12 pence per share for the year to 31 March 2022). NAV of £99.5 million or 99.44 pence per share as at 31 March 2023.
it throughout the lifecycle of our assets.
NAV divided by number of shares outstanding as at the period end.
Cash dividend cover(3,4) Reflects the Company's ability to cover its dividends from the income received 1.1x. The Company has successfully paid a cash covered dividend and has experienced
in its wholly owned subsidiary, TENT Holdings, from the portfolio companies.
the advantages of a full year of income since the IPO proceeds were fully
Operational cash flow divided by dividends paid to shareholders during the The Company delivered a dividend for the year cash covered 1.1x (0.14x for the deployed and committed.
year. year to 31 March 2022).
Contractual Revenue The forecasted revenue contractually underpinned and due to the Group 92% of forecasted income is contractually underpinned and due to the Group The Group has stable and predictable income stream from interest payments and
encompassing two key components: interest payments on debt facilities and over the next 10 years. government subsidies, ensuring the financial stability and growth of the
Average percentage of underlying forecast income contractually underpinned government subsidies received by the equity investee companies. organisation.
over the next 10 years.
Ongoing Charges Ratio ("OCR")(4) Ongoing charges shows the effect of the operational expenses incurred by the 1.94% annualised (1.38% for the year to 31 March 2022). Company level budgets are approved annually by the Board and actual spend is
Company.
reviewed quarterly. This is a key measure of our operational performance.
Annualised ongoing charges (i.e., excluding acquisition costs and other Keeping costs low supports our ability to pay dividends. The increase in OCR
non-recurring items, such as the premium listing application costs) divided by has mainly been driven by the increase in management fees. In the prior
the average published undiluted NAV in the period, calculated in accordance financial year, the management fee calculation was 0.9% of deployed IPO
with Association of Investment Companies guidelines. proceeds until 10 December 2021. At this date 75% of net IPO proceeds had been
deployed and the investment management fee calculation changed to 0.9% of NAV.
Avoided emissions(4) A measure of our success in investing in projects that have a positive 27,112 tonnes CO(2) avoided in the year ended 31 March 2023 (17,074 tonnes The tCO(2) avoided has increased compared to end of year 2022 as expected, due
environmental impact through a decrease in CO(2) emissions compared to an CO(2) avoided for the year to 31 March 2022). to continued deployment and the inclusion of full-year data for the
The carbon emissions avoided by the Company's investments. equivalent asset. Hydroelectric Portfolio.
Gross loan to value ("LTV")(4) The LTV measures the prudence of our financing strategy, balancing the 0% (0% for the year to 31 March 2022). The Group will follow a prudent approach to gearing with a target medium-term
potential amplification of returns and portfolio diversification that come target gearing of up to 40% of GAV and a maximum gearing that will not exceed
The proportion of our GAV that is funded by borrowings. with using debt against the need to successfully manage risk. 45% of GAV, at the time of drawdown.
On full drawdown of the RCF, the gross LTV is expected to be around 30%, based
on prevailing NAV and all the existing commitments.
Notes:
(3)Investors should note that references to "dividends" and "distributions"
are intended to cover both dividend income and income which is designated as
an interest distribution for UK tax purposes and therefore subject to the
interest streaming regime applicable to investment trusts.
(4)Alternative Performance Measure.
Investment Manager's Report
Review of the Period
The past year has been significant for the Company, marked by fully committing
all of the Group's remaining capital, broadening of the Company's investment
mandate with the change in Company name to reflect this, as well as the
migration of the Company's shares to trading on the Premium Segment of the
Main Market of the London Stock Exchange. These events reflect our strategic
vision and ambition to drive sustainable growth and positive impacts in
today's challenging energy market.
A diversified mandate provides numerous advantages, such as greater
flexibility to invest in a wide array of opportunities and the ability to
adapt to market changes. This diversification mitigates risk and allows us to
stay competitive in the face of emerging technologies and regulatory shifts.
The Group's strategic investments are unaffected by the Electricity Generator
Levy. Our successful transactions to date have demonstrated the Investment
Manager's expertise, showcasing our experience in managing a range of asset
classes and capital structures, whilst building a compelling pipeline. In the
deals closed to date, 92% of the Group's revenues are contracted for the next
ten years, with 47% of the Group's revenues being linked to inflation,
providing a high level of visibility and security over the Group's income
stream.
As we continue to expand our portfolio, during the financial year we have
ventured into new asset classes and capital structures, for example
receivables financing of LED lighting and solar and BESS project development
through a debt structure. These investments not only underscore our commitment
to advancing innovative technologies but also allow us to leverage the
stability of debt financing to support projects that drive energy transition
and sustainability, whilst generating ongoing contractual returns for the
Group at an attractive risk adjusted rate.
The investment trust market as a whole has had a challenging year, and this
compounded with the scale and illiquidity of the Company's shares has driven
its discount to NAV. We do not believe that the Company's discount to NAV is
reflective of the quality of the Group's portfolio.
Investments
LED
During the period, the Group's lighting service partner completed multiple
projects installing LED lighting at logistics warehouses, totalling c.£2.2
million. Starting in September 2022, the Group has received monthly repayments
for its fixed rate receivables financing, with "hell or high water"(5) income
contracted over the next five years.
Solar Development Financing
In March 2023 the Group committed to providing a £5 million development debt
facility to Innova Renewables Limited, ("Innova"), part of the Innova group,
one of the UK's leading solar and BESS developers and operators. The facility
will be used to develop ground-mounted solar and BESS assets across the UK.
The facility has a 12-month term and delivers fixed rate contractual returns
to investors that are materially higher than the Group's target return of 7-8%
pa, reflecting the flexibility of the Group's investment strategy. The
facility was fully drawn on 3 April 2023.
BESS Portfolio
In March 2022, the Group committed £45.6 million fixed rate debt facility to
fund a portfolio of four geographically diverse BESS assets in the UK. The
debt facility is provided to a subsidiary of Virmati Energy Ltd and £6.3
million was drawn at 31 March 2023, with a further drawdown subsequent to the
balance sheet date of £3.9 million, resulting in 78% of the facility
remaining undrawn. It is expected that the facility will be fully drawn in
2024.
Portfolio Overview
Tech Exposure(6)
CHP 19.0% 25.1
Hydro 41.1% 54.3
BESS 34.5% 45.6
LED 1.6% 2.1
Development 3.8% 5.0
Total 100% 132.1
Investment Type(6)
Debt 58.9% 77.8
Equity 41.1% 54.3
Total 100% 132.1
Lifecycle Stage(6)
Operating 66.4% 87.7
Construction 3.7% 4.9
Commitments awaiting deployment 26.1% 34.5
Development 3.8% 5.0
Total 100% 132.1
Asset Exposure(6)
Harvest 7.0% 9.2
Glasshouse 6.9% 9.2
Spark Steam 5.1% 6.7
Achnacarry 18.5% 24.4
Choire A Bhalachain 3.4% 4.6
Elementary Energy 2.6% 3.4
Ladaidh 6.1% 8.1
Luaidhe 3.6% 4.7
Phocachain 6.9% 9.1
BESS Drawn 4.7% 6.2
BESS Commitment 29.8% 39.4
LED 1.6% 2.1
Development 3.8% 5.0
Total 100% 132.1
Underlying Counterparty Exposure(6)
Non-Investment Grade (Unrated) 57.4% 75.7
Investment Grade (Rated) 42.6% 56.3
Total 100% 132.1
Notes:
5 With an absolute payment obligation.
(6) Weighted on the sum of underlying portfolio held at fair value and
commitments waiting deployment held at cost.
Portfolio performance
CHP Portfolio
In 2021 the Group made fixed rate debt investments into a portfolio of three
Combined Heat and Power ("CHP") Energy Service Centre Companies ("ESCos) which
deliver heat and power to glasshouses leased by a large-scale tomato grower.
These ESCos have continued to perform above the budget in the financial year.
This demonstrates the benefits of the economic model underlying these
projects, which generate revenues from both the wholesale electricity market
and/or direct offtake of heat and power by the glasshouse occupiers.
The benefit of the CHP assets' business model is that it has two
countercyclical sources of revenue, thereby providing a stable income which,
in turn, underpins the loan repayments to the Group, as highlighted this year.
Under ordinary conditions, where energy prices are lower than they are
currently, the revenues generated by the CHP projects are predominantly from
the demand from the tomato producers which purchase the heat and power
produced by the CHP assets to operate their glasshouses. However, during times
of higher energy prices, the electricity produced by the CHP assets during
peak load periods is able to be exported and provides the projects with
significant revenues from the wholesale electricity market instead.
In December 2022, following a difficult trading period, the company leasing
the glasshouses underwent a change of ownership resulting in a stronger
counterparty for the Group. The recapitalised tomato grower has boosted the
management team to support and reposition the business. This provided an
opportunity for the Group to renegotiate some of the terms of the facility
agreement and introduce more reporting requirements.
The duality of the model also underpins the dual purpose of the assets in
supporting the grid by providing electricity during the peak demand periods
and supporting the UK local food supply at a time when both sectors were
challenged by their respective constraints.
This year, the CHP Portfolio avoided 18,098 tCO(2) equivalent emissions(7).
Hydroelectric Portfolio
The financial year ended 31 March 2023 marked the first full year of ownership
of the Hydroelectric Portfolio. During the period, the nine hydroelectric
schemes performed below expectation. The annual generation performance of the
portfolio was closely aligned to the long-term energy yield forecast, with a
variance of less than 5%. The marginal variance was due to a temporary period
of curtailment imposed on certain schemes by the local grid operator in March
2023.
Portfolio performance since the commissioning of the nine assets has been
reliable and closely corroborates with the power generation forecasts based on
historical rainfall data. Accordingly, the average annual generation
performance over the last six years is within 1% of the P50 estimate.
With the current high level of technical availability and reliable forecasting
at our disposal, it has become imperative for us to focus on pursuing
optimisation to maximise the scheme's potential. Loch Blair is the largest
generator of the Hydroelectric Portfolio in MWh per year and we have focused
on optimising this scheme. The optimisation will involve construction of a
small dam upstream of the intake. The reservoir created will attenuate peak
rainfall which combined with a control of the release of the flow feeding the
existing plant will increase the annual generation. This will enable the
scheme to target the peak load period of the tariff in the PPA, increasing
revenues from the power wholesale.
All Feed-in-Tariff revenues enjoy annual indexation to UK RPI. This has
resulted in Feed in Tariff rates being adjusted upwards by RPI of 13.40% in
2023. 3.00% is forecast from 2024 to 2031 and 2.40% is forecast thereafter,
which has given an uplift to revenues and underpins the highly defensive and
attractive nature of this portfolio.
Considering the robustness of our projected revenues, which are safeguarded by
a dependable generation forecast and the Feed-in Tariff, our management team
is actively evaluating prospects to enhance profitability related to the sale
of electricity in the wholesale market, with various options available.
The portfolio generated 18,965 MWh of renewable energy and avoided 8,866
tCO(2) equivalent emissions. Please see page 51 of the Sustainability Report
for further detail.
The total generation of the portfolio remains under the threshold of the
Electricity Generation Levy and therefore the Group will not be subject to the
increased tax rate in the coming years.
BESS Portfolio
The BESS Portfolio has a total capacity of 110MW. The first BESS asset,
located in Oldham, a one-hour duration battery project, reached its Commercial
Operation Debut ("COD") on 1 December 2022. It is located in the North of
England and has a total capacity of 20MW.
The second asset, at Gerrards Cross, located at the border of Greater London,
is also a one hour duration 20MW project and is under construction with the
COD expected in late 2023. The remaining two BESS assets are located in
Scotland (two-hour duration battery; total capacity 50MW) and Wales (two-hour
duration battery; total capacity 20MW) and are expected to commence
construction in summer 2023 and to be operational in 2024.
While these projects are greenfield projects, the construction risk is
mitigated through the modular nature of the design where high value components
(the batteries) are manufactured off-site and delivered ready to install. This
reduces the risk of interface issues and construction delay. The bespoke
elements of the projects, mainly the power step-up and export to the grid, are
similar to other renewable energy and conventional generation projects. Given
the relatively conservative loan to cost ratio the construction risks are
substantially borne by the equity investors.
Notes:
(7) details of calculation can be found in Annex 1 - Reporting Principles and
Methodologies
Portfolio Valuation
The Investment Manager is responsible for conducting the fair market valuation
of the Group's investments. The Company engages Mazars LLP as an external,
independent, and qualified valuer to assess the validity of the discount rates
used by the Investment Manager in the determination of fair value. During the
financial year the Company transitioned to reporting quarterly financial
updates and portfolio valuations, reporting for the periods 30 September, 31
December and 31 March in 2022/23.
For non-market traded investments (being all the investments in the current
portfolio), the valuation is based on a discounted cash flow ("DCF")
methodology and adjusted in accordance with the International Private Equity
Valuation Guidelines where appropriate to comply with IFRS 13, given the
special nature of portfolio investments.
The valuation of each investment within the portfolio is determined through
the application of a suitable discount rate, which accounts for the perceived
risk to the investment's future cash flows and by applying this discount rate,
the present value of the investment's expected cash flows is derived. The
Investment Manager exercises its judgement in assessing the expected future
cash flows from each investment based on the project's expected life and the
financial model produced by each project entity. In determining the
appropriate discount rate, the Investment Manager considers the relative risks
associated with the revenues. For the year ending 31 March 2023, the discount
rates range from 5.6% to 8.3% pa. (31 March 2022: range from 5% to 8%).
The valuation of the portfolio by the Investment Manager and reviewed and
supported by the Directors as at 31 March 2023 was £90.1 million (31 March
2022: £78.8 million).
Valuation movements
Although UK gilt rates have increased over the past 12 months, the CHP
Portfolio has been held at par during the financial year. This is supported by
the underlying trading performance of the portfolio, exceeding budget for the
second year in a row at a revenue and profit level, which flowed through to
higher debt servicing cover ratios. Furthermore, during the financial year,
the borrowers' on-site customer was acquired and benefited from a cash
injection and balance sheet restructure. This reduction in counterparty risk
broadly offset increased movements in the risk-free rate and the Company
believes the discount rate applied is consistent with market pricing for
investments of this nature.
During the financial year, the Group deployed 13.7% of the committed debt
proceeds into the BESS portfolio and it is expected that during 2023 and 2024
the remaining commitment will be drawn.
The valuation of the debt financing for the receivables from the
energy-efficient lighting portfolio has largely stayed consistent throughout
the financial year, with only a negligible change. This stability reflects the
high quality of the counterparties involved and the associated risk-return
ratio.
Due to the debt investments being valued at or close to par, the fair value
movements observed during the financial year primarily stem from the equity
investment into the Hydroelectric Portfolio. A breakdown of the movement in
the Directors' portfolio valuation is detailed and explained below.
