Triple Point Energy - Results for the year ended 31 March 2022
24/06/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220624:nRSX0460Qa&default-theme=true
RNS Number : 0460Q Triple Point Energy Efficiency 24 June 2022
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE INFORMATION FOR THE
PURPOSES OF THE UK VERSION OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, IN OR TO
THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR
ANY OTHER JURISDICTION IN WHICH THE PUBLICATION, DISTRIBUTION OR RELEASE OF
THIS ANNOUNCEMENT WOULD BE UNLAWFUL.
The financial information set out in these statements does not constitute the
Company's statutory accounts for the year ended 31 March 2021, prepared in
accordance with section 435 of the Companies Act 2006, but is derived from
those accounts. Statutory accounts will be delivered to the Registrar of
Companies in due course. The auditors have reported on these accounts and
their report was unqualified and did not contain a statement under section
498(2) of the Companies Act 2006.
24 June 2022
Triple Point Energy Efficiency Infrastructure Company plc
("TEEC" or the "Company" or, together with its subsidiaries, the "Group")
RESULTS FOR THE YEAR ENDED 31 MARCH 2022
The Board of Triple Point Energy Efficiency Infrastructure Company plc
(ticker: TEEC) is pleased to announce the Company's audited results for the
year ended 31 March 2022.
31 March 2022 31 March 2021*
Net Asset Value ("NAV") £96.1m £97.49m
NAV per share 96.12p 97.49p
Value of the portfolio £78.8m £20.88m
Ongoing charges ratio (annualised) 1.38% 1.07%
Dividend declared per share 5.50p 2.0p
* The results for the period 31 March 2021 were not for a full 12 months and,
therefore, are not directly comparable to the results for the year ended 31
March 2022
Highlights
· The Company made significant progress in the deployment of
capital:
o Capital committed during the year ended 31 March 2022 amounted to £100.2
million (2021: £21 million)
o June 2021: £8.0 million fixed rate debt investment in Spark Steam
Limited, a company which owns and operates a combined heat and power asset
o November 2021: £26.6 million acquisition of six operational, Feed in
Tariff accredited, "run of the river" hydroelectric power projects in Scotland
o December 2021: £19.6 million acquisition of a further three operational,
Feed in Tariff accredited, "run of the river" hydroelectric power projects in
Scotland
o March 2022: signed contracts to provide a £45.6 million fixed rate debt
facility to a subsidiary of Virmati Energy Ltd (trading as "Field"), for the
purposes of building a 110MW portfolio of four geographically diverse Battery
Energy Storage System ("BESS") assets in the UK
· The portfolio valuation as at 31 March 2022 was £78.8
million (2021: £20.88 million)
o Adjusting for commitments, at the year ended 31 March 2022, the portfolio
valuation would amount to £124 million
· In March 2022, the Company entered into a loan facility
agreement for a £40 million Revolving Credit Facility ("RCF") from TP Leasing
Limited
· Dividends declared in respect of the year ended 31 March 2022
totalled 5.5p per share, in line with the Company's target for the year
· Net Asset Value as at 31 March 2022 was £96.1 million (2021:
£97.49 million), equal to a NAV per share of 96.12 pence (2021: 97.49 pence),
largely reflecting the impact of uncovered dividends paid as a result of
slower than expected deployment offsetting the uplift in valuation
· The Group's activities resulted in:
o Energy saved: 7,113 MWh
o CO(2) avoided: 17,074 tonnes of CO(2) avoided through lower emissions
o Renewable energy generated: 9,425 MWh
· Post period-end, in June 2022, the Company committed £1
million to a lighting solutions provider to fund the installation of efficient
lighting and control at a leading logistics company
· Looking towards the future, today, the Company also
announced:
o J.P. Morgan Cazenove has been appointed as the Company's sole broker with
immediate effect
o The Investment Manager will be consulting key shareholders regarding
proposed amendments to the Company's Investment Policy, evolving to an "energy
transition" mandate to reflect better the nature of the current portfolio and
the pipeline of investment opportunities
o Conditional on the amendment of the Investment Policy, a proposed change
of name to "Triple Point Energy Transition plc"
o Both the proposed amended Investment Policy and the new name will be put
to shareholders for approval at the Annual General Meeting due to take place
in August 2022
John Roberts, the Company's Chair, commented:
"In the last 12 months the Board has been pleased with the depth and breadth
of the investment opportunities that have been sourced across a range of
technologies and from a variety of partners. The diversity of our portfolio of
lower carbon and energy efficient projects has enabled us to achieve our
objective of contributing towards the transition to a lower carbon economy and
assisting in the acceleration of the UK achieving its Net Zero targets.
With the IPO proceeds fully committed, as well as the majority of the RCF, and
the strong performance of our existing portfolio, we look ahead with optimism
as the Company maintains its focus on delivering a dividend fully covered by
cash earnings and a total NAV return target of 7-8% for investors comprising
sustainable and growing income and capital growth.
We thank our shareholders for their continued support and look forward to
consulting with them regarding the amendments to our existing Investment
Policy which we believe better reflects the nature of our existing portfolio
and the exciting pipeline of opportunities."
For further information, please contact:
Triple Point Investment Management LLP +44 (0) 20 7201 8989
Jonathan Hick
Ben Beaton
J.P. Morgan Cazenove (Corporate Broker +44 (0) 20 7742 4000
William Simmonds / Jérémie Birnbaum (Corporate Finance)
James Bouverat / Liam MacDonald-Raggett (Sales)
Akur Limited (Financial Adviser) +44 (0) 20 7493 3631
Tom Frost
Anthony Richardson
Siobhan Sergeant
LEI: 213800UDP142E67X9X28
Further information on the Company can be found on its website:
www.tpenergyefficiency.com (http://www.tpenergyefficiency.com)
NOTES:
The Company is an investment trust which aims to have a positive environmental
impact by investing 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: provision of 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
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.
The Company was admitted to trading on the Specialist Fund Segment of the Main
Market of the London Stock Exchange on 19 October 2020 and was awarded the
London Stock Exchange's Green Economy Mark.
CHAIR'S STATEMENT
Dear Shareholder,
I am pleased to present the results for Triple Point Energy Efficiency
Infrastructure Company plc ("TEEC" or the "Company") for the year ended 31
March 2022. The past year has been one of significant events. COP26 in
November 2021 brought together global leaders to address the challenges of
climate change and the move to a low carbon economy. The devastating war in
Ukraine has called attention to the need for greater energy security, whilst
the volatile energy markets have underlined the need for energy efficiency to
assist in cutting escalating energy costs. In April 2022, the UK Government's
British Energy Security Strategy laid out ambitious plans to achieve Net Zero
and secure clean, green and UK-made energy. For TEEC, each of these events
provides a significant opportunity to contribute to the energy transition
through the deployment of capital in a diversified portfolio of assets which
are targeted to generate a long-term and consistent return profile for
investors.
Investment Activity
There has been significant deployment and increasing diversification for the
Company over the last year. The Company has now fully committed the proceeds
from its IPO, as well as most of a new £40 million Revolving Credit Facility
("RCF") made available to the Company's sole wholly owned subsidiary TEEC
Holdings Limited ("TEEC Holdings").
We have remained focused on maintaining strong investment discipline to ensure
the portfolio is robust, diverse, and provides a good risk-adjusted return for
our shareholders. Commitments during the year have been made into assets that
support the transition to a low carbon, more efficient energy system: an £8
million senior debt investment into a combined heat and power plant ("Spark
Steam"); a £47 million equity investment into nine hydro assets (the
"Hydroelectric Portfolio"); and a £45.6 million debt facility to a subsidiary
of Virmati Energy Ltd (trading as Field), to fund a 110MW portfolio of four
BESS assets (the "BESS Portfolio"). The weighted average contract length of
the operational assets in the portfolio is 31.6 years.
The Hydroelectric Portfolio brings recurring revenues with 96% of them
underpinned by Government supported long-term Feed in Tariffs which are index
linked, and PPAs with utility-grade counterparties. This was an important
investment bringing diversification to the portfolio, inflation protection,
and the security of revenues underpinned by long-term Government contracts -
we are pleased to have such assets in our portfolio, particularly in the
volatile markets that we are currently experiencing.
The Hydroelectric Portfolio was owned by entities advised by the Investment
Manager and, as a result, a potential conflict of interest existed. In
accordance with the provisions set out in the IPO Prospectus, the Board were
required to approve the transaction and we were given comfort by the steps
taken to manage and mitigate the conflict, which included separate dedicated
buy and sell side teams within the Investment Manager and third-party
valuations.
At the end of the period, we made a significant investment commitment into
energy storage assets, a key growth area in the energy sector which
efficiently manages the generation of power from renewables. TEEC has
committed to provide £45.6 million to Field and has obtained exclusivity over
a further 390MW/470MWh of energy storage opportunities.
Portfolio Performance
The existing portfolio has performed well, notably with the profitability of
the CHP Portfolio significantly exceeding budget driven by the
higher-than-expected power prices. The offtaker, APS, like many other
agricultural producers, experienced a challenging year but remains well
positioned, it being a leading supplier of British tomatoes to major UK food
retailers including Aldi, Iceland, Lidl, M&S, Morrisons, Ocado,
Sainsbury's, Tesco and Waitrose.
For the Hydroelectric Portfolio, in the period from 1 October to 31 March
2022, generation was 10% ahead of budget. In the final quarter of the year
ended 31 March 2022, revenues were 8% below expectations given some technical
issues, which have been resolved, and the uncharacteristically dry period in
March.
The Investment Manager is exploring portfolio optimisation opportunities,
including for instance in the Hydroelectric Portfolio to optimise the flow
from the catchment area from an initial three sites to provide a better
generation profile.
Please see the Investment Manager's Report for further details.
Gearing
As announced to the market on the 30 March 2022, the Group, via TEEC Holdings,
has entered into a loan facility agreement for a £40 million Revolving Credit
Facility (RCF) with TP Leasing Limited.
TP Leasing Ltd is an established private credit and asset leasing business
which is managed by the Investment Manager and, as a result, is deemed to be a
related party as defined in the Listing Rules. The RCF is deemed to be a
"smaller related party transaction" for the purposes of LR11.1.10R. As set out
in the IPO Prospectus, the Company has adopted a related party policy pursuant
to which, prior to entering into the facility agreement, (i) the RCF was
approved by the Directors and (ii) the Company obtained a fair and reasonable
opinion from a qualified, independent adviser. The Board was satisfied with
the conflict management procedures put in place, including team segregation
within the Investment Manager and obtaining independent third-party pricing
validation.
The RCF has a two-year term, with the possibility to be extended. The interest
rate on the RCF is 4.5%(1) based on the Sterling Overnight Index Average
("SONIA") 2-year fixed rate of 2% and a margin of 2.5%.
The Group will make use of the RCF to fund the BESS portfolio and some of its
growing pipeline of high-quality investment opportunities. 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.
As at 31 March 2022, the RCF had not been drawn. It is expected that the RCF
will be substantially utilised during the financial year ending 31 March 2023.
Notes:
(1) Excluding fees
Pipeline
Our Investment Manager has built up an attractive pipeline of circa £500
million of opportunities across a variety of technologies and sectors with
strong counterparties.
The pipeline includes a range of technologies including energy storage, solar,
combined heat and power, EV charging, lighting, heat networks and other
technologies. The projects are at different development stages and are a
mixture of equity and debt, as well as public and private sector
opportunities.
Given the large market opportunity to invest into energy storage, and the
compatibility with other technologies such as solar photovoltaic panels, we
believe that energy storage presents an attractive asset class to add to the
TEEC portfolio which can help unlock the true potential of renewable energy
and will play a fundamental role in the move to a clean energy future.
Please see the Investment Manager's Report for further details.
Financial Results
This was the Company's first full financial year. The NAV per share was 96.12
pence per share as at 31 March 2022 (31 March 2021: 97.49 pence per share).
The NAV includes an uplift in valuation as a result of the Hydroelectric
Portfolio being valued upwards by £4.1 million, largely due to the heightened
inflationary environment we are now operating within and the increased
forecast power prices which have been exacerbated by the Russian invasion of
Ukraine. This offsets the negative impact of the dividend payments which have,
to date, largely been paid out of capital while the Company has ramped up its
deployment.
The portfolio, consisting of 12 funded assets (and four unfunded but committed
assets) held via the Company's subsidiary TEEC Holdings, was valued at £78.8
million as at 31 March 2022 (31 March 2021: £21.0 million) and the Company
held cash of £17.1 million as at 31 March 2022 (31 March 2021: £76.6
million). The Company made a profit before tax of £4.8 million for the year
(31 March 2021: loss of £0.5 million), equal to 4.76 pence per share (31
March 2021: 0.01p loss).
The Company's annualised operating cost ratio ("OCR") was 1.38% (31 March
2021: 1.07%). The increase in the OCR is predominately driven by the increase
in management fees payable to the Investment Manager. In accordance with the
Investment Management Agreement, upon reaching 75% deployment of the IPO
proceeds, the management fee is calculated by reference to the Company's NAV.
This point was reached in December 2021, whereas it was previously charged on
deployed proceeds only. The Board will continue to monitor the OCR closely as
we seek to grow the Company and achieve economies of scale on fixed costs,
delivering value to our shareholders.
Share Price and Distributions
Our share price has experienced a volatile period, as has much of the market
due to macro-economic market conditions.
In February 2022, the Investment Manager purchased 158,882 Ordinary Shares at
an average price of 94.4 pence per share.
For the year ended 31 March 2022, we declared a total dividend of 5.50 pence
per share, in line with our target.
The Board anticipates paying quarterly interim dividends, targeting total
dividends of 5.50 pence per share for the year ending March 2023(2). We remain
focused on delivering a dividend fully covered by cash earnings as soon as
practicable and to that end, notes that in the year ending 31 March 2023, the
Company will benefit from a full year of income from the CHP Portfolio and
Hydroelectric portfolio, as well as income from the BESS Portfolio.
Notes:
(2) 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 integration to add value to the strategy.
A current key focus is ensuring the Investment Manager continues to refine its
approach to the integration of climate change into investment decision making.
Accounting for the risks and opportunities associated with our changing
climate is important for protecting the Company's assets and maximising their
potential. We will continue to hold the Investment Manager to account on this
issue and expect continued progression in the maturity of climate analysis for
TEEC. Details on the Investment Manager's approach to ESG integration,
including climate analysis and the Task Force on Climate-related Financial
Disclosure (TCFD), are shared in the Sustainability Report.
Proposed amendments to the Group's Investment Policy
Since the Company's IPO in October 2020, we have seen a rapid evolution in
clean energy policy, the commitment to addressing the global climate
emergency, concerns regarding energy security and the opportunities that exist
for investments which both contribute to energy transition and deliver returns
to our shareholders. Therefore, as we have announced today, the Investment
Manager is undertaking a consultation with key shareholders regarding amending
our existing Investment Policy to reflect better the nature of our existing
portfolio and pipeline of opportunities.