Valuation Movement in the year to 31 March 2023 (£millions)
The opening valuation as at 31 March 2022 was £79.0 million. When considering
the in year cash investments through the Company's wholly owned subsidiary,
the rebased valuation was £86.5 million. Each movement between the valuation
at the start of the financial year and the rebased valuation is considered in
turn below:
Inflation
The war in Ukraine, in addition to the multiple primary impacts felt in
Ukraine itself, has driven an increase in energy and commodity prices. This,
along with supply chain bottlenecks has continued to place significant upward
pressure on inflation.
During the financial period, inflation forecasts for 2022 and 2023 have
increased significantly and as a result have caused a valuation uplift of
£4.6 million. The methodology adopted in relation to inflation, for both RPI
and CPI, follows the latest available (March 2023) Office for Budget
Responsibility forecast for the 12 months from the 31 March 2023 valuation
date. Thereafter, a long-term 3.00% assumption is made in relation to RPI,
dropping to 2.40% in 2031 to reflect the 0.60% reduction as RPI is phased out
and replaced with CPI.
The Company's long-term assumption for CPI remains at 2.25%. We also model a
power curve indexation assumption, as wholesale power prices are not
intrinsically linked to consumer prices, of 3.00%.
Power Prices
The valuation as at 31 March 2023 applies long-term, forward looking power
prices from a leading third-party consultant. A blend of the two most recent
quarters' central case forecasts are taken and applied, consistent with the
approach applied in previous periods. The Company adopts this approach due to
the unpredictability and fluctuations in power price forecasts. Where fixed
price arrangements are in place, the valuation model reflects this price for
the relevant time period and subsequently reverts to the power price forecast
using the methodology described. The updated power price forecast has been
accretive to the valuation of the Hydroelectric Portfolio by £2.0 million in
the year ended 31 March 2023. The Company notes that the outlook for power
prices is expected to decline over the course of FY24, however the power price
forecast for the Hydroelectric Portfolio are underpinned by the Feed-in-Tariff
export rate.
Discount Rates
A range of discount rates are used when calculating the fair value of the
portfolio valuations and are representative of the view of the Investment
Manager and Board, who benefit from Company's independent valuer's guidance.
The discount rates are indicative of the rate of return in the market for
assets with similar characteristics and risk profiles. The weighted average
discount rate of the investments made as at 31 March 2023 is 6.6%, an increase
of 46 basis points since 31 March 2022. The weighted average discount rate of
the deployed and committed portfolio as at 31 March 2023 is 7.2%.
During the financial year, the discount rate increase has caused a reduction
in the valuation in the Hydroelectric Portfolio of £3.0 million. The discount
rate movement is reflective of the significant increase in gilt yields since
the prior financial year, and although the yields fell between the peak in
September 2022 and the year end, they remain higher than they were at the
start of the financial year.
Investment Obligations
At 31 March 2023, the Group had two outstanding investment commitments
totalling £44.4 million, one in relation to the BESS Portfolio which has a
total capacity of 110MW and a second with a leading solar, battery and energy
storage systems developer for a 12-month development finance facility.
The committed investment into the BESS Portfolio totals £45.6 million, via a
fixed rate debt facility, of which £6.2 million has been drawn and £39.4
million remains committed at the financial year end, with a further £3.9
million being deployed in June 2023.
The solar PV development finance fixed rate debt facility with Innova is for
£5.0 million and was fully drawn on 3 April 2023.
Fully invested portfolio valuation
The valuation of the portfolio on a fully invested basis can be derived by
adding the valuation at 31 March 2023 and the expected outstanding commitments
are as follows:
£ million
Underlying Portfolio valuation as at 31 March 2023 87.7
Valuation of TENT Holdings Limited as at 31 March 2023 2.4
Future investments committed at cost 44.4
Portfolio valuation once fully invested 134.5
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, wholly owned 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 and investment portfolio valuations are now calculated on a
quarterly basis on 30 June, 30 September, 31 December and 31 March each year.
Valuations are prepared by the Investment Manager and reviewed by Mazars LLP.
The other assets and liabilities of the Company are calculated by the
Administrator. 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 DCF
valuation.
NAV Bridge for the year ended 31 March 2023 (£millions)
The movement in NAV was driven by investment income of £7.3 million
representing the interest and dividend income to TENT, via TENT Holdings, the
Company's sole wholly owned subsidiary through which investments are purchased
and measured at fair value. Income was offset by investment management fees
and other expenses, as well as dividends paid to investors. The Investment
portfolio benefited from an increase in valuation, resulting in an unrealised
fair value gain of £4.0 million. The NAV at 31 March 2023 has increased by
£3.3 million.
Operating Results
The profit before tax of the Company has increased by 85% during the financial
year to £8.8 million (31 March 2022: £4.8 million), with earnings per share
of 8.81 pence (31 March 2022: 4.76 pence).
Operating Expenses and Ongoing Charges
The operating expenses for the year ended 31 March 2023 amounted to £2.5
million (31 March 2022: £1.3 million). During the financial year the Company
incurred one-off expenditure of £0.6 million in relation to the application
to trading on the Premium Segment of the Main Market of the London Stock
Exchange.
During the financial year the management fee was calculated based on NAV and
in the prior financial year the management fee was partly calculated in
reference to deployed funds. In accordance with the terms of the Investment
Management Agreement once 75% of the net IPO proceeds were deployed (achieved
in December 2021), the annual fee is calculated based on the Net Asset Value
of the Company.
The Company's OCR is 1.94% (31 March 2022: 1.38%). The primary factor
contributing to the increase is the management fee charge, as described above.
The ongoing charge ratio has been calculated as an annualised ongoing charge
(excluding non-recurring items), divided by the average Net Asset Value in the
period. With the exception of the management fee, the operating expenses of
the Company are predominantly fixed and predetermined. As a result, as the
scale of the fund increases, the Operating Cost Ratio (OCR) is expected to
decline.
Cash Dividend Cover
The Company measures dividend cover on a look through basis, by consolidating
the income and operating expenses of its sole wholly owned subsidiary, TENT
Holdings. The below table summarises the cash income, cash expenses and
finance costs incurred by the Company and TENT Holdings in the financial year
ended 31 March 2023. The cash flow statement for the Company alone does not
capture the total income and expenses of the Group as the interest income,
financing costs and further expenses are received and paid for by TENT
Holdings.
In the year, the Company has delivered a cash dividend cover of 1.1x (2022:
0.14x). However, it is important to note that this calculation includes
one-off expenditure associated with the migration to trading to the Premium
Segment of the Main Market of the London Stock Exchange and excluding the
impact of this exceptional one-off expenditure, the dividend cover increases
to 1.2x.
The below table outlines the cash income and expenditure of the Company and
its wholly owned subsidiary TENT Holdings:
31 March 2023
£millions
Consolidated cash income 9.0
Consolidated operating Cash Expenses and Finance Costs (3.0)
Dividends paid per Statement of Changes in Equity 5.5
Cash dividend cover 1.1x
Gearing and Liquidity
At the year ending 31 March 2023, the Group had cash balances of £11.2
million (31 March 2022: £17.4 million).
The Group has a committed £40 million RCF in place and intends utilise the
facility to fund the commitments to the BESS Portfolio.
Environmental, Social and Governance
The Investment Manager is committed to promoting ESG when assessing investment
opportunities and has been a signatory to the United Nations' Principles for
Responsible Investing ("PRI") since 2019.
In addition, the Investment Manager is a certified B Corp which formalises its
consideration of social and environmental impact.
We have continued to focus on our ESG impact through the TENT portfolio and
during the year we enhanced the portfolio from an ESG perspective through, for
example, health and safety audits conducted across the assets.
The overall TENT portfolio generated 18,965 MWh of renewable energy and
avoided 27,122 tonnes of CO(2) in the year ended 31 March 2023.
The Group targets a wide range of assets that contribute to energy transition
and the Investment Manager and Board believe that TENT's investments are
well-aligned to the energy transition through the resulting avoided carbon.
The Company also recognises the importance of continuing to reduce the
emissions intensity of assets and will continue to track a pathway to Net Zero
and will report on reduction in emissions intensity of the assets each year,
along with continued reporting of avoided emissions. The Investment Manager,
with the oversight of the Board, has also conducted extensive analysis to
determine its ability to set an overarching Net Zero target, to reduce its
emissions intensity in line with the accepted scientific consensus on reducing
global temperature rises to 1.5°c. At this time there is currently no
established methodology, or combination of methodologies, available to show
the Net Zero alignment of the diversified asset base that the Company holds.
The Investment Manager will continue to actively monitor this position for
future reporting.
Pipeline
Sector Pipeline % of Total Pipeline Weighted Average Return
£millions
Distributed 55 10% 6.4%
Efficient Storage 254 47% 7.6%
Onsite Generation/Demand Reduction 236 43% 10.6%
Total 545 100% 8.8%
The current pipeline comprises opportunities that would deliver an average
yield of 8.8%, indicating a high potential to further support the dividend
cover and deliver a progressive dividend return to shareholders. The pipeline
includes both debt and equity opportunities, covering a range of technologies
and sectors in the Company's three thematic areas. Potential investments
include BESS, onsite generation, low-carbon energy consumption, and green
hydrogen.
The pipeline also includes early-stage development, mid-stage development,
pre-construction projects, and operational assets. This means that the Company
can use the pipeline to select a balanced set of investments to deliver
attractive risk-adjusted returns to investors while also considering
risk-return profiles and time horizons. By investing a small part of the
portfolio in early-stage development, the Company can create value by taking
projects from concept to consent, capturing a larger proportion of the project
margin.
The pipeline includes several joint venture opportunities, outright project
purchases, and alternative debt funding structures, including senior and
mezzanine. This enhances the benefit of diversifying capital deployment,
allowing the Company to strike the right balance of risk and return. The
pipeline offers multiple types of investment opportunities, which have
different implications on capital allocation and portfolio composition. By
engaging in JV opportunities, the Company can share risks and rewards with
other partners, while leveraging their expertise and resources. By pursuing
outright project purchases, the Company can gain full ownership and control
over the assets, as well as optimise their design and operation. By providing
alternative debt funding structures, the Company can generate attractive
returns with lower risks than equity investments.
Outlook
Energy System Transformation
The transition towards Net Zero emissions by 2050, propelled by the ambitious
targets and robust policies of the UK and EU, is precipitating a profound
transformation in the energy system. This shift, from centralised fossil
fuel-based sources to decentralised, renewable, and flexible energy systems,
creates substantial opportunities for investors well-positioned to navigate
these changes.
The intermittency of renewable energy sources and increased electrification of
assets presents a complex dynamic of challenges and opportunities. Balancing
grid stability against the unpredictability of energy supply and demand
necessitates innovative solutions. The Company's diversified mandate provides
a robust framework to navigate these uncertainties, mitigate risk, and tap
into alternative sources of income, enhancing resilience.
Decarbonisation of buildings and transport, sectors with significant
contributions to greenhouse gas emissions and energy consumption, represents a
key component of this transition. Strategic investment decisions today in
these sectors will shape the emissions trajectory for the coming decades.
Company Strategy
In addition to optimising the existing portfolio and maximising its value for
shareholders, the long-term strategy of the Company is designed to capitalise
on the opportunities presented by the energy transition as soon as additional
capital is available. The unique mandate allows for investments across three
thematic areas aligned with the key drivers of energy system transformation,
offering potential for significant value creation.
The Company will strengthen its focus on distributed energy generation,
specifically on renewable and lower-carbon assets. Emerging technologies such
as green hydrogen and carbon capture are recognised for their potential, and
the Company will actively assess the viability of investing in these areas.
Energy storage and its distribution form critical parts of the Company's
strategy. By investing in assets like battery storage systems, the Company
aims to support the increased integration of renewable energy sources into the
grid, which is becoming increasingly important in the context of volatility in
energy supply and demand.
The Company's commitment to onsite energy generation and lower carbon
consumption underscores its dedication to driving energy transition and
reducing emissions. By investing in solutions such as rooftop solar and demand
reduction measures, the aim is to decrease dependence on grid connections,
mitigating risks associated with grid availability and volatile power prices.
In a market environment characterised by falling power prices, the Company's
diversified mandate offers a significant advantage. This approach provides
insulation from single-technology risks and enables income generation from a
wide range of sources. The Company is confident that its strategic focus will
continue to drive shareholder value and contribute positively to the global
transition to a low-carbon economy.
Jonathan Hick
TENT Fund Manager
16 June 2023
Sustainability Report
Introduction
This report provides a summary of the Group's sustainability outcomes,
approach and ambition (as implemented by the Investment Manager). The report
includes Environmental, Social and Governance performance, with a particular
focus on how the Group's investments align with its energy transition theme.
It also provides detail on the Investment Manager's credentials and resources
to implement this process.
TENT's approach to sustainability is predicated on the belief that a low
carbon economy and a Net Zero future can only be achieved through the adoption
of transition technologies: technologies which offer decarbonised energy,
support decarbonisation, or enable existing economic activity to continue
whilst reducing carbon footprint, until more radical carbon-free solutions
become available. As a result, ensuring carbon avoided against an appropriate
counterfactual is essential to the selection of every investment.
To implement a meaningful energy transition strategy, it is also essential
that assets are considered for possible unintended negative social and
environmental impacts, which may undermine their energy transition benefits.
Or where possible, that the opportunity to improve the ESG performance of an
asset is implemented. ESG analysis is used throughout the investment process
to manage this consideration, and to improve outcomes where possible.
Selecting assets for avoided carbon and energy transition alignment
For an asset to qualify as a TENT investment, it must be possible to
demonstrate that its operation results in avoided carbon, relative to the
expected status quo or other sensible or relevant counterfactual. There is no
current industry methodology for quantifying avoided carbon. TENT approaches
this challenge by ensuring transparency in our assessment and a willingness to
continue to critically reflect on how these calculations are made, can be
justified, and can be improved. Details of the counterfactual approach are
provided in the Methodology and Principles section, Annex 1.
Data is collected during the due diligence stage of a deal to determine an
estimate of avoided carbon over the lifetime of the asset, accounting where
necessary for shifting counterfactuals such as a decarbonising grid. This
estimate is refined throughout the deal process, and then tracked and refined
further as necessary during exposure to the asset. Agreement is sought early
on from the O&M or other asset manager to ensure the relevant carbon data
is provided. The alignment of the asset to a recognised energy transition
pathway is also assessed. In the UK, the alignment of assets to the Balanced
Pathway from the Climate Change Committee's 6(th) Budget is assessed.
The table details how each of the operational assets contributes to the theme
of energy transition, through avoided carbon or renewable energy generation.
Lifetime avoided carbon estimation (tCO(2))(8) Avoided carbon for reporting period (tCO(2)) Renewable Energy Generation (MWh)
CHP Harvest 53,000 5,396
Glasshouse 49,000 7,900
Spark Steam 23,000 4,802
186,000 8,865 18,965
Hydroelectric
BESS Oldham 3,000 -10
Lighting LED project 620 158
Data is for the year ended 31 March 2023, or from the point of acquisition, if
the investment was made during the course of the year.
Managing wider ESG risk and opportunity
The Company recognises it is important to balance supporting assets which will
result in avoided carbon with the potential wider impacts on environment and
society. Failure to take due care could result in unintended negative impacts
as a result of the investment decisions taken by the Company. ESG integration
helps to manage this risk and also identify where improved practice can be
implemented to drive positive outcomes for people and planet.