The key aspects of the proposed amendments include: confirming the scope of
the Company's investment mandate to reflect the wider energy transition
sector; expanding our geographical reach to enable the Company to make
appropriate investments in Europe, albeit the United Kingdom will remain the
core focus of the Company; clarify the structures that the Company is able to
invest into, including both debt and equity; and including a definition of
"Adjusted Gross Asset Value" in place of "Gross Asset Value" for the purposes
of applying the Investment Policy restrictions.
In conjunction with (and dependent on approval of) the proposed changes to the
Investment Policy, the Company's name will change to "Triple Point Energy
Transition plc" (ticker: TENT) to reflect the revised mandate.
Subject to the outcome of the consultation and Board decision, the proposals
to amend the Investment Policy and name of the Company (the "Proposals") will
be put to the vote of all shareholders at the Company's Annual General Meeting
to be held in August 2022.
Full details of the Proposals will be notified via a further announcement to
the market and set out in the circular accompanying the Notice of AGM to be
sent to shareholders in due course.
Appointment of Sole Corporate Broker
Today, the Board was pleased to announce the appointment of J.P. Morgan
Securities plc (which conducts its UK investment banking activities as J.P.
Morgan Cazenove) ("J.P. Morgan Cazenove") as sole corporate broker to the
Company with immediate effect. We look forward to working with J.P. Morgan
Cazenove as the Company embarks on the next phase of its growth,
Outlook
The Board is pleased to have fully committed the IPO proceeds, as well as the
majority of the RCF, in the Company's first full year of operation. The
investments made to date into hydroelectric power, energy storage and onsite
heat and power generation exemplify the Company's strategy of investing into
lower carbon, efficient energy systems. We are also satisfied by the total NAV
return of 4.9% achieved in the year and are well positioned to achieve our
objective of a 7-8% total NAV return, as the Company is now fully
committed.
In 2021, Jonathan Hick joined Triple Point with the intention that he would
assume the position as the TEEC Fund Manager, following a comprehensive
induction period. The Board are pleased that following a successful transition
he will become the Company's fund manager effective immediately, replacing
Jonathan Parr who will assume a new role at Triple Point focused on the
Investment Manager's wider product strategy. The Board would like to thank
Jonathan Parr for his management during the launch and throughout TEEC's first
full financial year.
The recent record high energy prices, as well as higher expectations for power
prices over the next few years, provide significant tailwinds for the Company,
both with respect to its existing assets as well as its pipeline. Energy is
increasingly becoming too valuable to waste, and whether that means storing it
more effectively to better match demand, producing it onsite, or reducing
demand, we are seeing businesses and government organisations prioritising the
efficient use of energy. The Company's pipeline of circa £500 million, spread
across a diverse range of technologies, demonstrates this increased focus.
The devastating events in Ukraine have also highlighted the importance of a
low carbon, efficient energy system to energy security. This is partly
achieved through reducing our exposure to fossil fuels through increased
renewable generation, and through reducing energy usage, making the energy
generated go further and optimising energy generation locally. TEEC's
portfolio and pipeline illustrate how this can be achieved in practice.
In addition to the beneficial tailwinds from the energy pricing and the focus
on energy security, a significant proportion of the Company's investments also
benefit from a rising inflationary environment. This can be through the
explicit contractual linkage to inflation, for example the Feed in Tariff
contracts that the Hydroelectric Portfolio benefit from RPI indexation, or
through the broader correlation between inflation and wholesale energy prices.
COP26 signaled the intention to transition to a new energy system, one that
the Company is well positioned to take advantage of.
I would like to thank shareholders for their continued support of the Company,
and I look forward to reporting on the achievement of our objectives in the
year ending 31 March 2023.
John Roberts
Chair
23 June 2022
STRATEGY AND BUSINESS MODEL
The Board is responsible for the Company's Investment Objective and Investment
Policy and has overall responsibility for ensuring the Company's activities
are in line with such overall strategy. The Group's Investment Objective and
Investment Policy are published below.
As noted in the Chair's statement, the Investment Manager is undertaking a
consultation with key shareholders regarding the proposed amendment of the
Company's investment policy, following which a resolution will be proposed at
the upcoming AGM. The Company's existing investment policy is set out below.
Investment Objective
The Company's Investment Objective is to generate a total return for investors
comprising sustainable and growing income and capital growth. The Company
intends to achieve its Investment Objective by investing in a diversified
portfolio of energy efficiency investments in the United Kingdom.
Investment Policy
The Company intends to achieve its Investment Objective by investing in a
diversified portfolio of energy efficiency investments in the United Kingdom.
The term energy efficiency refers to assets or processes which reduce primary
energy input for a given output, thereby reducing or eliminating energy waste.
Energy efficiency is one of the cornerstones of the global drive to addressing
the climate emergency. The cleanest or greenest energy is the energy that is
never used - the projects and assets which deliver such savings are the focus
of the Company.
The Group will invest in a range of assets which will contribute or are
already contributing to energy efficiency in sub-sectors including electricity
and heat generation, distribution and end user consumption, and which meet the
following criteria:
· contribute towards demonstrable energy (and financial) savings over a
"business as usual" scenario;
· are established technologies (the Group will not invest in unproven
technologies);
· provide long-term contracts based predominantly on availability,
government subsidy or savings-based contracts with high quality industrial,
governmental, and corporate Counterparties, including Counterparties which
represent multiple end-users; and
· entitle the Company to receive stable, predictable Sterling cash
flows over the medium to long-term.
The Group's returns will typically take the form of contractual payments by
Counterparties in respect of equipment, usually installed at their premises
(and which may provide index-linked, rental payments), as well as payments
under off-take agreements in respect of energy generated and, where available,
the Group will capitalise on government incentive programmes.
Contractual payments by Counterparties are expected to be predominantly
availability, government subsidy or savings based. Availability payments will
be receivable on the basis that the equipment is available and in suitable
working order to deliver the applicable outputs; savings-based payments work
by setting an agreed baseline for savings in kWhs up-front and are then
ascribed a monetary value by applying the prevailing energy cost, with annual
increases based on an agreed energy price index insulating the Company from
any changes in the cost of energy.
The Group will invest predominantly in operational energy efficiency projects.
It will invest in either single assets or portfolios of multiple assets, via
debt and/or equity structures. The Group may, under certain circumstances,
invest in energy efficiency projects that are in the Development Phase, the
Construction Phase or the Stabilisation Phase, either directly or through
funding of a third-party developer, where such investments will deliver an
attractive risk adjusted return. In addition, the Group 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 efficiency projects, subject to the restrictions set out
below.
In respect of each type of investment, the Group will seek to diversify its
commercial exposure by contracting, where practicable, with a range of
different equipment manufacturers, project developers and other service
providers, as well as off-takers.
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.
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 Energy Efficiency Project investment by the Group will
represent more than 20% of Gross Asset Value;
· the aggregate maximum exposure to any Counterparty will not
exceed 20% of Gross Asset Value (and where an energy efficiency project
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);
· the aggregate maximum exposure to energy efficiency projects in
the development phase and the construction phase will not exceed, in
aggregate, 25% of Gross Asset Value, provided that, the aggregate maximum
exposure to projects in the development phase will not exceed 5% of Gross
Asset Value, and the aggregate exposure to any one developer will not exceed
10% of Gross Asset Value;
· the Group will not invest more than 5% of 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 Company nor any of its subsidiaries 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.