The Investment Manager's approach to ESG integration is to ensure it is
embedded at each stage of the investment process. Each step of the investment
process represents an opportunity to consider how ESG factors may influence
the short and long-term success of a project.
Notes:
(8) Avoided carbon for the reporting period is based on estimated energy
savings from the point of investment.
Topics of assessment
While the approach to ESG must take into account the individual nature of the
target asset, for example, its size and type, region, operational environment
and stage of project cycle, there are common measures that can be
systematically applied to calculate the longevity of an infrastructure asset's
value. For responsible infrastructure investments, the following areas are
considered relevant:
Environmental
We consider use, generation type, and carbon intensity of energy, along with
water use and its pollution. We also look at levels of waste generated,
avoided and disposed of approach to raw material sourcing and supply chain
sustainability, and build in impacts on biodiversity and habitat by
understanding management and protection measures. Carbon analysis is also
carried out to ensure the asset will avoid emissions compared to an
appropriate counterfactual.
Social
We consider the asset quality and fit with a more sustainable economy,
including relevance/appropriateness to the locality. We seek reassurance of
good customer and stakeholder relations, including management of land rights,
accessibility, and social inclusion of access to the asset. We expect strong
management and reporting of health and safety (during and after build) as well
as good labour management. This includes staff wellbeing, good diversity and
inclusion practices, appropriate training, and presence of fair pay, including
reassurance of the absence of modern slavery.
Governance
We scrutinise management, at the level where it is most material to the
success of the asset, to promote accountability and responsiveness to
stakeholders by addressing issues such as Boards and senior management, pay
structure, ownership and accounting practices. We also look for evidence of
best practice in approaches to tax policy, management of bribery and
corruption and conflicts of interest.
Climate analysis
Within initial deal scanning and on-going pre acquisition due diligence, the
Investment Manager considers the implications of climate change on the
long-term value of the Company. Details on the approach to date in the
management of climate change are captured in our voluntary reporting under the
Task Force on Climate related Financial Disclosure (TCFD) framework.
Operational ESG outcomes:
The following information provides high-level outcomes of the ESG credentials
within TENT's investments.
Environmental Social Governance
Environ-mental incidents Health & Safety incidents Workers receive living wage Modern slavery policy in place Local employ-ment Apprentice-ships H&S policy review/ Gender Diversity of SPV directors (% female) O&M contractors review/
(Riddor/ Audit(9) audit
non-Riddor)
CHP Portfolio Harvest Non reported Non reported Y Y 2 0 Y 0 n/a(10)
Glasshouse Non reported Non reported Y Y 2 1 Y 0 n/a(10)
Spark Steam Non reported Non reported Y Y 1 0 Y 0 n/a(10)
Hydroelectric Portfolio 0 0/0 Y N 5(11) 0.25(11) Y (external) 0 Y
BESS Portfolio Oldham 0 0/4(12) Y(13) Y 0 0 Y 0 Y
Gerrards Cross 0 0/0 Y(13) Y 0 0 Y 0 Y
Lighting LED Project 1(14) 0/2(15) Y Y 0 0 Y 0 n/a(16)
Operational ESG outcomes for each of the Group's investments. Reporting at the
asset level unless stated otherwise.
Notes:
(9) Audit reviews conducted internally unless stated otherwise
(10) On-going long-term contract
(11)Number reported in full time equivalent positions - the TENT O&M
contracts represent circa 20% time equivalent of a 25 person workforce and 2
apprentices at the O&M level
(12) Non Riddor incidents: Incorrect site discharging; fire alarm reset
without incident, site lost communication briefly; attempted site break in
(13)Refers to pay levels within the O&M
(14)Broken fluorescent tube
(15)Non Riddor incidents: Broken tube fragments falling to floor; computer
monitor accidentally damaged
(16)No maintenance in contract
The portfolio is regularly reviewed for opportunities to improve these ESG
credentials and look for other opportunities to create additional social or
environmental opportunities or risk management. The details below provide
further insight on some specific outcomes linked to particular environmental
and social themes, or particular assets.
TENT is committed to the health and safety of employees, contractors and the
public. Over the period, the Investment Manager has conducted a two-tiered
audit process to assess the Hydroelectric Portfolio. The first step consisted
of a site visit by the technical adviser whereby some observations and
recommendations were highlighted. The second step involved a desktop review by
a specialised health and safety consultancy who confirmed that the
observations had been recognised by the O&M service and were already
progressing with improvements. The consultancy concluded from the audit that
there were no major concerns regarding the current O&M service and that
significant assurance can be taken that there is no significant or ongoing
health and safety risks. TENT will continue to arrange periodic health and
safety audits and continue to monitor the progress of corrective actions. The
BESS, CHP and LED portfolios continue to report on health and safety
requirements as per the reporting agreements. The owners carried out internal
H&S audits in the period.
Recognising the need for a responsible supply chain in BESS
BESS assets have an important role to providing much-needed resiliency to an
ever more renewable grid. Despite this positive impact, there are potential
ESG risks, in particular, within the supply chain of BESS assets, that the
Investment Manager has aimed to mitigate: human rights issues may exist within
mineral supply chains, embodied emissions are significant, and circular
end-of-life options for the assets are not well established. To minimise the
risk of human rights issues in the supply chain, agreements are in place at
the Gerrards Cross site to ensure that the EPC contractor conducts appropriate
supply chain due diligence to establish supply chain transparency compliance
with the OECD Due Diligence Guidance for Responsible Supply Chains of
Minerals. Additionally, all battery cells in use avoid the use of the riskiest
mineral, cobalt. This transparency, combined with waste and emissions data
collection for the construction phase of the assets, will be used to refine a
lifecycle carbon assessment of the assets, to identify emissions hotspots and
reduce embodied emissions for future projects. The Facility Agreement with the
borrower further includes an interest rate reduction in the period where cells
are disposed of, to fund responsible recycling.
Widening the value of the Hydroelectric Portfolio to benefit local communities
The Hydroelectric Portfolio contributes to local communities with payments
averaging around £42,000 per year. These funds are used to support community
projects including teaching Gaelic in primary schools, community woodlands
preservation, heritage societies, village upkeep such as updating fire alarms
systems and roof repairs. One particular community has used the contribution
to provide grants to students attending tertiary education who would otherwise
struggle with considerable travel costs from living in a remote location.
Investment Manager's credentials and approach
The Investment Manager is a purpose-led investor, committed to responsible
investment and aligning the funds it manages to sustainability themes.
TPIM became signatories to the PRI in 2019 and will receive their first public
star rating in November 2023. The Investment Manager is also B Corp certified
since December 2022 with a score of 97.6.
Responsibility for the ESG integration strategy sits with the Head of
Sustainability. There are a number of oversight functions in place to ensure
the effective implementation of ESG by investment teams with the support of
the Sustainability Team.
The Investment Manager operates a Sustainability Group which consists of
senior partners and managers from across the Investment Manager. This group
meets monthly to discuss sustainability initiatives. The Sustainability Group
is chaired by TPIM's Co-Managing Partner; and both Managing Partners sit on
the group. The Sustainable Investment Subgroup (SISG) reports to the
Sustainability Group. The SISG consists of senior investment team members from
across the Investment Manager. This SISG meets every eight weeks to share best
practice, latest industry activity and ESG ideas from across the business. It
can also be called to review an investment opportunity for critical debate
should it present a complex sustainability profile.
During the reporting period, one investment opportunity was presented to the
SISG to discuss more complex sustainability and responsible investment themes
associated with the opportunity. Based on this review process, the deal was
supported and ultimately progressed to funding.
The Sustainability Team conducts an annual ESG monitoring programme to assess
the effectiveness of ESG integration for TENT. The ESG integration policy is
reviewed, including opportunities for development and evolution. The findings
of this audit are presented to the Sustainability Group for discussion and
further action if appropriate and is also reported to the TENT Board.
The Sustainability Team are also subject to quarterly risk reviews by the risk
team, and any identified sustainability risks are recorded on the TPIM risk
register and on TENT's risk register where relevant, which are both reviewed
quarterly by the Investment Manager's Risk Committee. The Head of
Sustainability also sits on the Risk Committee to ensure that the Investment
Manager's outlook for risk appropriately considers sustainability issues.
The Board is actively engaged in discussion in relation to sustainability
risks and opportunities facing portfolio companies and assets, through
information provided by the investment team and sustainability team, including
deep dives into sustainability integration, engagement, target setting and
performance.
For further details on Investment Manager Governance processes please refer to
page 63 of the Annual Report.
The transparency of TENT's sustainability activities is an important aspect of
the Investment Manager's commitment. The data provided reflects avoided carbon
and alignment to the energy transition theme and disclosures in line with a
number of external frameworks and regulations. TENT is not currently required
to report against any of these frameworks, however the Investment Manager and
Board recognise the importance of structured and comparable sustainability
information for the Group and as such follows a range of reporting frameworks.
These frameworks have their limitations and challenges in interpretation and
the Investment Manager looks to implement a value-adding approach to TENT
which is not driven solely by frameworks.
Framework based reporting
Respecting latest reporting requirements and to demonstrate clearly how the
Company and the Investment Manager align with relevant frameworks, the Annual
Report provides reporting according to the following:
I. Intended approach to Sustainable Disclosure Regulation (SDR)
II. Principles for Responsible Investments (PRI)
III. UN Sustainable Development Goals (SDGs)
IV. Sustainable Financial Disclosure Regulation (SFDR)
V. Task Force on Climate-related Financial Disclosure (TCFD)
Section 172(1) Statement
The Board is committed to promoting the long-term success of the Company
whilst conducting business in a fair, ethical, and transparent manner.
The Board makes every effort to understand the views of the Company's key
stakeholders and to take into consideration these views as part of
its decision-making process. Our key stakeholders are our shareholders, the
Investment Manager, our service providers, the asset-level service
counterparties, the investee companies/borrowers and our lenders. Information
on our stakeholder engagement, including how the Board keeps itself informed
about stakeholder's views and how we take their views into account in
decision-making, can be found on pages 74 to 75 of the Annual Report.
The majority of the key stakeholder groups interface with the Company
primarily through the Investment Manager. The Investment Manager is
responsible for communicating stakeholder concerns to the Board, such that
they can input on actions as required.
As an investment company, the Company does not have any employees and conducts
its core activities through third-party service providers. The Board seeks to
ensure each service provider has an established track record and
is required to have in place suitable policies and procedures to ensure
they maintain high standards of business conduct, treat shareholders fairly,
and employ corporate governance best practice.
The following disclosure describes how the Directors have had regard to the
matters set out in section 172(1) (a) to (f) when performing their duty under
s172 and forms the Directors' statement required under section 414CZA of the
Act.
The likely consequence of any decision in the long term Please refer to the Investment Objectives and business model on pages 20 to 24
The nature of our business means that the Board have to consider the long-term
impact of their decisions, given that the Company's investments are generally
held for the long term.
The Board hold a strategy day annually, which allows for the effectiveness of
past decisions to be assessed and to consider the actions of the Company going
forward.
The interests of the Company's employees Please refer to stakeholder engagement section on pages 74 to 75
As a closed-ended investment company, the Company does not have any employees
but maintains close working relationships with the Investment Manager and
Administrator.
The need to foster the Company's business relationships with suppliers, Please refer to stakeholder engagement section on pages 74 to 75
customers and others
The Company's primary suppliers are our service providers, principally the
Investment Manager and Administrator. The Board engages regularly with both,
as well as at its Board meetings.
The impact of the Company's operations on the community and the environment Please refer to the sustainability report on pages 50 to 54
Having a positive environmental impact is central to the Company's operations,
given that its strategy is to invest in assets, support the transition to a
lower carbon economy, and help the UK achieve Net Zero.
The desirability of the Company maintaining a reputation for high standards of Please refer to page 88 of the Corporate Governance Statement
business conduct
The Directors have a duty to promote the success of the Company for the
benefit of shareholders. As such they are dedicated to ensuring the
maintenance of high standards of business conduct and corporate governance.
The need to act fairly as between members of the Company Please refer to stakeholder engagement section on pages 74 to 75
The Board actively engages with shareholders and considers their interests
when setting the Company's strategy.
Principal Decisions
Principal decisions have been defined as those that have a material impact to
the Group and its key stakeholders. In taking these decisions,
the Directors considered their duties under section 172 of the Act. Below we
provide describe some of the principal decisions made by the Board in the year
and demonstrate how the Board took account of stakeholders' interest in making
those decisions.
Migration to the Premium Segment of the Main Market of the London Stock
Exchange
With effect from 28 October 2022, the Company migrated the trading of its
shares to the Premium Segment of the Main Market of the London Stock Exchange
and listed on the FCA's Official List. In its decision making process, the
Board considered the associated costs of the migration and the expected
benefits. The Company's shareholders, were the key stakeholder impacted by
this decision and the Board gave due consideration to their interests,
concluding that it was in the best interests of the Company and its
shareholders, as it would provide the opportunity to increase the diversity of
the shareholder base and improve liquidity of the Company's shares.
Net Zero planning
During the year the Board had multiple discussions regarding sustainability
and has held workshops with the Investment Manager and the Carbon Trust to
discuss the approach to Net Zero planning and setting targets. In considering
Net Zero planning, the Board considered the interests of shareholders and also
the Investee Companies and Borrowers in which the Group has invested. The
decisions made by the Board in respect to Net Zero planning will directly
impact the Investee Companies and Borrowers. The Investment Manager has been
continuously engaged with those key stakeholders to support them in providing
data and reporting required by the Company. Further the Board recognises the
ever growing importance of sustainability to its shareholders and therefore
considers tracking progress towards Net Zero to be aligned with shareholder
interests.
Risk appetite
The Board has an established risk appetite, which was updated during the year,
to reflect the updated Investment Policy and to better align the categories
with those in the risk register. In updating the risk appetite, the Board
considered the interests of the shareholders, the Investment Manager and the
lenders. The intention of the risk appetite is to provide guidance to the
Investment Manager on what level of risk the Board are comfortable taking, in
the pursuit of achieving the Company's Investment Objective. The risk appetite
provides an effective way for the Board to monitor the Investment Manager's
activity and ensures that the interests of the shareholders are appropriately
protected.
Stakeholder Engagement
Stakeholder Shareholders
Why is it important to engage? Shareholders and their continued support are critical to the continuing
existence of the business and delivery of our long-term strategy.
How have the Investment Manager/Directors engaged? The way in which we engage with our shareholders is set out on page 97 of the
Corporate Governance Report.
During the year, the Investment Manager met with the majority of existing
shareholders as well as prospective investors. The Chair and the Senior
Independent Director met with a number of shareholders following publication
of the Company's interim results for the period ended 30 September 2022.
What were the key topics of engagement? The key topics of discussion included: deployment of capital, frequency of
communications with shareholders, the Company's share price discount to NAV,
the change of the Company's name and Investment Policy.
What was the feedback obtained and/or the outcome of the engagement? A key piece of feedback received, was that the Company did not communicate
regularly enough, about the progress of the underlying assets in the
portfolio, with the market through RNS announcements and other channels.
Following due consideration, the Board approved the publication of the
Company's unaudited NAV and portfolio update on a quarterly basis.
Stakeholder Investment Manager
Why is it important to engage? The Investment Manager is responsible for executing the Investment Objective
within the Investment Policy of the Company.
How have the Investment Manager/Directors engaged? The Board maintains regular and open dialogue with the Investment Manager at
Board meetings and has regular contact on operational and investment matters
outside of meetings.
The Management Engagement Committee is responsible for conducting periodic
reviews of the Investment Manager.
What were the key topics of engagement? A key topic of conversation during the year revolved around the Company's
share price discount to NAV and the development of a strategy to reduce the
discount.
What was the feedback obtained and/or the outcome of the engagement? In developing a strategy to manage the Company's share price discount to NAV,
it was decided to change the Company's name and investment policy to better
reflect the nature of the current portfolio of investments and offer a greater
number of opportunities for investment in the future.
Following this change, the Investment Manager has been heavily engaged with
shareholders and prospective investors to promote the Company.
Stakeholder Service Providers
Why is it important to engage? As an externally managed Company, we are reliant on our service providers
to conduct our core activities. We believe that fostering constructive and
collaborative relationships with our service providers will assist in the
promotion of the success of the Company.
How have the Investment Manager/Directors engaged? The Board maintains regular contact with its service providers, both through
Board and Committee meetings, as well as outside the regular meeting
cycle.
The Management Engagement Committee is responsible for conducting periodic
reviews of service providers.
What were the key topics of engagement? In discussion with the Investment Manager, the Board considered the
appointment of a new broker.
What was the feedback obtained and/or the outcome of the engagement? On 24 June 2022, the Company announced the appointment of J.P. Morgan Cazenove
as its sole broker. Since their appointment, J.P. Morgan Cazenove have been
highly engaged with shareholders and the Company have undertaken several
activities in an attempt to reduce the Company's share price discount to NAV.
Stakeholder Asset-level service counterparties
Why is it important to engage? Asset-level counterparties are an essential stakeholder group and engagement
with them is important to ensure assets are operating safely and
effectively.
How have the Investment Manager/Directors engaged? The Investment Manager has developed strong working relationships with the
asset-level counterparties and has regular communication with them to ensure
the assets are being managed appropriately.
What were the key topics of engagement? During the year, the O&M contracts for the Hydroelectric Portfolio were
renegotiated.
What was the feedback obtained and/or the outcome of the engagement? The renegotiated contracts ensure that fair working mechanisms between the
operator and the owner are embedded in the contract, as well as providing
visibility and business continuity to the operator who has since hired more
personnel.
Stakeholder Investee Companies/Borrowers
Why is it important to engage? Investee companies and borrowers are companies in which TENT Holdings has
invested either by debt or equity. They are an essential stakeholder and
engagement with them, particularly the individuals responsible for their
operations, is important to ensure the maintenance and performance
of each investee company.
How have the Investment Manager/Directors engaged? The Investment Manager holds Board positions on the Hydroelectric Portfolio.
Each investee company and borrower have certain reporting obligations to the
Group.
What were the key topics of engagement? The Investment Manager engaged with the boards and senior management of the
investee companies to discuss the relationship going forward, including
frequency of reporting.
What was the feedback obtained and/or the outcome of the engagement? During the year the Investment Manager has renegotiated the reporting
requirements and information disclosure with the Hydroelectric Portfolio
O&M contractors and the borrowers, specifically requiring reporting on ESG
KPIs .
Stakeholder Lenders
Why is it important to engage? The lenders provide an essential source of finance for the Group, allowing it
to pursue investment opportunities.
How have the Investment Manager/Directors engaged? The Investment Manager provides reporting to the Lender on covenant compliance
and communicates with them as required.
What were the key topics of engagement? During the year the Group, via the Investment Manager, negotiated an extension
of its existing £40 million RCF with TP Leasing Limited.
What was the feedback obtained and/or the outcome of the engagement? The £40 million RCF was successfully extended to 28 March 2025 on
advantageous terms including a very competitive annual coupon despite a rising
interest rate environment.
Risk Management
The Board and the Investment Manager recognise that risk is inherent in the
operation of the Company and are committed to effective risk management to
ensure that shareholder value is protected and maximised.
As an externally managed investment company, the Company outsources key
services to the Investment Manager and other service providers and relies on
their systems and controls. The Board has ultimate responsibility for
oversight of risk management and internal controls within the Company. The
Board sets the risk appetite for the Company, and reviewed and updated it in
the year. The Investment Manager presents the Company's top risks, changes
since the previous quarter, risks outside of appetite and emerging risks to
the Board on a quarterly basis for their review. The Board assesses and
challenges the effectiveness of the Investment Manager's risk management
against the risk appetite and controls to manage risks within that appetite,
particularly those which would threaten its business model, future
performance, solvency, valuation, liquidity or reputation. Further details of
the Board's activities relating to risk can be found on pages 76 to 82.
The Investment Manager has responsibility for identifying potential risks at
an early stage, escalating risks or changes to risk, and relevant
considerations and implementing appropriate mitigations which are recorded in
the Group's risk register. Where relevant the financial model is stress tested
to assess the potential impact of certain risks against the likelihood of
occurrence. In assessing risks, both internal controls and external factors
that could mitigate the risk are considered. A post mitigation risk score is
then determined for each principal risk. The Group's detailed risk register
identifying risks and controls to mitigate their potential impact and/or
likelihood is maintained by the Investment Manager, and subject to an annual
review by the Board.
Risk appetite
Managing risk is fundamental to the delivery of the Company's strategy, and
this is achieved by defining risk appetite and managing risks within that
appetite. Risk appetite is the level of risk the Company is willing to take to
achieve its strategic objectives. The Board has defined its risk appetite
using a category of risks inherent to the environment in which the Company
operates. This enables the actual risks which are identified by the Investment
Manager to be compared to the defined appetite, to identify where any
additional mitigation activity is required. The Company manages its risks
within the tolerance set. Any risks outside of appetite are subject to
additional oversight and action planning.
The Board has reviewed the Company's appetite for each of the principal risks
set out below. The Company seeks to take risk in executing its strategy and in
line with its Investment Policy. The Company's risk management framework is
designed to manage rather than eliminate the risk of failure to achieve
objectives and breaches of risk appetite.
The Board reviews and monitors the Company's risk appetite on, at least, an
annual basis to ensure that it remains appropriate and consistent with the
Investment Policy.
Principal Risks and Uncertainties
The table below sets out what we believe to be the principal risks and
uncertainties facing the Group. The table does not cover all of the risks that
the Group may face. The Board defines the Group's risk appetite, enabling the
Group, in both quantitative and qualitative terms, to judge the level of risk
it is prepared to take in achieving its overall objectives. Additional risks
and uncertainties not presently known to management or deemed to be less
material at the date of this report may also have an adverse effect on the
Group.
A risk heat map is included on page 77 of the Annual Report.
Risk Identified Risk Description Risk Impact Mitigation
Introduction of, or amendment to laws, regulations, or technology A technological or regulatory change could occur which could have the effect The future legislative prohibition or tax of particular fuels (such as As part of the Group's acquisition process, the Investment Manager conducts a Post Mitigation Impact
(especially in relation to climate change) of rendering an investment in which the Group has invested obsolete or natural gas) or as a result of technological innovation or otherwise by thorough due diligence process on all projects that takes account of
materially change the way in which a service or product is delivered or changes to law and regulation that renders an investment obsolete could the technology, regulatory environment, potential future regulatory changes Moderate
alter the return profile of an investment. threaten the profitability of such an investment, in particular due to the and the robustness of any Government subsidy.
financing projections that are dependent on an extended project life. If such
Post Mitigation Likelihood
a change were to occur, these assets would have very few alternative uses
should they become obsolete.
Moderate to High
In addition, environmental regulators may seek to impose injunctions or other In particular, the Group considers how to manage the risk of carbon pricing
sanctions on an investment's operation due to changes in laws or regulations through using carbon price forecasts and offsetting carbon cost risk to Change in Year
that may have a material adverse effect on its financial condition. Carbon off-takers where possible. The Group monitors government guidance and is
pricing is a particular risk. looking to build the portfolio in line with this guidance. See the Company's Stable
reporting toward TCFD on pages 62 to 71 for further detail.
The Group's Investment Strategy focuses on a diverse range of assets across
various energy transition sub-sectors, which reduces the impact on the Group
should any such changes impact any one sector. As a result, the Group is not
impacted by the recent Electricity Generation Levy.
Ability to raise additional equity Ability to raise additional equity, may limit the Group's ability to achieve It may be difficult to raise further equity given that the share price has The Board has been closely monitoring the Company's share price discount to Post Mitigation Impact
its Investment Objective. been trading below NAV for some time, as part of a broader market background NAV and liquidity and is keeping options for managing the discount and
where most other investment trusts in energy are also trading at a discount. liquidity under review. Moderate
Post Mitigation Likelihood
Without sufficient funding, the Group will be unable to pursue suitable The Company has increased the frequency of its communications with investors, Moderate to High
investments in line with its Investment Policy. for example by publishing unaudited quarterly NAV and portfolio updates.
Change in Year
Stable
The Company has delivered a fully covered dividend for the year ended 31 March
2023, demonstrating the quality of the portfolio to potential equity
investors.
Weather changes Hydro, solar, wind or other renewable production levels may be lower than This would affect their ability to perform as well as expected, causing The Investment Manager is introducing optimisation projects in the Post Mitigation Impact
forecast or more drastic as a result of climate change detriment to the revenues and Net Asset Value of the Group. Hydroelectric Portfolio; installing log barriers to expand the pooling storage
of the water, so that there is a greater amount in reserve to cater for lower Moderate
rain levels or to capture excess rainfall.
Post Mitigation Likelihood
Moderate
Energy forecasts take into account predicted changes in energy resource.
Change in Year
New
The Company utilises an external provider, Climate X, to analyse and quantify
the risk of physical damage to its assets resulting from climate change.
Investments are concentrated in a particular technology The Group's performance may be negatively impacted if its portfolio is overly Different technologies are at risk of poor operational and financial The Group's portfolio is being built up in phases with technology exposure Post Mitigation Impact
concentrated in any one technology type. performance in the event of mechanical breakdown, or obsolescence caused by being monitored and a variety of technologies in its investment pipeline.
disruptive technologies. This would affect their ability to perform as well as
Moderate
expected, causing detriment to the revenues and Net Asset Value of the Group.
Post Mitigation Likelihood
The technologies that TENT invests in are proven technologies, with
established operating track records. Further diversification has been achieved Moderate
during the year ended 31 March 2023, with the addition of two technologies
into the portfolio bringing the total to five technology types. Change in Year
Stable
Exposure to power prices and risk to hedging power prices The Group makes investments in projects and concessions with revenue Changes in market demand for electricity, including changes in consumer demand The Company targets Energy Transition projects where a significant portion of Post Mitigation Impact
exposure to power prices. The market price of electricity is volatile and is patterns, could have a material adverse effect on the Company's revenues are set by long term contracts with an end user and/or off-taker, to
affected by a variety of factors, including market demand for electricity, profitability, the Net Asset Value, the Company's earnings and returns mitigate the volatility of commodity prices. Alternatively, the company may Moderate
the generation mix of power plants, government support for various forms of to shareholders. invest through debt structures, with the equity sponsor taking the primary
power generation, as well as fluctuations in the market prices of commodities
exposure to commodity prices. Post Mitigation Likelihood
and foreign exchange.
Moderate
To the extent that the Group enters into contracts to fix the price that it
receives on the electricity generated or enters into derivatives with a In addition, the Group believe that the transition to a lower carbon economy, Change in Year
view to hedging against fluctuations in power prices, the Group will be increased usage of smart grids and residential participation in renewable
exposed to risk related to delivering an amount of electricity over energy generation should all positively impact demand levels and patterns Stable
a specific period. If there are periods of non-production the Group may need for electricity.
to pay the difference between the price it has sold the power at and the
market price at that time.
The Group aims to spread credit risk by putting in place PPAs with a range of
different counterparties.
The valuation of investments is subject to uncertainties The valuation of assets is inherently subjective leading to uncertainty about Changes in values attributed to investments during each quarter may result in The Investment Manager is responsible for carrying out the fair market Post Mitigation Impact
how projects are valued from period to period. These uncertainties arise from volatility in the Net Asset Values that the Group reports from period to valuation of the Group's investments, but the Group engages external
project valuation assumptions and as well as macro-economic factors, such as period. independent valuers to assess the validity of these valuations, with quarterly Moderate
inflation and interest rates, which feed into operating assumptions and reviews and annual audits.
discount rates, with higher discount rates leading to lower Net Asset Values.
Post Mitigation Likelihood
Moderate
Valuations are prepared using external market benchmarks and
externally-sourced power market curves from reputable providers or a blend Change in Year
from more than one. The fair valuation of investments is calculated in
accordance with IPEV (International Private Equity and Venture Capital) Stable
valuation guidelines.
Counterparties' ability to make contractual payments The Group's revenue derives from the investments in the portfolio, and The failure by a counterparty to pay the contractual payments due, or the As part of the Group's acquisition process, the Investment Manager conducts a Post Mitigation Impact
the Group is exposed to the financial strength of the counterparties to such early termination of an investment due to insolvency, may materially affect thorough due diligence process on all projects that includes a credit check
projects and their ability to meet their contractual payment obligations. the value of the portfolio and could have a material adverse effect on the on counterparties. Moderate
performance of the Group, the Net Asset Value, the Group's earnings and
returns to shareholders. Post Mitigation Likelihood
The Investment Manager will look to Moderate
build in suitable mechanisms to protect the Group's income stream from the Change in Year
relevant investment, which may include parent guarantees and liquidated
damages payments on termination. Stable
Following asset acquisitions, the Investment Manager puts in place, and
follows, an ongoing management plan tailored to the specific asset.
The Group's exposure to defaults may be further mitigated by contracting with
counterparties who are public sector or quasi-public sector bodies or who are
able to draw upon government subsidies to partly fund contractual
payments.
Target returns are not met The Group's targeted returns are targets only, based on estimates and Generating returns which are lower than the targeted returns would probably There are regular reviews of the investment environment, competition, the Post Mitigation Impact
assumptions which are subject to significant uncertainties, including affect the share price of the Company, which would affect its ability to raise pipeline, the portfolio, and future cash flow focused on the Group's returns.
competitive market pricing being lower than targeted returns, and actual further finance. The Group has the flexibility to structure investments to be as competitive as Moderate
returns may be materially lower than targeted returns. possible through the overall terms of a funding solution rather than just on
price. Post Mitigation Likelihood
Moderate
In addition, the Group's Revolving Credit Facility has given the Group access Change in Year
to funding with a cheaper cost of capital which should help towards achieving
its target returns. Stable
The Group's average pipeline return is 9%, with a broad range of opportunities
across a range of sectors, asset classes and return profiles. The ability to
reinvest capital into higher returning opportunities should help towards
achieving its target returns.