The investment limits set out above apply following full investment of the Net
Proceeds and following the Group becoming substantially geared (meaning for
this purpose borrowings by way of long-term structural debt of 20% of Gross
Asset Value being put in place).
Compliance with the above investment limits will be measured at the time of
investment and non-compliance resulting from changes in the price or value of
assets following investment will not be considered as a breach of the
investment limits.
Gearing
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 at the level of the Company, at the level of any
intermediate wholly owned subsidiary of the Company or at the level of the
relevant Project SPV, and any limits shall apply on a look-through basis. The
Company's target medium term gearing for the Group will be up to 40% 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 intermediate subsidiary level or at the Project SPV level, provided that
the aggregate borrowing of the Group shall not exceed a maximum of 45% of
Gross Asset Value, calculated at the time of drawdown.
Debt may be secured with or without a charge over some or all the 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
subsidiaries will not be included in the definition of borrowings for these
purposes.
Use of Derivatives
The Group may use Derivatives for efficient portfolio management. The Group
will only enter into hedging contracts (in particular, in respect of
inflation, interest rate, 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 will not employ
derivatives for investment purposes.
Cash Management
Whilst it is the intention of the Company to be fully or near fully invested
in normal market conditions, the Company may hold cash on deposit and 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 Equivalent position instead of being fully
or near fully invested.
Changes to and compliance with the Investment Policy
Any material changes to the Company's Investment Policy set out above will
require the approval of Shareholders by way of an ordinary resolution at a
general meeting.
In the event of a breach of the investment guidelines and/or the investment
restrictions set out above, the Investment Manager shall inform the Board as
soon as practicable upon becoming aware of any breach. If the Board considers
the breach to be material, notification will be made through an announcement
via a Regulatory Information Service.
Business Model
TEEC sources opportunities to deploy investors' capital into energy efficiency
and distributed energy projects that support the transition to a sustainable
energy future. We interact with a wide variety of energy market participants,
from individual project developers with a single-technology solution, to large
corporations with multi-technology opportunities. The energy transition to a
more sustainable future is a huge challenge and at the same time it is a great
opportunity. It is dependent on multiple parties working together to design,
finance, install and maintain energy infrastructure to more efficiently
generate, store, distribute and use energy with equipment that does so as
efficiently as possible. This will reduce the amount of wastage of energy and
other resources and help to protect the environment from further damage.
TEEC is well positioned to make a significant contribution to the energy
transition as it is focused on investing into onsite energy generation and
efficient consumption, distributed energy generation and energy storage and
distribution. It is the deployment of capital to fund technological solutions
such as energy storage, hydroelectric power, CHP plants, lighting, building
management systems, solar, wind or other energy efficient technologies, that
enables the transition to a sustainable energy future.
TEEC focuses on investment opportunities that contribute to our total NAV
return for investors of between 7-8%. The investments made by the Group fund
technologies which provide solutions for counterparties who contract through
TEEC investee companies to pay for these solutions. The payments are, for
instance, through interest and principal debt repayments from a counterparty
that is borrowing money from the Group, or through returns from an equity
investment that is providing a solution for a counterparty, or for example
through generating energy supplied to the grid. Contractual structures include
power purchase agreements, energy services agreements or other such
structures, which in some cases may provide index-linked payments. The cash
flows generated from the contracts with the counterparties pay for the
investment made by the Group and enable TEEC to pay dividends to its
shareholders.
To reduce risks involved with the investments made by the Group, we seek
strong counterparties and diversify the portfolio by counterparty, technology,
location, type of investment as well as other measures dependent on the
specificities of each investment. In addition, we carry out due diligence as
required for each investment to properly understand the risks and
opportunities of the project. We particularly focus on the ESG aspects of the
investment opportunity and go through a risk and opportunities assessment from
an ESG perspective. The due diligence process, dependent on the requirements
of each investment, can involve ESG, legal, technological, financial,
accounting, tax, or other types of due diligence, involving both internal
Triple Point employees as well as third party specialist firms.
The combination of the need to transition to sustainable energy generation and
usage, along with TEEC's ability to fund this transition, make for a great
opportunity to be optimised.
KEY PERFORMANCE INDICATORS
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.
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 EXPLANATION
Dividends per share(3)
Dividends paid to shareholders and declared in relation to the year. 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 2022 (2.00 pence per share for the period to 31 March 2021). of the year to 31 March 2022, which it achieved.
Total NAV return(4)
NAV growth and dividends paid per share in the year. The total NAV return measure highlights the gross return to investors 4.9% (Negative 2.5% for the year to 31 March 2021) Dividends paid in the year contributed 6.3% to total NAV return which was
including dividends paid. partially offset by a 1.4% reduction in NAV. The target total NAV return is 7%
- 8% per annum. Underperformance was attributable to dividends paid in the
year, being substantially uncovered. During the year, the proceeds from the
IPO and a majority of the RCF have been committed, which on an annualised
basis will be accretive to NAV.
NAV per share
NAV divided by number of shares outstanding as at the period end. The NAV per share shows our ability to grow the portfolio and to add value to 96.12 pence per share. (97.49 pence per share for the year to 31 March 2021) £96.1 million/ 96.12 pence per share as at 31 March 2022
it throughout the life cycle of our assets
Cash dividend cover(3) (4)
Operational cash flow divided by dividends paid to shareholders during the Reflects the Company's ability to cover its dividends from the income received 0.14x.The Company will monitor dividend cover as the Company continues to The Company maintained its dividend target, despite slower than originally
year. from its portfolio. deploy funds. (N/A for the year to 31 March 2021) anticipated commitment of IPO proceeds. Now the Company is substantially
committed on a levered basis, cash dividend cover is forecast to improve
significantly. The Company will be fully dividend covered by cash flows
generated in the underlying investments as soon as practicable and to that
end, note that in the year ending 31 March 2023, the Company will benefit from
a full year of income from the CHP Portfolio and Hydroelectric portfolio, as
well as income from the BESS Portfolio.
Weighted average project life ("WAL")(4)
Weighted average number of years assumed to be remaining in project contracts. The weighted average project life is a key measure of the quality of our 31.6 years (10.0 years for the year to 31 March 2021) The Portfolio WAL is driven by the long project life of the Hydroelectric
portfolio. Long lease or loan terms help underpin the security of our income Portfolio and debt investments providing long term cash flows. Growth in the
stream. WAL has been largely delivered through deployment into the Hydroelectric
portfolio which have attractive long term cash flows.
Ongoing Charges Ratio ("OCR")(4)
Annualised ongoing charges (i.e., excluding acquisition costs and other Ongoing charges shows the effect of the operational expenses incurred by the 1.38% annualised (1.07% for the year to 31 March 2021) Company level budgets are approved annually by the Board and actual spend is
non-recurring items) divided by the average published undiluted NAV in the Company. reviewed quarterly. This is a key measure of our operational performance.
period, calculated in accordance with Association of Investment Companies Keeping costs low supports our ability to pay dividends. The increase in OCR
guidelines. has been driven by the management fee being measured in reference to NAV, as
IPO proceeds were substantially deployed in the year, prior to this they were
charged in reference to deployment.
Avoided emissions(4)
The carbon emissions avoided by the Company's investments. A measure of our success in investing in projects that have a positive 17,074 tonnes CO(2) avoided in the year ended 31 March 2022 (0 tonnes CO(2) The tCO(2) avoided has increased compared to end of year 2021 as expected,
environmental impact through a decrease in CO(2) emissions compared to an avoided for the year to 31 March 2021) given the Company's continued deployment.
equivalent asset.