Supply Chain Increases in the costs of raw materials and shipping increase the overall Delays to delivery of key items required for the construction of energy Long lead time items, such as with BESS assets, are typically secured through Post Mitigation Impact
supply chain costs. transition assets can result in delays to projects being funded by the Group, deposit payments, with penalties for delays passed onto to contractual
therefore impacting returns. counterparties, therefore limiting the impact on the Group. Moderate
Post Mitigation Likelihood
High demand for energy transition assets increases the length of time taken to
receive key items. Alternative methods for sourcing raw materials are being developed, which will Moderate
ease supply chain pressures over time.
Change in Year
New
With the exception of the BESS Portfolio, this risk has a limited impact on
the remainder of the portfolio given the operational nature of assets.
Spare parts strategies have been established to limit the impact of supply
chain issues for each of the respective investments.
Ability to raise debt on acceptable terms Ability to raise debt on acceptable terms, may limit the Group's ability to Should debt not be available at the terms assumed in the financial model, TENT The Company, through its wholly owned subsidiary, TENT Holdings, successfully Post Mitigation Impact
deliver the target returns and dividend coverage. may be unable to meet the total NAV return target and/or reduce dividend extended its existing £40 million RCF to 28 March 2025 on acceptable terms.
cover. This provides funding for the Group to invest into the BESS Portfolio and Moderate to High
allow it to reinvest the capital recycled into and attractive pipeline of
opportunities above the current blended return of the portfolio. Post Mitigation Likelihood
. Low to Moderate
Change in Year
Decrease
Reliance on the Investment Manager The Group relies on the Investment Manager's services and its reputation in The performance of the Group depends, in part, on the ability of the Unless there is a default, either party may terminate the Investment Post Mitigation Impact
the energy and infrastructure market. As a result, the Group's performance Investment Manager to provide competent and efficient services to the Management Agreement by giving not less than 12 months' written notice, such
will, to a large extent, depend on the Investment Manager's abilities in the
notice not being served before the fourth anniversary of the date of Admission Moderate to High
energy transition market. Group. (which was October 2020).
Post Mitigation Likelihood
Low to Moderate
The departure of any of the key personnel of the Investment Manager without The Board regularly reviews and monitors the Investment Manager's performance.
adequate replacement may also have a material adverse effect on the Group's In addition, the Board meets regularly with the Investment Manager to ensure Change in Year
performance. In addition, if any such personnel were to do anything or were that we maintain a positive working relationship.
alleged to have done something that may be the subject of public criticism or
Decrease
other negative publicity or may lead to investigation, litigation or sanction,
this may have an adverse impact on the Group and its reputation by
association. The key personnel of the Investment Manager are subject to a six-month notice
period which would provide sufficient time for the Investment Manager to find
a suitable replacement with relevant industry experience.
Termination of the Investment Management
Agreement would severely affect the Group's ability to effectively manage its
operations and may have a negative impact on the share price of the Company.
Since the last Annual Report, the following risks have been removed from the
Principal Risks table:
- Significant abortive costs in terms of financial cost and time
- Geopolitical
Each of these risks are still being actively managed through our risk
management process.
The risk of ability to raise additional finance has been broken out into
ability to raise debt on acceptable terms and ability to raise additional
equity.
Emerging risks
Emerging risks are characterised by a degree of uncertainty and the
Investment Manager and the Board consider new and emerging risks every six
months, the risk register is then updated to include these
considerations.
The Board have recognised climate change as a risk since fund inception and
where known risks have been identified, and considered material they enter the
risk register, and in some cases the principal risk register, as is the case,
for example, with carbon pricing and weather effects. Our inclusion of climate
change in emerging risks is recognition of 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 Scientific knowledge continues to develop and the latest
Intergovernmental Panel on Climate Change's (IPCC) sixth assessment report,
published in March 2023, confirmed that latest data indicates remaining within
a 1.5 degree world is unlikely to be achievable, and that staying within a 4
degree world is the more realistic target still requiring urgent and
significant action to be achieved. In the face of this latest insight, we see
increasing risk of laws and/or regulation being introduced with the purpose of
driving a transition to lower carbon emissions which may impact a given
asset's activities. Assets are also at increased risk from physical climate
risks resulting from the more turbulent and unpredictable weather and
environmental conditions, caused by a warming climate.
Transition Risks The risk that results from changing policies, practices and
technologies that arise as countries and societies work to decrease their
reliance on carbon. In the near and medium term, transition risks to portfolio
investments may arise from any unexpected changes to existing government
policies. This could have a negative impact on the valuation of the Group's
portfolio. For the top-rated transition risks please refer back to the
progress report under the Task Force on Climate-related Financial Disclosure
framework.
Physical Effects of Climate Change While efforts to mitigate climate change
continue to progress, the physical impacts are already emerging in the form of
changing weather patterns. For example, 2022 saw both heatwaves and flash
flooding throughout the UK and Europe. We assess for ten major extreme weather
events: flooding (river, coastal, surface) subsidence, landslides, coastal
erosion, heat stress, storm, droughts, wildfires, which may potentially impair
the operations of existing and future portfolio companies at certain locations
or impacting locations of companies within their supply chain. The investment
manager now uses a specialist external data platform to identify predicted
physical risk exposure (ten major physical risks) for TENT's investments, or
future prospective assets, in a <1.5- and 3-degree warming environment. For
the top-rated physical risks please refer back to the progress report under
the Task Force on Climate-related Financial Disclosure framework.
Going Concern and Viability Statement
Going Concern
The Directors have adopted the going concern basis in preparing the Annual
Report for the year ended 31 March 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 September 2024.
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
Investment Manager's Report. The Group faces a number of risks and
uncertainties, as set out in the Strategic Report. The financial risk
management objectives and policies of the Group, including exposure to credit
risk, price risk and market risk are disclosed in Note 17 to the financial
statements.
The Group continues to meet day to day liquidity needs through its cash
resources.
As at 31 March 2023, the Company had net assets of £99.4 million including
cash balances of £9.3 million. The Company's sole wholly owned subsidiary,
TENT Holdings, has a £40 million RCF which is undrawn and a £2 million cash
balance which, on a Group basis, offer sufficient cashflow to meet the
Company's obligations, including investment commitments of £44.4 million, as
they fall due. The covenants on the RCF are limited to gearing and interest
cover and the Group is expecting to comply with these covenants on drawdown
and in future periods. The Company acknowledges the current trend of rising
interest rates, and while the Group's Revolving Credit Facility (RCF) interest
rate is fixed until March 2025, there is a possibility of future increases. As
part of the assessment of its ongoing operations and viability, the Group has
analysed the potential impact of such a scenario. The findings indicate that
the Company would continue to operate as a going concern and maintain ample
liquidity.
The Group's investment portfolio consists of fixed-rate debt investments, with
most of these investments having contractual maturities between 2031 and 2035.
Additionally, the Group has the Hydroelectric Portfolio, which is fully
operational and has an economic lifespan of over thirty years. As a result,
the Group benefits from long-term contractual 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
next financial year. Forecast revenues thereafter are subject to wholesale
power prices, the levels of which are based upon qualified independent
forecasts.
The Group's cash outflows encompass operational expenses, debt servicing,
dividend payments, and costs associated with acquiring new assets. These
outflows are anticipated to be covered by the Group'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.
The war in Ukraine continues into 2023 and the impact of sanctions placed on
Russia aimed to weaken the Russian economy have had considerable impact on its
affiliated countries during the year. Although sanctions are a foreign policy
tool deployed in several contexts, the coordinated sanctions on Russia are
significant to the global economy due to the size of the Russian economy. The
Company does not have any direct exposure to Russia and no assets located in
nearby jurisdictions, however we, the Company, continues to monitor the
macroeconomic consequences on the investment portfolio closely, including
energy price volatility, increase risk of political intervention to regulate
prices, change in inflation, taxes and further sanctions. The Directors do not
consider that the effects of the conflict have created a material uncertainty
over the assessment of the Company as a going concern.
On the basis of this review, and after making due enquiries, the Directors
have a reasonable expectation that the Company has adequate resources to
continue in operational existence for at least 12 months from the date of
approval of this report. Accordingly, they continue to adopt the going concern
basis in preparing the financial statements.
Viability Statement
The Directors have assessed the viability of the Group over a five-year period
to March 2028.
In making this statement the Directors have considered the resilience of the
Group, taking account of its current position, the principal risks facing the
business (especially the level of future energy prices and our counterparties'
ability to make contractual payments), in severe but plausible downside
scenarios and the effectiveness of any mitigating actions.
The Directors have determined that the five-year period to March 2028 is an
appropriate period over which to provide this viability statement as this
period accords with the Group's business planning exercises and is appropriate
for the investments owned by the Group. The Group's risk management processes,
described in the Risk Management section, consider the key risks during this
five-year period and beyond. These include sustainability-related risks that
take into account ESG considerations, including the physical and transition
risks of climate change (in line with the recommendations of the Task Force on
Climate-related Financial Disclosures ("TCFD")).
The viability analysis has been prepared on the assumption that the Groups
investments comprising fixed rate debt investments and a portfolio of
hydroelectric assets which are fully operational with economic lives well in
excess of the period being considered. As a result, the Group benefits from
long-term cash flows and a set of risks that can be identified and assessed.
Over the next five years, the loan investments contribute a fixed return, and
the Hydroelectric Portfolio contributes returns based on its upward only RPI
linked revenue flow under a UK government arrangement. The Hydroelectric
Portfolio also benefits from fixed price PPAs, with institutional
counterparties, for the next year. Forecast revenues thereafter are subject to
wholesale power prices whose levels are based upon qualified independent
forecasts. The projects are each supported by detailed financial models.
The Directors believe that portfolio diversification of asset classes across
the energy transition landscape with fixed rate debt in multiple technologies
and equity investments in hydroelectric assets helps to withstand and mitigate
risks it is most likely to meet.
The Investment Manager prepares and considers, and the Board reviews, summary
cash flow projections bi-annually as part of management reporting, business
planning and dividend approval processes. The projections consider cash
balances, key covenants and limits, dividend cover, investment policy
compliance and other key financial indicators over the five-year period.
These projections are based on the Investment Manager's expectations of future
asset performance, income and costs, and are consistent with the methodology
applied to produce the valuation of the investments.
In the viability assessment, the Company has thoroughly evaluated its capacity
to sustain operations in various challenging scenarios. These scenarios
include a potential decrease in income and an increase in Group expenditure,
higher interest rates and even an extreme scenario involving a substantial
valuation write-down. The assessment has confirmed that both the Company and
the Group would remain viable, fulfilling all obligations, while also
maintaining adequate liquidity and (except in the extreme scenario where a
waiver would be necessary) meeting the covenant conditions associated with the
RCF.
The Directors continue to encourage the Investment Manager to ensure that the
portfolio of investments is able to operate as effectively as possible. The
Investment Manager has performed downside risk scenario planning encompassing
a range of potential outcomes including a breakeven scenario where the model
is stressed to failure, illustrating a highly unlikely outcome. The other
downside scenarios demonstrate that whilst profitability may be adversely
affected, the Company and its investments are expected to remain viable.
Based on this review, the Directors confirm that they have a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the five-year period to March 2028.
Board Approval of the Strategic Report
The Strategic Report has been approved by the Board of Directors and signed
on its behalf by the Chair.
John Roberts
Chair
16 June 2023
Financial Statements
Income Statement
For the year ended 31 March 2023
Year Ended Year Ended
31 March 2023 31 March 2022
Note Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment income 5 7,282 - 7,282 2,451 - 2,451
Profit arising on the revaluation of investments at the year end - 4,017 4,017 - 3,634 3,634
Investment return 7,282 4,017 11,299 2,451 3,634 6,085
Investment management fees 4 662 221 883 327 109 436
Other expenses 6 1,581 22 1,603 867 21 888
2,243 243 2,486 1,194 130 1,324
Profit before taxation 5,039 3,774 8,813 1,257 3,504 4,761
Taxation 8 - - - - - -
Profit Loss after taxation 5,039 3,774 8,813 1,257 3,504 4,761
Other comprehensive income - - -
Total comprehensive income 5,039 3,774 8,813 1,257 3,504 4,761
Basic & diluted earnings per share (pence) 9 5.04p 3.78p 8.81p 1.26p 3.50p 4.76p
The total column of this statement is the Income Statement of the Company
prepared in accordance with the requirements of the Act and in accordance
with the UK adopted international accounting standards. The supplementary
revenue return and capital columns have been prepared in accordance with the
Association of Investment Companies Statement of Recommended Practice (AIC
SORP).
All revenue and capital items in the above statement derive from continuing
operations.
This Income Statement includes all recognised gains and losses.
The accompanying Notes are an integral part of this statement.
Balance Sheet
at 31 March 2023
Company Number: 12693305
31 March 2023 31 March 2022
Note £'000 £'000
Non-current assets
Investments at fair value through profit or loss 12
90,060 78,952
Current assets
Trade and other receivables 13 374 453
Cash and cash equivalents 9,257 17,144
9,631 17,597
Total assets
99,691 96,549
Current liabilities
Trade and other payables 14 (242) (412)
(242) (412)
Net assets 99,449 96,137
Equity attributable to equity holders
Share capital 15 1,000 1,000
Share premium 13 13
Special distributable reserve 91,037 91,444
Capital reserve 7,093 3,319
Revenue reserve 306 361
Total equity 99,449 96,137
Shareholders' funds
Net asset value per Ordinary Share (pence) 11 99.44p 96.12p
The statements were approved by the Directors and authorised for issue on 19
June 2023 and are signed on behalf of the Board by:
Dr John Roberts
Chair
16 June 2023
The accompanying Notes are an integral part of this statement.
Statement of Changes in Shareholders' Equity
For the year ended 31 March 2023
Issued Capital Share Premium Special Distributable Reserve Capital Reserve Revenue Reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
For year ended 31 March 2023
Opening balance 1,000 13 91,444 3,319 361 96,137
Issue of share capital 15 - - - - -
Total comprehensive income for the year - - - 3,774 5,039 8,813
Dividends Paid 10 - - (407) - (5,094) (5,501)
Balance at 31 March 2023 1,000 13 91,037 7,093 306 99,449
Issued Capital Share Premium Special Distributable Reserve Capital Reserve Revenue Reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
For year ended 31 March 2022
Opening balance 1,000 - 97,009 (185) (336) 97,488
Issue of share capital 15 - 13 - - - 13
Total comprehensive income for the year - - - 3,504 1,257 4,761
Dividends Paid 10 - - (5,565) - (560) (6,125)
Balance at 31 March 2022 1,000 13 91,444 3,319 361 96,137
The capital reserve represents the proportion of Investment Management
fees and other expenses, where applicable, charged against capital and
realised/unrealised gains or losses on the disposal/revaluation of
investments. The unrealised element of the capital reserve is not
distributable. The special distributable reserve was created on court
cancellation of the share premium account. The revenue, special
distributable and realised capital reserves are distributable by way of
dividend and total £91.0 million (31 March 2022: £91.6 million).
The accompanying Notes are an integral part of this statement.
Statement of Cash Flows
For the year ended 31 March 2023
Year ended Year ended
31 March 2023 31 March 2022
Note £'000 £'000
Cash flows from operating activities
Profit before taxation 8,813 4,761
Gain on revaluation of investments held at fair value through profit or loss 12 (4,017) (3,634)
Cash flows from operations 4,796 1,127
Interest income 5 (3,402) (2,451)
Interest received 2,541 1,646
Decrease in receivables 13 (57) 34
Increase / (Decrease) in payables 14 (170) 263
Net cash flows from operating activities 3,708 619
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss
12
(9,433) (56,019)
Loan principal repaid 12 3,339 2,103
Net cash flows used in investing activities (6,094) (53,916)
Cash flows used in financing activities
Issue of shares 15
- 13
Dividends paid (5,501) (6,125)
Net cash flows from financing activities (5,501) (6,112)
Net decrease in cash and cash equivalents (7,887) (59,409)
Reconciliation of net cash flow to movements in cash and cash equivalents
Cash and cash equivalents at beginning of year 17,144 76,553
Net decrease in cash and cash equivalents (7,887) (59,409)
Cash and cash equivalents at end of year 9,257 17,144
The accompanying Notes are an integral part of this statement.
Notes to the Financial Statements
1. Corporate 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. Significant accounting policies
Basis of Preparation
The financial statements, which aim to give a true and fair
view, have been prepared in accordance with UK-adopted international
accounting standards and the applicable legal requirements of the Companies
Act 2006.
The Company prepares its financial statements in compliance with UK-adopted
International Accounting Standards.
The financial statements have been prepared in accordance with the guidelines
outlined in the Statement of Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital Trusts ("SORP") issued by the
Association of Investment Companies ("AIC") in April 2021. This ensures that
the financial statements are relevant and applicable to the Company.
In line with the SORP, supplementary information has been provided to analyse
the Statement of Comprehensive Income and distinguish between items of a
revenue and capital nature. This supplementary information is presented
alongside the total Statement of Comprehensive Income, allowing for a
comprehensive understanding of the Company's financial performance and the
breakdown between revenue and capital activities.
The financial statements are prepared on the historical cost basis, except for
revaluation of certain financial investments at fair value through profit or
loss. The principal accounting policies adopted are set out below and
consistently applied, subject to changes in accordance with any amendments in
IFRS.
The Company regularly reviews estimates and underlying. Any revisions to
accounting estimates are recognised in the period in which the estimates are
revised and in future periods affected. The significant estimates, judgements,
or assumptions made during the period are detailed on pages 137 to 138.
Basis of Consolidation
The sole objective of the Company, through its subsidiary TENT Holdings, is
to make investments, via individual corporate entities. The
Company typically will subscribe for equity in or issue loans to TENT
Holdings in order for it 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 needs to be met (see below). Under IFRS 10, investment
entities are required to hold subsidiaries at fair value through
the Income Statement rather than consolidate them on
a line-by-line basis, meaning TENT Holdings' cash, debt and working capital
balances are included in the fair value of the investment rather than in the
Company's assets and liabilities. 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 beneficiary investors. TENT Holdings Limited meets the criteria to
be classified as an independent investment entity in accordance with IFRS 10,
thereby meeting the criteria of exemption from consolidating its subsidiaries.
The Company therefore does not consolidate its Subsidiaries.
Characteristics of an investment entity
There are three key conditions to be met by the Company for it to meet the
definition of an investment entity. For each reporting period, the
Directors will continue to assess whether the Company continues to meet these
conditions:
1. It obtains funds from one or more investors for the purpose of
providing these investors with professional investment
management services;
2. It commits to its investors that its business purpose is to invest
its funds solely for returns (including having an exit strategy for
investments) from capital appreciation, investment income or both; and
3. It measures and evaluates the performance of substantially all its
investments on a fair value basis.
In satisfying the second criteria, the notion of an investment time frame is
critical. An investment entity should not hold its investments indefinitely
but should have an exit strategy for their realisation. The Company intends
to hold its investments through TENT Holdings for the remainder of their
useful life to preserve the capital value of the portfolio. However, as the
energy transition assets are expected to have no residual value after their
life, the Directors consider that this demonstrates a clear exit strategy from
these investments.
Subsidiaries are therefore measured at fair value through profit or loss, in
accordance with IFRS 13 "Fair Value Measurement", IFRS 10 "Consolidated
Financial Statements" and IFRS 9 "Financial Instruments".
The Directors believe the treatment outlined above provides the most relevant
information to investors.
Going Concern
The Directors have adopted the going concern basis in preparing the Annual
Report for the year ended 31 March 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 September 2024.
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
Investment Manager's Report. The Group faces a number of risks and
uncertainties, as set out in the Strategic Report. The financial risk
management objectives and policies of the Group, including exposure to credit
risk, price risk and market risk are disclosed in Note 17 to the financial
statements.
The Group continues to meet day to day liquidity needs through its cash
resources.
As at 31 March 2023, the Company had net assets of £99.4 million including
cash balances of £9.3 million. The Company's sole wholly owned subsidiary,
TENT Holdings, has a £40 million RCF which is undrawn and a £2 million cash
balance which, on a Group basis, offer sufficient cashflow to meet the
Company's obligations, including investment commitments of £44.4 million, as
they fall due. The covenants on the RCF are limited to gearing and interest
cover and the Group is expecting to comply with these covenants on drawdown
and in future periods. The Company acknowledges the current trend of rising
interest rates, and while the Group's Revolving Credit Facility (RCF) interest
rate is fixed until March 2025, there is a possibility of future increases. As
part of the assessment of its ongoing operations and viability, the Group has
analysed the potential impact of such a scenario. The findings indicate that
the Company would continue to operate as a going concern and maintain ample
liquidity.
The Group's investment portfolio consists of fixed-rate debt investments, with
most of these investments having contractual maturities between 2031 and 2035.
Additionally, the Group has the Hydroelectric Portfolio, which is fully
operational and has an economic lifespan of over thirty years. As a result,
the Group benefits from long-term contractual 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
next financial year. Forecast revenues thereafter are subject to wholesale
power prices, the levels of which are based upon qualified independent
forecasts.
The Group's cash outflows encompass operational expenses, debt servicing,
dividend payments, and costs associated with acquiring new assets. These
outflows are anticipated to be covered by the Group'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.
The war in Ukraine continues into 2023 and the impact of sanctions placed on
Russia aimed to weaken the Russian economy have had considerable impact on its
affiliated countries during the year. Although sanctions are a foreign policy
tool deployed in several contexts, the coordinated sanctions on Russia are
significant to the global economy due to the size of the Russian economy. The
Company does not have any direct exposure to Russia and no assets located in
nearby jurisdictions, however we, the Company, continues to monitor the
macroeconomic consequences on the investment portfolio closely, including
energy price volatility, increase risk of political intervention to regulate
prices, change in inflation, taxes and further sanctions. The Directors do not
consider that the effects of the conflict have created a material uncertainty
over the assessment of the Company as a going concern.
On the basis of this review, and after making due enquiries, the Directors
have a reasonable expectation that the Company has adequate resources to
continue in operational existence for at least 12 months from the date of
approval of this report. Accordingly, they continue to adopt the going concern
basis in preparing the financial statements.
Financial Instruments
Financial assets and financial liabilities are recognised on the Company's
statement of financial position when the Company becomes a party to the
contractual provisions of the instrument. Financial assets are to be
de-recognised when the contractual rights to the cash flows from the
instrument expire or the asset is transferred, and the transfer qualifies for
de-recognition in accordance with IFRS 9 Financial Instruments.
Financial assets
The Company classifies its financial assets as either investments at fair
value through profit or loss or financial assets at amortised cost.
The classification depends on the purpose for which the financial assets are
acquired. The Investment Manager determines the classification of its
financial assets at initial recognition.
Investments at fair value through profit or loss
At initial recognition, the Company measures its investments, through its
investment in TENT Holdings, at fair value through profit or loss and any
transaction costs are expensed to profit or loss. The Company
subsequently, through its investment in TENT Holdings, continues to measure
all investments at fair value and any changes in the fair value are
recognised as gains or losses on investments at fair value through profit
or loss within investment income.
Investments at fair value through profit or loss are recognised upon initial
recognition as financial assets at fair value through profit or loss in
accordance with IFRS 9. Investments held at fair value through profit or
loss consist of the Company's subsidiary, TENT Holdings.
The Company's investment in TENT Holdings comprises both equity and loan
notes. The Company measures its investment as a single class of
financial asset at fair value in accordance with IFRS 13 Fair Value
Measurement.
In determining the fair value, the Board will consider any observable market
transactions and will measure fair value using assumptions that market
participants would use when pricing the asset, including any assumptions
regarding risk surrounding the transaction.
Financial assets at amortised cost
Trade receivables, loans and other receivables that are non-derivative
financial assets and that have fixed or determinable payments that are not
quoted in an active market are classified as "financial assets at amortised
cost". Trade receivables, loans and other receivables are measured
at amortised cost using the effective interest method, less any impairment.
They are included in current assets, except where maturities are greater than
12 months after the reporting date, in which case they are to be classified as
non-current assets. The Company's financial assets held at amortised cost
comprise "trade and other receivables" and "cash and cash equivalents" in
the statement of financial position.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
Financial liabilities
Financial liabilities are classified as other financial liabilities,
comprising other non-derivative financial instruments, including trade and
other payables, which are to be measured at amortised cost using the effective
interest method.
Effective interest method
The effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts through the expected life of the financial
instrument to the relevant asset's carrying amount.
Fair value estimation for investments at fair value
The Group's investments are not typically traded in active markets. Fair
value is calculated by discounting at an appropriate discount rate future cash
flows expected to be received, by TENT Holdings, from the investment
portfolio. The underlying cash flows are from investments in both equity
(dividends and equity redemptions), shareholder, inter-company and third-party
loans (interest and repayments). The valuations are based on the expected
future cash flows, using reasonable assumptions and forecasts for revenues,
operating costs, macro-level factors and an appropriate discount rate.
The discount rates used in the valuation exercise represent the Investment
Manager's best assessment of the rate of return in the market for assets with
similar characteristics and risk profile. The discount rates are reviewed on a
regular basis and updated, where appropriate, to reflect changes in the
market and in the project risk characteristics.
Investments, which are entered into by TENT Holdings, are designated upon
initial recognition as held at fair value through profit or loss. Gains or
losses resulting from the movement in fair value of the investments are
reflected in the valuation of TENT Holdings and recognised in the Statement of
Comprehensive Income at each quarterly valuation point.
The Company's loan and equity investment in TENT Holdings is held at fair
value through profit or loss which is measured by reference to the net asset
value of TENT Holdings. Gains or losses resulting from the movement in fair
value are recognised in the Company's Statement of Comprehensive Income at
each quarterly valuation point.
For each quarterly valuation period the Company engages external, independent
and qualified valuers to assess the validity of the forecast cash flow
assumptions and discount rates used by the Investment Manager in determination
of fair value. The Board reviews and approves the valuations following
appropriate challenge and examination.
Revenue Recognition
Gains and losses on fair value of investments in the income statement
represent gains or losses that arise from the movement in the fair value of
the Company's investment in TENT Holdings.
Investment income comprises interest income and dividend income received from
the Company's subsidiary, TENT Holdings. Interest income is recognised in
the Income Statement using the effective interest method.
Dividends from TENT Holdings are recognised when the Company's right to
receive payment has been established.
Share capital and share premium
The Company's Ordinary Shares are classified as equity and are not
redeemable. Costs associated or directly attributable to the issue of new
equity shares are recognised as a deduction in equity and are charged from
the share premium account.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, deposits held on call with
banks and other short-term highly liquid deposits with original maturities of
three months or less. At 31 March 2023, the Company's cash balances were held
in the Company's bank current account.
There are no expected credit losses and the counterparty risk is mitigated
as the banking institution that the Company holds balances with has high
credit ratings assigned by international credit rating agencies.
Foreign currencies
Items included in the financial statements are presented in Pounds Sterling
because that is the currency of the primary economic environment in which
the Company operates and is the Company's functional currency.
Transactions and balances
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are translated at the
foreign exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in the Income Statement.
Dividends
Dividends to the Company's shareholders are recognised when they become
legally payable. In the case of interim dividends, this is when they are paid.
In the case of final dividends, this is when they are approved by the
shareholders at the Annual General Meeting.
Fund Expenses
Expenses are accounted for on an accruals basis. Share issue expenses of the
Company directly attributable to the issue and listing of shares are charged
to the share premium account. The Company's investment management fee,
administration fees and all other expenses are charged through the Income
Statement.
Capital expenses
In accordance with the Company's investment objective, it is anticipated that
income returns will constitute the majority of the Company's long-term return
and based on the estimated apportionment of future returns (which cannot
be guaranteed), 25% of the investment management fee is charged as a
capital item within the Income Statement.
All expenditures are carefully assessed to determine whether they are related
to revenue or capital. Subsequently, the expenditure will be appropriately
allocated to the respective section in the income statement.
Taxation
Under the current system of taxation in the UK, the Company is liable to
taxation on its operations in the UK. Current tax is the expected tax payable
on the taxable income for the period, using tax rates that have been enacted
or substantively enacted at the date of the Statement of Financial
Position.
Deferred tax is the tax expected to be payable or recoverable on temporary
differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Deferred tax assets
and liabilities are not recognised if the temporary differences arise from
goodwill or from the initial recognition of other assets and liabilities in a
transaction that affects neither the tax profit or the accounting
profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments, except where the Company is able to control the
timing of the reversal of the difference and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred tax is
calculated at the tax rates that are expected to apply in the period when the
liability is settled, or the asset is realised. Deferred tax is charged or
credited to the Income Statement except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with
in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off tax assets against tax liabilities and when they
relate to income taxes levied by the same taxation authority and
the Company intends to settle its current tax assets and liabilities on a
net basis.
Deferred tax assets and liabilities are not discounted.
New, revised and amended standards applicable to future reporting periods
There were no new standards or interpretations effective in the year that have
had a significant impact on the Company's financial statements. Furthermore,
none of the amendments to the standards summarised below have had a
significant effect on the financial statements.
New and revised standards not applied
At the date of authorisation of these financial statements, the following
amendments had been published and will be mandatory for future accounting
periods beginning on or after 1 January 2023:
· Amendments to IFRS 17, "Insurance contracts" - this standard replaced
IFRS 4, which currently permits a wide variety of practices in accounting for
insurance contracts.
· Narrow-scope amendments to IAS 1 "Presentation of Financial
Statements", practise statement 2 and IAS 8 "Accounting Policies, Changes in
Accounting Estimates and Errors".
· Amendments to IAS 12 "Income Taxes" - deferred tax related to assets
and liabilities arising from a single transaction.
Effective for accounting periods beginning on or after 1 January 2024:
· Amendments to IAS 1 on classification of liabilities clarify that
liabilities are classified as either current or non-current, depending on the
rights that exist at the end of the reporting period and amendments to
Non-current Liabilities with covenants.