Gross loan to value ("LTV") (4)
The proportion of our GAV that is funded by borrowings. The LTV measures the prudence of our financing strategy, balancing the 0% (0% for the year to 31 March 2021) The Group will follow a prudent approach to gearing with a target
potential amplification of returns and portfolio diversification that come medium-term gearing of up to 40% of GAV and a maximum gearing that will not
with using debt against the need to exceed 45% of GAV at the time of drawdown. On full drawdown of the RCF Gross
LTV is expected to be around 30% based on prevailing NAV and future funding of
successfully manage risk. the BESS Portfolio.
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
Late last year, COP26 in Glasgow closed with a renewed commitment to limiting
global warming to 1.5 degrees above pre-industrial levels. The UK has
committed to Net Zero emissions by 2050. That is an ambitious target that will
require a "historic surge" in clean energy investment. The adoption of
renewable energy will be key to our Net Zero ambitions, but for any push to
Net Zero it is crucial we make better use of the energy we produce. We need to
be more energy efficient. The government has a large part to play, of course,
by committing to long-term policies that encourage investment in clean energy
infrastructure, but private capital is also a key component to driving
decarbonisation and supporting the Net Zero mission.
We have now fully committed the IPO proceeds, in addition to the majority of
the proceeds from the RCF that were put in place at the end of the year.
Proceeds have been committed while maintaining strong investment discipline to
ensure the portfolio construct is robust, diverse and provides a good risk
adjusted return for our shareholders. As a result of being committed on a
levered basis, the portfolio is well positioned to deliver financial returns
on an annualised basis. Harvest & Glasshouse and Spark Steam have shown
their ability to perform and deliver strong returns despite high gas prices,
as a result of the even higher electricity prices and benefitting from the
spark spread. The Hydroelectric Portfolio has demonstrated the attractiveness
of stable long-term revenues from government supported Feed in Tariffs. The
BESS Portfolio will be able to store energy and supply it when needed rather
than energy and revenues being wasted when there is a surplus of production.
The war in the Ukraine and the embargo on Russian oil and gas have raised the
importance of energy security. Energy prices have significantly increased, due
to geopolitical risk, as well as the strong demand for natural gas. Gas supply
is limited and there is strong demand from many countries given low existing
stocks as well as a strong internal demand. TEEC's portfolio contributes to
strengthening the UK's energy infrastructure through efficient energy
generation and energy storage, providing greater energy security.
From a technology perspective, we are seeing a number of technologies where
prices have been increasing as a result of supply and demand imbalances and
the shortage of semiconductors. An example is solar photovoltaic prices, which
have seen price increases in solar panel costs from China. Where we are
investing in such projects, TEEC will sign fixed price contracts to ensure it
is protected from further price volatility at the point of investment. From a
longer-term perspective, however, we have seen price decreases as efficiencies
in production and economies of scale have worked to reduce costs.
What is clearly not in debate is the need to deploy energy efficiency measures
on a massive scale in order to be able to transition to a sustainable energy
infrastructure and to improve energy security. TEEC is well positioned to
assist in that transition and we have an attractive pipeline of opportunities
in which to invest.
Investments
Spark Steam
In May 2021, and building on the previous year's debt investments in Harvest
and Glasshouse, TEEC invested £8 million of senior debt finance into Spark
Steam, a CHP providing heat, power and carbon dioxide to APS which is the UK's
leading supplier of British tomatoes and has over 65 years of operational
experience. APS owns and operates over six million sq. ft. of glasshouses and
distributes to all major UK food retailers including Aldi, Iceland, Lidl,
M&S, Morrisons, Ocado, Sainsbury's, Tesco and Waitrose. CHPs ensure an
efficient use of energy to provide on-site power generation with use of heat
and carbon dioxide to enhance crop yields rather than being vented into the
atmosphere.
In addition, there is a Power Purchase Agreement ("PPA") with a well-known,
large food manufacturer through a private wire arrangement. This arrangement
benefits the food manufacturer by providing it with savings against its
electricity costs, whilst enabling Spark Steam to benefit from a greater level
of contractual cash flows at more attractive rates. Based on National Grid
Electricity Transmission data avoidance of the electricity transmission system
(or grid) is likely to result in approximately 2.25% efficiency increase.
Reducing transmission traffic also helps to bring marginal benefits of reduced
congestion on the grid which increases its energy efficiency.
Hydroelectric Portfolio
In November 2021, TEEC invested £27 million in the purchase of six
operational hydroelectric assets. This was followed in December 2021 with a
second investment into a further three operational hydroelectric assets for
£20 million. The Hydroelectric Portfolio brings recurring revenues with 96%
of them underpinned by Government supported long-term Feed in Tariffs which
are index linked, and PPAs with utility counterparties. This was an important
investment bringing diversification to the portfolio from an attractive asset
class.
The Hydroelectric Portfolio consists of run-of-the-river hydroelectric schemes
located across the Scottish Highlands. The schemes were developed by Green
Highland Renewables, who continue to provide operations and maintenance
services. The schemes were commissioned during 2015 and 2016 and range from
0.4MW to 1.35MW output. The performance of a hydroelectric scheme is primarily
driven by the availability of a scheme and the flow of water available.
BESS Portfolio
In March 2022, TEEC committed £45.6 million to fund a portfolio of four
geographically diverse BESS assets in the UK. The portfolio has a total
capacity of 110MW. The first BESS asset, which is a one-hour duration battery,
is expected to become operational in Q2 of the financial year ending 31 March
2023. It is located in the North of England and has a total capacity of 20MW.
The other three BESS assets are located in Scotland (two-hour duration
battery; total capacity 50MW), Wales (two-hour duration battery; total
capacity 20MW), and the South-East of England (one-hour duration battery;
total capacity 20MW). These are expected to become operational during 2023.
Portfolio Overview
Credit Counterparty
As at 31 March 2022
Non-Investment Grade - Unrated 29.3%
Investment Grade - Rated 52.8%
Cash 17.9%
Investment Type
As at 31 March 2022
Debt 29.3%
Equity 52.8%
Cash 17.9%
Lifecycle Stage
As at 31 March 2022
Operating 81.4%
Construction 0.7%
Cash 17.9%
Technology Exposure
As at 31 March 2022
CHP 28.6%
Hydro 52.8%
BESS 0.7%
Cash 17.9%
Asset Exposure
As at 31 March 2022
Harvest 10.7%
Glasshouse 10.1%
Spark Steam 7.8%
Green Highland Allt Choire A Bhalachain (255) Limited 4.2%
Elementary Energy Limited 3.0%
Green Highland Allt Ladaidh (1148) Limited 7.8%
Green Highland Allt Luaidhe (228) Limited 4.5%
Green Highland Allt Phocachain (1015) Limited 9.1%
Achnacarry Hydro Limited 24.2%
BESS 0.7%
Cash 17.9%
Portfolio performance
Harvest and Glasshouse
Harvest and Glasshouse revenues and EBITDA significantly exceeded budget
driven by the higher-than-expected power prices. The primary off-taker is APS
which is the UK's leading supplier of British tomatoes and, like other
businesses in the agricultural and food production sectors, it has experienced
a challenging year, citing labour shortages and lower than expected crop
yields. It is, however, well-positioned for future growth, producing
approximately one third of the UK's tomato production with distribution
to the major UK food retailers.
Spark Steam
Spark Steam revenue and EBITDA exceeded budget driven by the
higher-than-expected power prices. The off-takers include APS, the leading
supplier of British tomatoes and a well-known large food manufacturer. Both
companies are well-positioned as suppliers of food items to leading UK
supermarkets. This year Spark Steam has avoided 1,891 tCO(2) carbon emissions.