· Amendments to IFRS16 on Lease Liability in a Sale and Leaseback.
The impact of these standards is not expected to be material to the reported
results of the Company.
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. All the investments are based in the UK.
The Company has no single major customer. The internal financial information
to be used by the CODM on a quarterly basis to allocate resources, assess
performance and manage the Company will present the business as a single
segment comprising the portfolio of investments in energy
transition assets.
3. Critical accounting estimates, judgements and assumptions
In the application of the Company's accounting policies, which are described
in Note 2, the Directors are required to make judgements, estimates and
assumptions about the fair value of assets and liabilities that affect
reported amounts. It is possible that actual results may differ from these
estimates.
The preparation of the financial statements requires the Board to make
judgements, estimates and assumptions that affect the application of the
accounting policies and the reported amount of assets, liabilities, income and
expenses. Estimates, by their nature, are based on judgement and available
information, hence actual results may differ from these judgements, estimates
and assumptions.
The key estimates that have a significant impact on the carrying values of
underlying investments that are valued by reference to the discounted value of
future cash flows are the useful life of the assets, the discount rates, the
rate of inflation, the price at which the power and associated benefits can be
sold and the amount of electricity the assets are expected to produce. The
sensitivity analysis of these key assumptions is outlined in Note 12 to the
financial statements, on page 142.
For equity investments, entered into by TENT Holdings, useful lives are based
on the Investment Manger's estimates of the period over which the assets will
generate revenue which are periodically reviewed for continued
appropriateness. Where land is leased from an external landlord, the
operational life assumed for the purposes of the asset valuations is valued at
lease expiry or end of contractual extension options. For the loan investments
the future cash flows are as per contractual maturity of the facility.
The discount rates are subjective and therefore it is feasible that a
reasonable alternative assumption may be used resulting in a different value.
The discount rates applied to cash flows are reviewed regularly by the
Investment Manager to ensure they are at an appropriate level. The Investment
Manager will take into consideration market transactions, of similar nature,
when considering changes to the discount rates used. For the year end and
half-year accounts and the other quarterly NAV updates, the Company engages
external, independent and qualified valuers to assess the validity of the
discount rates used by the Investment Manager in determination of fair value.
For equity investments, by TENT Holdings, the revenues and expenditure of the
investee companies are frequently or wholly subject to indexation and an
assumption is made as to near term and long-term rates. For debt investments,
by TENT Holdings, the cashflows are determined by reference to contractual
arrangements.
The price at which the output from the generating equity assets is sold is a
factor of both wholesale electricity prices and the revenue received from the
Government support regimes such as the Feed in Tariffs. Future power prices
are estimated using external third-party forecasts which take the form of
special consultancy reports, which reflect various factors including gas
prices, carbon prices and renewables deployment.
TENT Holdings' investments in unquoted investments are valued by reference to
valuation techniques approved by the Directors and in accordance with the
International Private Equity and Venture Capital ("IPEV") Guidelines.
As noted above, the Board has concluded that the Company meets the definition
of an investment entity as defined in IFRS 10. This conclusion involved a
degree of judgement and assessment as to whether the Company meets the
criteria outlined in the accounting standards.
4. Investment management fees
The Company and the Investment Manager entered into an Investment Management
Agreement on 25 August 2020.
During the financial year the Annual Management Fee was calculated at 0.9% of
Net Asset Value. In the prior financial year, the Annual Management Fee was
calculated on the deployed cash funds arising from IPO, until 10 December
2021. At this date 75% of net IPO proceeds had been deployed and therefore for
the remaining part of the financial year 2022 the fee was calculated at 0.9%
of NAV.
Under the terms of the agreement, the Investment Manager must use 20% of
the management fee received (net of taxes) to acquire shares in the
Company. On a semi-annual basis, following the announcement of the Net Asset
Value for the semi-annual periods ending 31 March and 30 September in each
year, the Investment Manager shall procure that the Wider Triple Point Group
shall apply an amount, in aggregate, equal to 20% of the Annual Management Fee
for the relevant six-month period as follows:
(a) where the Ordinary Shares are trading at, or at a premium to, the latest
published Net Asset Value per Ordinary Share; the Investment Manager shall
procure that the Wider Triple Point Group shall use the relevant amount to
subscribe for new Ordinary Shares issued at the latest published Net Asset
Value per Ordinary Share applicable at the date of issuance; or
(b) where the Ordinary Shares are trading at a discount to the latest
published Net Asset Value per Ordinary Share; the Investment Manager shall
procure that the Wider Triple Point Group shall, as soon as reasonably
practicable, use the relevant amount to make market purchases of Ordinary
Shares within four months of the relevant Net Asset Value
publication date.
The Annual Management Fee is payable on a quarterly basis, and Ordinary
Shares are acquired by the Wider Triple Point Group on a half-yearly basis.
Any such Ordinary Shares acquired by the Wider Triple Point Group are subject
to a minimum lock-in period of 12 months.
Investment management fees paid or accrued during the year were as
follows:
For the year ended For the year ended
31 March 2023 31
March
2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Cash element 662 221 883 317 106 423
Equity element* - - - 10 3 13
662 221 883 327 109 436
* During the financial year ended 31 March 2023, the Investment Manager
purchased shares in the Company through the open market, as the share price
was trading at a discount to NAV. In the prior financial year, the Company
issued new shares to the Investment Manager, as the shares were trading at a
premium to NAV.
5. Investment Income
For the year ended For the year ended
31 March 2023 31
March
2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on cash deposits 48 - 48 5 - 5
Interest income from investments 3,354 - 3,354 2,446 - 2,446
Dividend income from investments 3,880 - 3,880 - - -
7,282 - 7,282 2,451 - 2,451
6. Operating Expenses
For the year ended
For the year ended
31 March 2023 31
Mar
ch
202
2
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment Management fees 662 221 883 327 109 436
Directors' fees* 200 - 200 200 - 200
Company's audit fees:
- in respect of audit services 109 - 109 70 - 70
- in respect of non-audit services 44 - 44 25 - 25
Premium Listing Fees 547 - 547 - - -
Other operating expenses 681 22 703 572 21 593
2,243 243 2,486 1,194 130 1,324
*Directors' fees exclude employer's national insurance contributions and
travel expenses which are included as appropriate in other operating expenses.
Travel expenses for the year ended 31 March 2023 totalled £485 (31 March
2022: £643).
7. Employees
The Company had no employees during the period.
Full detail on Directors' fees is provided in Note 19. The Directors' fees
exclude employer's national insurance contribution which is included as
appropriate in other operating expenses. There were no other emoluments
during the period.
8. Taxation
Analysis of charge in the period
For the year ended For the year ended
31 March 2023 31 March 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
The effective UK corporation tax rate applicable to the Company for the period
is 19%. The tax charge differs from the charge resulting from applying the
standard rate of UK corporation tax for an investment trust company. The
differences are explained below:
For the year ended For the year ended
31 March 2023 31 March 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit before taxation 5,039 3,774 8,813 1,257 3,504 4,761
Corporation tax at 19% 957 717 1,674 239 666 905
Effect of:
Capital (gain) not deductible (763) (763) - (690) (690)
Interest distributions (646) - (646) (239) - (239)
Dividends received not taxable (737) - (737)
Disallowed expenditure 108 - 108 - - -
Group relief of excess management expenses 318 46 364 - 24 24
Tax charge for the period - - - - - -
The Directors are of the opinion that the Company has complied with the
requirements for maintaining investment trust status for the purposes of
section 1158 of the Corporation Tax Act 2010. This allows certain capital
profits of the Company to be exempt from UK tax.
Additionally, the Company has in the financial year utilised the interest
streaming election which allows the Company to designate dividends wholly or
partly as interest distributions for UK tax purposes. Interest distributions
are treated as tax deductions against taxable income of the Company so that
investors do not suffer double taxation on their returns.
The financial statements do not directly include the tax charges for the
Company's intermediate holding company, as TENT Holdings is held at fair
value. TENT Holdings is subject to taxation in the United Kingdom at the
current main rate of 19%.
9. Earnings per Share
For the year ended For the year ended
31 March 2023 31 March 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit attributable to the equity 5,039 3,774 8,813 1,257 3,504 4,761
holders of the Company (£'000)
Weighted average number of 100,014 100,014 100,014 100,014 100,014 100,014
Ordinary Shares in issue (000)
Profit per Ordinary share (pence) - 5.04p 8.81p 1.26p 3.50p 4.76p
basic and diluted 3.77p
Dilution of the earnings per share as a result of the equity element of the
investment management fee as disclosed in Note 4, is not expected to have a
material impact on the basic earnings per share.
There is no difference between the weighted average Ordinary and diluted
number of Shares.
10. Dividends and Interest Distributions
Interim dividends paid during year ended 31 March 2023 Dividend per share Total dividend £'000
pence
Interest distribution per share pence
Final quarter interim dividend for the year ended 31 March 2022 0.678 0.697 1,375
First quarter interim dividend for year ended 0.799 1,375
31 March 2023 0.576
Second quarter interim dividend for year ended 0.799 1,375
31 March 2023 0.576
Third quarter interim dividend for year ended 0.799 1,376
31 March 2023 0.576
3.075 2.425 5,501
Interim dividends declared after 31 March 2023 and not accrued in the year Dividend per share pence Total dividend £'000
Interest distribution per share pence
Fourth quarter interim dividend for the year ended 31 March 2023 0.370 1.005 1,375
0.370 1.005 1,375
As at the date of this report, the Board declared a fourth quarter interim
dividend of 1.375 pence per share with respect to the period ended 31 March
2023. The dividend is expected to be paid on or around 14 July 2023 to
shareholders on the register on 30 June 2023 The ex-dividend date is 29 June
2023. The Company has chosen to designate part of this interim dividend as an
interest distribution. 1.005 pence per share will be paid as an interest
payment and 0.370 as an ordinary dividend.
Shareholders in receipt of an interest distribution will be treated for UK tax
purposes as though they received a payment of interest. This will result in a
reduction in the corporation tax payable by the Company.
11. Net assets per Ordinary share
31 March 2023 31 March 2022
£'000 £'000
Total shareholders' equity (£'000) 99,449 96,137
Number of Ordinary Shares in issue ('000) 100,014 100,014
Net asset value per Ordinary Share (pence) 99.44p 96.12p
12. Investments at Fair Value through Profit or Loss
As set out in Note 2, 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:
31 March 2023 31 March 2022
£'000 £'000
Fair value at start of the year 78,952 20,883
Loan advanced to TENT Holdings Limited in the year 7,964 32,704
Shareholding in TENT Holdings Limited invested in the year 1,469 23,315
Capitalised interest 997 519
Loan principal repaid (3,339) (2,103)
Fair value of other net assets in intermediate holding company 4,017 3,634
Fair Value of Company's investments as at end of the year 90,060 78,952
Loans advanced to TENT Holdings in the year totalled £7,964,000. The
advances were made at an interest rate of 7% to enable TENT Holdings to
complete the loan investment in BESS and LEDs.
The Company owns five shares in TENT Holdings, representing 100% of issued
share capital, allotted for a consideration of £24.8 million. The fair value
of the investment in TENT Holdings on 31 March 2023 is £90.1 million (31
March 2022: £79.0 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:
31 March 2023 31 March 2022
£'000 £'000
Portfolio Valuation 87,680 78,787
Intermediate holding company cash 1,982 293
Intermediate holding company debt* 329 454
Intermediate holding company net working capital 69 (582)
Fair Value of Company's investments as at end of the period 90,060 78,952
*Debt arrangement costs of £329,000 (31 March 2022: £454,000) which are
capitalised and expensed to profit or loss under amortised cost. At 31 March
2023 nil debt was drawn (31 March 2022: nil).
Fair Value measurements
As set out in Note 2, 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 three 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 investee companies, 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 cash flow 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 6.57% (31 March 2022: 6.11%).
An increase or decrease in this rate by 0.5% points 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 £'000 £'000 £'000 pence
Valuation - March 2023 2.84 92,896 90,060 87,478 (2.58)
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% Total portfolio value +5% change NAV per share impact
change
pence £'000 £'000 £'000 pence
Valuation - March 2023 (3.18) 86,880 90,060 93,193 3.13
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 £'000 £'000 £'000 pence
Valuation - March 2023 (2.37) 87,686 90,060 92,855 2.79
Inflation
The Hydroelectric Portfolio's income streams are principally subsidy based,
which is amended each year with inflation, with the remaining income being
from the power price, 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 average long-term inflation assumptions across the portfolio
are 3.00% for RPI from 2024 to 2030 (inclusive) and 2.40% thereafter, 2.25%
for CPI from 2024. The Company models wholesale power prices inflating at 3%
from 2024 onwards as power prices are not intrinsically linked to consumer
prices, unlike costs of sales and labour.
The sensitivity illustrates the effect on the portfolio 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 £'000 £'000 £'000 pence
Valuation - March 2023 (2.34) 87,721 90,060 92,540 2.48
13. Trade and other Receivables
For the year ended For the year ended
31 March 2023 31 March 2022
£'000 £'000
Prepayments 111 114
Other receivables 263 339
374 453
14. Trade and other Payables
For the year ended For the year ended
31 March 2023 31 March 2022
£'000 £'000
Accrued expenses 219 125
Other payables 23 287
242 412
15. Share Capital and Reserves
Number of shares Nominal value of
For the year ended 31 March 2023 shares (£)
Allotted, issued and fully paid:
Opening balance as at 1 April 2022 100,014,079 1,000,140.79
Ordinary Shares of 1p each - -
Closing balance of Ordinary Shares at 31 March 2023 100,014,079 1,000,140.79
Number of shares Nominal value of
For the year ended 31 March 2022 shares (£)
Allotted, issued and fully paid:
Opening balance as at 1 April 2021 100,000,000 1,000,000.00
Ordinary Shares of 1p each 14,079 140.79
Closing balance of Ordinary Shares at 31 March 2022 100,014,079 1,000,140.79
The Company did not issue any new shares to the Investment Manager in year
ending March 2023, under the terms of the Investment Management Agreement.
Shares acquired by the Investment Manager in the year have been purchased on
the open market to fulfil that requirement.
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.
16. Special Distributable Reserve
On 19 October 2020 the Company's Ordinary Shares were admitted to trading on
the Specialist Fund Segment of the London Stock Exchange, the Directors
applied to the Court and obtained a judgement on 12 January 2021 to cancel
the amount standing to the credit of the share premium account of the
Company.
As stated by the Institute of Chartered Accountants in England and Wales
("ICAEW") and the Institute of Chartered Accountants in Scotland ("ICAS") in
the technical release TECH 02/17BL, the Companies (Reduction of Share
Capital) Order 2008 SI 2008/1915 ("the Order") specifies the cases in which a
reserve arising from a reduction in a company's capital (i.e., share capital,
share premium account, capital redemption reserve or redenomination reserve)
is to be treated as a realised profit as a matter of law.