Hydroelectric Portfolio
TEEC completed the acquisition of the Hydroelectric Portfolio at the end of
2021, but with economic ownership effective from 1 October 2021. In the period
from 1 October to 31 March 2022, generation was 10% ahead of budget. In the
final quarter of the year ended 31 March 2022, revenues were 8% below
expectations given some technical issues, which have been resolved, and the
uncharacteristically dry period in March. Prior to acquisition, we
commissioned new hydrology studies to give confidence in the long-term
generation capability. The operations and maintenance team remain confident
that variance in rainfall over a long period (e.g., 10 years) is generally low
and therefore the 40-year average rainfall is expected to be achieved. Extreme
weather with exceptionally high rainfall can result in not all the water being
utilised, which provides improvement opportunities.
In the coming year, attention will be focused on how to boost performance
through asset management and working with the operations and maintenance team
at Green Highland Renewables. Work has commenced to establish the cost/benefit
of enhancing the performance of the Hydroelectric Portfolio further, which
includes the reinstatement of peatland, that has associated environmental
benefits.
96% of revenues for the Hydroelectric Portfolio are underpinned by Government
supported Feed in Tariffs with a remaining period of c.14 years.
All Feed in Tariff revenues enjoy annual indexation to UK RPI. With the
current high level of UK RPI, this has resulted in Feed in Tariff rates being
adjusted upwards by RPI of 7.5%, effective from 1 April 2022, which has given
an uplift to revenues and underpins the highly defensive and attractive
nature of this portfolio.
Portfolio Valuation
The Investment Manager is responsible for carrying out the fair market
valuation of the Group's investments. The Company engages Mazars as an
external, independent, and qualified valuer to assess the validity of the
discount rates used by the Investment Manager in determination of fair value.
Portfolio valuations are carried out on a semi-annual basis as at 31 March and
30 September each year.
For non-market traded investments (being all the investments in the current
portfolio), the valuation is based on a discounted cash flow methodology and
adjusted in accordance with the International Private Equity Valuation
Guidelines where appropriate to comply with IFRS 13 and IFRS 10, given the
special nature of portfolio investments.
The valuation for each investment in the portfolio is derived from the
application of an appropriate discount rate to reflect the perceived risk to
the investment's future cash flows to give the present value of those cash
flows. The Investment Manager exercises its judgement in assessing the
expected future cash flows from each investment based on the project's
expected life and the financial model produced by each project entity. In
determining the appropriate discount rate to apply to a given investment the
Investment Manager takes into account the relative risks associated with the
revenues. For the year ending 31 March 2022, the discount rates range from 5%
to 8% (31 March 2021: 8%).
The valuation of the portfolio by the Investment Manager and reviewed and
supported by the Directors as at 31 March 2022 was £78.8 million (31 March
2021: £21.0 million).
Valuation movements
The CHP Portfolio has been held at par, while there is scope for a discount
rate that are lower than the interest rates on the CHP Portfolio which derive
a par valuation, this is offset by relatively limited prepayment protections
supporting a par valuation. The small initial loan to the BESS Portfolio has
been valued at par as the initial drawdown took place on 31 March 2022 with
fair value being equal to the upfront costs. As a result of the loan
investments, being valued at par, the fair value movements in the year are
attributable, in its entirety, to revised cash flows in relation to the
Hydroelectric portfolio. The discount rate on the Hydroelectric Portfolio has
remained equal to the discount rate at acquisition.
The breakdown of the movement in the Directors' valuation can be found in the
Annual Report.
The opening valuation as at 31 March 2021 was £21.0 million. Allowing for, in
year cash investments comprising a debt investment in Spark Steam of £8.0
million, £46.5 million into the Hydroelectric Portfolio, £0.7 million into
the BESS Portfolio and £1.6 million of principal repayments from the CHP
Portfolio, the rebased valuation at 31 March 2022 was £74.7 million.
Each movement between the rebased valuation of £74.7 million and the 31 March
2022 valuation of £78.8 million is considered in turn below:
Inflation
Over 2021, as the initial impacts of the pandemic fall out of the inflation
figures, and supply constraints take hold, inflation has increased markedly.
Feed in Tariff rates, for example, were adjusted upwards by RPI of 7.5%,
effective from 1 April 2022. In February 2022, the Russian invasion of
Ukraine, in addition to the multiple primary impacts felt in Ukraine itself,
has placed significant upward pressure on inflation, in part due to the
sharply higher cost of energy and some commodities.
Given the quantum of the increase, consensus amongst the forecasters and broad
increases across prices in multiple sectors, portfolio inflation assumptions
have been updated. Our assumption for long-term RPI has moved to 3.00% for
2023, through to 2030, before falling to 2.40%. Our assumption for CPI has
moved to 2.25%, for 2023 and stays flat thereafter. We also model a power
curve indexation assumption, as wholesale power prices are not intrinsically
linked to consumers' prices, of 2.75% for 2023 staying flat thereafter. The
updated inflation assumptions have been accretive to the valuation of the
Hydroelectric Portfolio by £5.1 million.
Power Prices
The valuation as at 31 March 2022 applies long-term, forward looking power
prices from a leading third-party consultant. A blend of the last three
quarters central case forecasts is taken. Where fixed price arrangements are
in place, the financial model will reflect this price for the relevant time
and subsequently revert to the power price using the methodology described.
The updated power price forecast has been accretive to the valuation of the
Hydroelectric Portfolio by £0.3 million.
Energy Yields
For the Hydroelectric Portfolio, the energy yield assumption is predicated on
a P50 level of electricity output based on reports prepared by technical
advisers prior to acquisition. Since acquisition, TEEC has made a prudent
adjustment (5%) to that energy yield, primarily to enable it to obtain further
comfort as to the appropriate ongoing assumption with respect to curtailment
across the portfolio. The P50 output is the estimated annual amount of
electricity generation that has a 50% probability of being exceeded and a 50%
probability of being underachieved over the life of the asset.
Balance of Portfolio Return
This refers to the balance of valuation movements in the year ending 31 March
2022 (excluding the above) which has been accretive to valuations of £2.0
million. The balance of portfolio return is calculated as the expected return,
reflecting the net present value of future cash flows brought forward to the
valuation date at the prevailing discount rate.
The main drivers of the portfolio return have been updated cost forecasts
reflecting agreements entered into in relation to the Hydroelectric Portfolio
post acquisition and the impact of an optimised capital structure which
includes shareholder loans.
Investment Obligations
At 31 March 2022, the Company had outstanding investment commitments, in
relation to the BESS Portfolio which has a total capacity of 110 MW.
BESS asset Battery hour duration Location Size in MW Expected operational date
1(st) BESS asset One hour North of England 20 MW Q2 FY2023
2(nd) BESS asset Two hours Scotland 50 MW 2023
3(rd) BESS asset Two hours Wales 20 MW 2023
4(th) BESS asset One hour South-East England 20 MW 2023
The investment into the BESS Portfolio amounts to £45.6 million via a fixed
rate debt facility.
Key terms of the debt facility include:
· funding will only occur once key Engineering, Procurement and
Construction ("EPC") milestones have been approved. It is expected that draw
down will take place substantially over the financial year ending 31 March
2023;
· committed amortising term of 18.25 years following an initial 1-year
period;
· increased yield in the event of inflation (consumer price index)
exceeding base case expectations, subject to a cap;
· security including, amongst other rights, charges over the assets of
the Borrower;
· TEEC Holdings will receive an arrangement fee, annual monitoring
fees, and a non-utilisation fee on undrawn amounts of the facility; and
· Field benefits from an ESG margin ratchet which delivers a potential
reduction in the rate payable if ambitious avoided carbon targets are met
during trading.