The Order also disapplies the general prohibition in section 654 on the
distribution of a reserve arising from a reduction of capital. The
Order provides that if a limited company having a share capital reduces its
capital and the reduction is confirmed by order of court, the reserve
arising from the reduction is treated as a realised profit unless the court
orders otherwise.
The amount of the share premium account cancelled and credited to the
Company's Special reserve was £97.0 million which can be utilised to fund
distributions by way of dividends to the Company's shareholders. As at the
year ending 31 March 2023, the special distributable reserve balance is £91.0
million (31 March 2022: £91.4 million).
17. Financial Risk Management
The Company's investment activities expose it to a variety of
financial risks; including, interest rate risk, power price risk, credit
risk and liquidity risk. The Board of Directors has overall responsibility for
overseeing the management of financial risks, however the review and
management of financial risks are delegated to the AIFM.
Each risk and its management are summarised below.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect future cash flows or the fair values of financial instruments. The
Company is exposed to interest rate risk on its cash balances held with
counterparties, bank deposits, revolving credit facility, advances to
counterparties through loans to its subsidiary. The Company may be exposed to
changes in variable market rates of interest as this could impact the discount
rate and therefore the valuation of the investments as well as the fair value
of the loan receivable. Furthermore, the Company may be exposed to interest
rates rises when the revolving credit facility is refinanced. The Company is
not considered to be materially exposed to interest rate risk so no
sensitivity has been performed. Sensitivity analysis is disclosed in Note 12
to show the impact of changes in key assumptions adopted to arrive at the
valuation of investments.
The Company's interest and non-interest-bearing assets and liabilities are
summarised below:
Interest bearing Non-interest bearing Total value
£'000 £'000 £'000
For the year ended 31 March 2023
Assets: 57,537 32,523 90,060
Investments at fair value through profit or loss
Other receivables 263 263
Cash and cash equivalents 9,257 9,257
Total Assets 66,794 32,786 99,580
Liabilities:
Trade and other payables 242 242
Total Liabilities 242 242
Interest bearing Non-interest bearing Total value
£'000 £'000 £'000
For the year ended 31 March 2022
Assets:
Investments at fair value through profit or loss 52,116 26,836 78,952
Other receivables 339 339
Cash and cash equivalents 17,144 - 17,144
Total Assets 69,260 27,175 96,435
Liabilities:
Trade and other payables - 412 412
Total Liabilities - 412 412
Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet its
financial obligations as they fall due. The AIFM and the Board continuously
monitor forecast and actual cash flows from operating, financing, and
investing activities to consider payment of dividends, repayment of trade and
other payables or funding further investing activities.
The Company maintains appropriate reserves and has through TENT Holdings
established a revolving credit facility. This facility will be utilised to
fund the Group's investment commitments, ensuring sufficient liquidity to meet
obligations The Company will continuously monitor forecast and actual cash
flows to seek to match the maturity profiles of financial assets and
liabilities.
At the period end, the Company's investments, through TENT Holdings, were
in equity and secured loan investments in private companies, in which there is
no listed market and therefore such investments would take time to realise,
and there is no assurance that the valuations placed on the investments would
be achieved from any such sale process. The Company's wholly owned subsidiary
TENT Holdings, is the entity through which the Company holds its
investments. The liquidity of TENT Holdings is reflective of the investments
which it holds.
Financial liabilities by maturity at the period end are shown below:
For year ended March 2023 Less than 1 year 1-5 years More than 5 years Total
£'000 £'000 £'000 £'000
Liabilities:
Trade and other Payables (242) (242)
For year ended March 2022 Less than 1 year 1-5 years More than 5 years Total
£'000 £'000 £'000 £'000
Liabilities:
Trade and other Payables (412) - - (412)
Credit Risk
Credit risk is the risk that a counterparty of the Group will be unable or
unwilling to meet a commitment that it has entered into with
the Group. It is a key part of the pre-investment due diligence. The credit
standing of the companies which the Group intends to lend to or invest
in is reviewed, and the risk of default estimated for each significant
counterparty position. Monitoring is on-going, and period end positions are
reported to the Board on a quarterly basis.
Credit risk also arises from cash and cash equivalents, derivative financial
instruments, loan investments held through TENT Holdings and deposits
with banks and financial institutions. The Company and its
subsidiaries may mitigate their risk on cash investments and derivative
transactions by only transacting with major international financial
institutions with high credit ratings assigned by international credit rating
agencies, this is in line with the Company's treasury policy.
The Company had no derivatives during the period and the Company's cash
balances were held in the Company's current account. In light of the collapse
of long-standing financial institutions in recent times, the Company intends
to further mitigate its risk by assessing the viability of holding cash
balances in an additional bank account with a credit rating of at least Fitch
A- or Moody's A3.
To further mitigate counterparty risk, the credit rating and key financials
such as cash balance and net asset positions, of the banking provider is
reviewed on a regular basis.
The carrying value of the investments, trade and other receivables and cash
represent the Company's maximum exposure to credit risk.
Price Risk
Price risk is defined as the risk that the fair value of a financial
instrument held by the Group will fluctuate. Investments are measured at fair
value through profit and loss. As at 31 March 2023, the Company held 11
indirect investments through its intermediary holding company, TENT Holdings.
The value of the investments held by TENT Holdings will vary according to a
number of factors including; discount rate used, asset performance and
forecast power prices. Sensitivity analysis is disclosed in Note 12.
Capital Risk Management
The capital structure of the Company at the year-end consists of equity
attributable to equity holders of the Company, comprising issued capital and
reserves. The Board continues to monitor the balance of the overall capital
structure so as to maintain investor and market confidence. The Company is not
subject to any external capital requirements.
Market Risk
Returns from the Company's indirect investments are affected by the price at
which the investments are acquired. The value of these investments will be a
function of the discounted value of their expected future cash flows, and as
such will vary with, inter-alia, movements in interest rates, market prices
and competition for such assets. The Investment Manager carries out a full
valuation quarterly and this valuation exercise takes into account such
changes.
18. Subsidiaries
The following table shows subsidiaries of the Group. As the Company is
regarded as an Investment Entity as referred to in Note 2, the subsidiaries
have not been consolidated in the preparation of the financial statements.
Investment Place of Business Ownership interest as at 31 March 2023
TENT Holdings * UK 100.00%
Achnacarry Hydro Limited** UK 100.00%
Elementary Energy Limited** UK 99.32%
Green Highland ALLT Choire A Bhalachain (255) Limited** UK 100.00%
Green Highland ALLT Ladaidh (1148) Limited** UK 100.00%
Green Highland ALLT Luaidhe (228) Limited** UK 100.00%
Green Highland ALLT Phocachain (1015) Limited** UK 100.00%
Investment Place of Business Ownership interest as at 31 March 2022
TENT Holdings * UK 100.00%
Achnacarry Hydro Limited** UK 100.00%
Elementary Energy Limited** UK 99.32%
Green Highland ALLT Choire A Bhalachain (255) Limited** UK 100.00%
Green Highland ALLT Ladaidh (1148) Limited** UK 100.00%
Green Highland ALLT Luaidhe (228) Limited** UK 100.00%
Green Highland ALLT Phocachain (1015) Limited** UK 100.00%
* Direct shareholding in a financial services investment holding company.
** Indirect shareholding in an electricity production company.
19. Related Party Transactions
Director's Fees
The amounts incurred in respect of Director's fees during the period to 31
March 2023 was £200,000 (31 March 2022: £200,000). These amounts have been
fully paid at 31 March 2023. The amounts paid to individual directors during
the period were as follows:
For the year ended For the period ended
31 March 2023 31 March 2022
Dr John Roberts (Chair) £75,000 £75,000
Rosemary Boot £45,000 £45,000
Sonia McCorquodale £40,000 £40,000
Dr Anthony White £40,000 £40,000
Director's Expenses
The expenses claimed by the Directors during the period to 31 March 2023 was
£485 (31 March 2021: £643). These amounts have been fully paid at 31 March
2023. The amounts paid to individual directors during the period were as
follows:
For the year ended For the period ended
31 March 2023 31 March 2022
Dr John Roberts (Chair) £156 £551
Rosemary Boot £61 £51
Sonia McCorquodale £216 -
Dr Anthony White £52 £41
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 31 March
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 year interest totalling £3,353,665 was earned on the
Company's long-term interest-bearing loans between the Company and its
subsidiary (31 March 2022: £2,445,736). At the period end, £195,417 was
outstanding (31 March 2022: £344,105).
The loans to TENT Holdings are unsecured; the underlying loan from TENT
Holdings to the investment portfolio are secured against the assets of the
companies by a fixed and floating charge.
On 13 April 2022, the Company subscribed for one ordinary share for a total
consideration of £1,000,000 in TENT Holdings. The share subscription was used
to fund payment of the subsidiary's arrangement fees in connection with the
revolving credit facility and to partially fund the first drawdowns into the
LED lighting portfolio. A further share subscription of one ordinary share,
was executed on 26 August 2022, for a total consideration of £469,281 in TENT
Holdings. The subsidiary used the proceeds to further fund the deployment into
the LED lighting portfolio.
On 22 September 2022, TENT Holdings paid a £1,148,426 dividend to the
Company. On 30 March 2023 an additional dividend of £2,731,501 was paid by
TENT Holdings to the Company. The dividends represent a commensurate dividend
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 annum of the adjusted NAV in respect of the Net Asset
Value of up to, and including, £650 million; and
· 0.8%, 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 period ended 31 March 2023, management fees
of £883,215 (31 March 2022: £436,478) were incurred of which £nil (31
March 2022: £207,765) was payable at the period end.
Investment Manager's Interest in shares of the Company
On 27 September 2022, the Investment Manager purchased on the open market
41,500 Ordinary Shares in the Company in accordance with the terms of the
Investment Management Agreement pursuant to which 20% of the management fee
paid is used to acquire new ordinary shares of £0.01 each in the capital of
the Company. The average price per Investment Management Ordinary Share was
£0.8086.
On 22 December 2022, the Investment Manager purchased on the open market
57,616 Ordinary Shares in the Company in accordance with the terms of the
Investment Management Agreement pursuant to which 20% of the management fee
paid is used to acquire new ordinary shares of £0.01 each in the capital of
the Company. The average price per Investment Management Ordinary Share was
£0.8.
The below table 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 31 March 2023. In the year, Perihelion One
limited increased its shareholding in the Company by 369,195, through
acquiring shares on the open market.
Number of Shares % of Issued share Capital
Perihelion One Limited 1,042,157 1%
Perihelion One Limited is a company 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 and TP Leasing Limited. The RCF was entered
into on 13 March 2022 and extended on 29 March 2023 for a 12 month period to
28 March 2025. The facility remains undrawn at year end 31 March 2023.
Alongside the extension, the pricing terms were adjusted to reflect the
current interest rate environment, and for the 2(nd) year of the RCF facility,
the interest rate charged will be a fixed rate coupon of 6% pa on drawn
amounts. In the 3(rd) year of the facility, the interest will be calculated on
the lower of a fixed rate coupon of 6% pa; or the sum of the one-year SONIA
swap rate plus a fixed rate coupon of 2.5% pa, calculated no later than 30
days prior to the 2(nd) anniversary of the facility term.
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 extension 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 terms of the RCF extension
were approved as fair and reasonable by the Directors and (ii) the Company
obtained a fair and reasonable opinion for shareholders from a qualified,
independent adviser. The Board was satisfied with the conflict management
procedures put in place, including team segregation within the Investment
Manager.
20. Commitments and Contingent Liabilities
The Company's wholly owned subsidiary, TENT Holdings, has entered a £45.6
million investment commitment, to fund the build of a portfolio of four
geographically diverse BESS assets in the UK. £39.4 million of the commitment
is outstanding at the year end date, and is forecast to be fully deployed in
2024. The commitment will be funded by the undrawn £40 million RCF available
to TENT Holdings.
On 31 March 2023, the Company's wholly owned subsidiary, TENT Holdings,
entered into a 12 month secured lending facility agreement of £5 million with
Innova for the purpose of financing the repayment of shareholder loans and the
funding of the project development and acquisition of new renewables projects.
21. Events after the Reporting period
On 3 April 2023, the £5.0 million Innova facility was fully drawn.
On 8 June 2023, the BESS Portfolio completed a drawdown of a further £3.9
million, which was partly funded by the Group's revolving credit facility.
Dividend
As at the date of this report, the Board declared a fourth quarter interim
dividend of 1.375 pence per share with respect to the period ended 31 March
2023. The dividend is expected to be paid on or around 14 July 2023 to
shareholders on the register on 30 June 2023. The ex-dividend date is 29 June
2023. The Company has chosen to designate part of this interim dividend as an
interest distribution. 1.005 pence per share will be paid as an interest
payment and 0.370 as an ordinary dividend.
22. Ultimate controlling party
In the opinion of the Board, on the basis of the shareholdings advised to
them, the Company has no ultimate controlling party.
Glossary and Definitions
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 £45.6 million debt facility to a subsidiary of Virmati Energy Ltd (trading as
Field), to fund a portfolio of four Battery Energy Storage Systems assets
CfDs Contracts for difference
CHP Combined heat and power
CHP Portfolio A total debt investment of £29 million into Harvest and Glasshouse and Spark
Steam
CODM Chief Operating Decision Maker
The Company Triple Point Energy Transition plc (company number 12693305).
DCF Discounted Cash Flow
DTR FCA Disclosure and Transparency Rules
EGL Electricity Generator Levy
ESG Environmental, Social and Governance
ESS Energy Storage Systems
EU European Union
EV Electric Vehicle
FCA Financial Conduct Authority
FRC Financial Reporting Council
GAV Gross Asset Value
GHG Green House Gas
Group The Company and any subsidiary undertakings from time to time
Harvest and Glasshouse Harvest Generation Services Limited and Glasshouse Generation Limited
HVAC Heating, Ventilation and Air Conditioning
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
IEA International Energy Agency
Innova Innova Renewables Limited
IPEV International Private Equity and Venture Capital
ITC Investment Trust Company
Investment Manager or TPIM 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
NGFS Network for Greening the Financial System
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
O&M Operations & Maintenance
PPA Power Purchase Agreement
PRI Principals for Responsible Investing
Project SPV Special Purpose Vehicle in which energy transition assets are held
RCF The Group's £40 million Revolving Credit Facility, via TENT Holdings, with TP
Leasing Limited
SDG Sustainable Development Goals
SDR Sustainable Disclosure Regulation.
SECR Streamlined Energy and Carbon Reporting
SFDR Sustainable Finance Disclosure Regulation
SONIA Sterling Overnight Index Average
SORP Statement of Recommended Practise
Spark Steam Spark Steam Limited
tCO(2) Tonnes of carbon dioxide emissions
tCO(2)e Tonnes of carbon dioxide equivalent. Emissions of all greenhouse gases,
expressed in units of carbon dioxide equivalence, based on global warming
potential
TCFD Task Force on Climate-related Financial Disclosures
TENT Holdings The wholly owned subsidiary of the Company: TENT Holdings Limited (company
number 12695849)
UN SDGs United Nations Sustainable Development Goals
Wider Triple Point Group Triple Point LLP (company number OC310549) and any subsidiary undertakings
from time to time
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