Fully Invested Portfolio Valuation
The valuation of the portfolio on a fully invested basis can be derived by
adding the valuation at 31 March 2022 and the expected outstanding commitments
are as follows:
£'000
Portfolio valuation as at 31 March 2022 78,787
Future investment commitments at cost 44,941
Portfolio valuation once fully invested 123,728
Key Sensitivities
The following table 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):
Discount rate +0.5% -0.5%
NAV sensitivity (3.0p) 3.3p
Energy Yields +10% -10%
NAV sensitivity 3.1p (3.2p)
Power prices +10% -10%
NAV sensitivity 2.6p (2.2p)
Inflation +0.5% -0.5%
NAV sensitivity 2.5p (2.3p)
For each of the sensitivities, it is assumed that potential changes occur
independently of each other with no effect on any other base case assumption,
and that the number of investments in the portfolio remains static throughout
the modelled life.
Financial Review
The Company applies IFRS 10 and qualifies as an investment entity. IFRS 10
requires that investment entities measure investments, including subsidiaries
that are themselves investment entities, at fair value except for subsidiaries
that provide investment services which are required to be consolidated.
The Company's single, direct subsidiary, TEEC Holdings, is the ultimate
holding company for all the Company's investments.
It is, itself, an investment entity and is therefore measured at fair value.
NAV
The Company's NAV as well as the valuation of the investment portfolio are
calculated semi-annually on 30 September and 31 March each year. Valuations
are provided by the Investment Manager and are subject to review by Mazars
with the other assets and liabilities of the Company 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 discounted
cash flow valuation.
NAV Bridge for the year ended 31 March 2022
The NAV bridge can be found in the Annual Report.
The movement in NAV was driven by the following factors:
Investment income of £2.5 million representing interest income to TEEC, via
TEEC Holdings, from the interest on the CHP Portfolio and the shareholder
loans to the Hydroelectric Portfolio.
Fund expenses of £1.3 million and dividends paid in the year of £6.1
million.
The net impact of investment income, fund expenses and dividends paid led to a
reduction in NAV of £4.9 million. This was partially offset by upward
revaluation of £3.6 million of the Company's, sole, wholly owned subsidiary
TEEC Holdings, the entity through which investments are purchased and measured
at fair value.
The Company's NAV also benefitted from a relatively immaterial £13,000 uplift
through the issuance of new shares to the Investment Manager in accordance
with the Investment Management Agreement under which 20% of the management fee
is applied to the purchase of shares in the Company. During periods where the
Company's shares trade at a premium to NAV, the Company issues new shares at
the prevailing NAV. During periods where the Company's trade at a discount to
NAV, the Investment Manager purchases shares in the secondary market.
Operating Results
The Company was incorporated on 23 June 2020. The comparative figures cover
the period from 23 June 2020 to 31 March 2021, therefore are not comparable
with the amounts presented for the full year ended 31 March 2022.
Profit before tax was £4.8 million (31 March 2021: £0.5 million loss), with
earnings per share of 4.76 pence (31 March 2021: 0.01 pence loss).
Operating Expense and Ongoing Charges
The operating expenses for the year ended 31 March 2022 amounted to £1.3
million (31 March 2021: £0.5m). The Company's ongoing charges ratio ("OCR")
is 1.38% (31 March 2021: 1.07%) and reflects a full year's operating expenses.
With the exception of the management fee, fund operating expenses are
predominantly fixed and known, accordingly via scale the OCR will decline.
Absent of further fundraising, the OCR is expected to increase, on a constant
NAV basis, in the year ending 31 Mach 2023 as the management fee on the IPO
proceeds is now charged on full NAV.
Cash Dividend Cover
31 March 2022
£'000
Cash income 2,165
Total expenses as per Statement of Comprehensive Income (1,324)
Dividends paid per Statement of Changes in Equity 6,125
Cash dividend cover 0.14x
The Company's dividends paid in the year of £6.1 million (6.125 pence per
share) have been predominately paid from capital.
During the financial year ending 31 March 2022, deployment of £55.3 million
has been achieved, on which the Company will benefit from an annualised return
going forward, along with contribution from a further deployment on the £44.9
million of commitments at 31 March 2022. The Company remains focused on being
fully dividend covered by cash flows generated in the underlying investments,
as soon as practicable and to that end, note that in the year ending 31 March
2023, the Company will benefit from a full year of income from the CHP
Portfolio and Hydroelectric portfolio, as well as income from the BESS
Portfolio.
Gearing and Liquidity
At the year ending 31 March 2022, the Group had cash balances of £17.4
million (31 March 2021: £76.6 million).
As announced on the 30 March 2022, the Group, via TEEC Holdings, has entered
into a loan facility agreement for a £40 million Revolving Credit Facility
("RCF") with TP Leasing Limited.
The RCF has a two-year term, with the possibility to be extended. The interest
rate on the RCF is 4.5%(5) based on the Sterling Overnight Index Average
("SONIA") 2-year fixed rate of 2% and a margin of 2.5%.
The Group will make use of the RCF to fund the BESS Portfolio and some of its
growing pipeline of high-quality investment opportunities. The Group will
follow a prudent approach to gearing with a target medium-term gearing of up
to 40% of GAV and a maximum gearing that will not exceed 45% of GAV at time of
drawdown.
As at the end of March 2022, the RCF had not been drawn. It is expected that
the RCF will be substantially utilised during the financial year ending 31
March 2023.
Notes:
(5)Excluding fees
Pipeline
We have continued to build our pipeline and have established a variety of
investment opportunities across different technologies, counterparties,
structures and locations to create an attractive diversified portfolio of
opportunities. The Company has circa £500 million of pipeline of
opportunities across a variety of technologies including energy storage, solar
lighting, EV charging, district heating, energy from waste, hydrogen
production, and CHP.
These investment opportunities are from a variety of sources including from
off-market and competitive processes as well as through the Triple Point Group
network of contacts. Several opportunities include further deal flow that will
follow as a result of longer-term relations.
The distributed energy segment has experienced a significant increase in both
the volume and average deal size per opportunity. Solar photovoltaic projects,
as well as biomass and energy from waste projects are notable components of
the opportunity set. Through working with its developer, corporate and
construction partners, TEEC is well placed to achieve attractive rates of
returns in these sectors.
The onsite consumption and demand segment pipeline has seen notable recent
growth as energy prices have increased in recent months. Businesses are
looking both to reduce the amount of energy they consume, and to generate more
of it on site, materially reducing the bill they pay for that energy through
avoided levies and transmission costs. As well as enhancing energy security
and reducing costs for businesses, these opportunities both drive
decarbonisation and improve energy efficiency.
The energy storage segment has also grown significantly, with the maturing of
the storage business case and attractive returns driving new developments and
investments in this space. The electrification of transportation is creating
new investment opportunities while also adding pressure to grow renewable
generation and use the energy generated more efficiently. The rise in the
adoption of EV, is creating the opportunity to fund EV charging networks.
There is also greater usage of heating, ventilation and air conditioning
("HVAC"), which companies have sought to improve in part to protect against
the spread of Covid-19 through better ventilation. Other technologies are also
being highlighted for future growth such as heat pumps. These technologies
present opportunities for TEEC to finance the installation of new energy
efficient equipment which could use the increasing supply of renewable energy
thus reducing the carbon footprint and improving the environment.
Environmental, Social and Governance
Triple Point 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, Triple Point has applied to become a B Corp which formalises
Triple Point's consideration of social and environmental impact.
In addition, TEEC is considering the climate change strategy of its portfolio
including a review of its climate risks and opportunities. The initial TCFD
report is set out in the Sustainability Report of the Annual Report.
A disclosure for TEEC in line with the European Union's Sustainable Financial
Disclosure Regulation ("SFDR") requirements for Article 6 and Article 8, is
publicly available on our website https://www.tpenergyefficiency.com/.
Although not required to do so, we think it is important to provide
transparency on our sustainability approach wherever possible. Data points for
TEEC, aligned with the SFDR, are also provided in the Sustainability Report.
We have continued to focus on our ESG impact through the TEEC portfolio and in
2021 we enhanced the portfolio from an ESG perspective through the acquisition
of the Hydroelectric Portfolio which has 6.6 MW of hydroelectric power
generation from nine operational run of river generators in Scotland. We are
exploring further ESG improvements such as using peat restoration to improve
income through optimisation of the flow rate at an initial three sites whilst
acting as a carbon-sink - a natural capital solution for a better environment
and financial performance.
The overall TEEC portfolio generated 9,425 MWh of renewable energy and avoided
17,074 tonnes of CO(2) in the year ended 31 March 2022.
We continue to develop our ESG processes to ensure we select the highest
quality and sustainable energy efficient assets.
Outlook
We are pleased with the progress that the Company has achieved and we look
forward to the further deployment of capital in the pipeline that has been
built up. The depth and breadth of the investment opportunities that have been
sourced from a variety of partners and for different technologies ensures
confidence in the ability to build on and diversify the existing TEEC
portfolio of lower carbon and efficient energy projects.
The UK Government has committed to getting to Net Zero by 2050 and many
companies have made more aggressive deadlines. There are a vast number of
green initiatives and a greater demand for reporting on ESG. This all helps to
focus minds on implementing sustainability projects.
TEEC can make a significant contribution to the energy transition as it is
focused on investing into onsite energy generation and consumption,
distributed energy generation and energy storage and distribution. We are well
positioned to execute on these types of opportunities and to drive the
implementation of energy efficiency which will help reduce costs, save carbon
and to make our infrastructure more resilient and provide better energy
security.
Jonathan Hick
TEEC Fund Manager
Jonathan Parr
Partner
23 June 2022
SUSTAINABILITY REPORT
A Committed Investment Manager
Triple Point's mission statement is: "Through our people, and the partnerships
we build, Triple Point unlocks investment opportunities that have purpose,
while generating profits for investors".
In line with this business mission and the commitment to responsible
investment, the Investment Manager has applied to become a B Corporation
(status pending) and became a signatory to the Principles for Responsible
Investing ("PRI") in 2019, to demonstrate best practice in investor ESG
integration and guide continued improvement.
Sustainability Table 1: Triple Point's adoption of the six Principles for
Responsible Investment
Signatory of PRI: Principles for Responsible Investment PRI Principle How Triple Point adopts the principles for TEEC
PRI is recognised as the leading global network for investors who are 1 We will incorporate ESG issues into investment analysis and decision-making ESG analysis is considered by the investment team and shared in Investment
committed to integrating ESG considerations into their investment practices processes. Committee papers to inform the final investment decision.
and ownership policies. The principles demonstrate best practice in ESG
integration, guide signatories in improvements and promote closer alignment
between the objectives of institutional investors and those of society at
large.
Triple Point became a member of PRI in 2019. The first Assessment Report
period of 2020-2021 was a fallow reporting year for PRI to accommodate the
launch of a new reporting and scoring system. Triple Point's first assessment
report will be published in 2023.
2 We will be active owners and incorporate ESG issues into our ownership Tripe Point acts as asset manager on behalf of the Company and uses initial
policies and practices. ESG analysis to understand how operational control of the asset can be
improved to enhance ESG behaviours and/or outcomes.
3 We will seek appropriate disclosure on ESG issues by the entities in which we ESG topics are investigated in all due diligence of acquisitions/investments.
invest.
ESG topics are monitored through Board meetings and the ESG engagement
programme and reported on annually.
4 We will promote acceptance and implementation of the principles within the The value of the principles and importance of the role of ESG factors in good
investment community decision making are proactively promoted.
5 We will work together to enhance the effectiveness in implementing the TEEC uses the best practice promoted by the principles to inform asset
principles. optimisation recommendations.
6 We will each report on our activities towards implementing the principles. The Company has committed to reporting annually on ESG activities.
The Investment Manager reports on responsible investments activities annually
through the PRI assessment process. The next and first published assessment
report for Triple Point will be in 2023.
The importance of sustainability to TEEC
The level of commitment the Investment Manager has to sustainability extends
to each of the strategies it manages. As a result, the Investment Manager has
implemented a robust approach to the integration of sustainability for the
Company, which is based on the following four pillars:
1. Energy Efficiency and a sustainable energy transition
2. ESG research, analysis and integration
3. Asset optimisation and sustainable outcomes
4. Transparency and Governance
1. Energy Efficiency and a sustainable energy transition
Energy Efficiency, the bigger picture
The Company seeks to provide financial backing to projects and technologies
which deliver reductions in generated emissions.
Succeeding in carbon reduction targets requires midterm solutions which reduce
carbon consumption through more efficient energy usage, and the application of
energy utilising technologies which minimise carbon emissions. This transition
pathway to Net Zero recognises that carbon intensive industries require
immediate solutions to reduce their footprint through energy use, whilst
renewable energy generation and resource recycling technologies scales. The
Company takes a holistic approach to energy transition and how energy
efficiency solutions can contribute to the UK energy system. Assets offering
solutions across the chain are sought, from distributed energy generation, and
energy storage to onsite generation and consumption.
By investing in all aspects of the transition pathway, we seek to contribute
to the longer-term commitment for a UK economy which can half its carbon
emissions by 2030, compared to pre-industrial levels, and reduce them to Net
Zero by 2050.
The carbon crisis is a complex challenge, which requires immediate attention
across the economy. Latest analysis from the Intergovernmental Panel on
Climate Change ("IPCC") indicates remaining within the 1.5(o)C target is
increasingly challenging. To hold within 1.6(o)C and even 2(o)C degrees will
require significant efforts, and Part III of the IPCC's 6(th) Assessment
Report refers to the important role of low emission energy sources, energy
efficiency solutions and electrification.
There is a clear and current geopolitical threat to continued emission
reductions with pricing pressure bringing into question the pace of the energy
transition in the face of energy shortages and rising prices. The strength of
policy and change and technology implemented will determine how successful we
will be at remaining within the 1.5(o)C target, but all scenarios demonstrate
a need for rapid emissions reduction.
The pressure for energy security has never been more pressing. Public and
political support for energy solutions which offer competitive pricing, sound
environmental solutions and energy security will increasingly be favoured.
Energy Efficiency Alignment
A key aspect of TEEC's ESG Analysis, irrespective of the investment type, is
if the asset saves Carbon Dioxide equivalents ("CO(2)e") emissions against the
appropriate counterfactual.
CO(2)e savings (also known as CO(2)e avoidance), are a crucial part of our
strategy, offering a useful metric to show how TEEC has helped counterparties
to avoid emitting greenhouse gases.
TEEC measures these in accordance with the GHG Protocol and Partnership for
Carbon Accounting Financials ("PCAF"), which provide an industry-standard
approach to accounting for financed emissions, ensuring a robust, transparent,
and comparable approach. PCAF stress this is crucial because measuring
financed emissions is an important step to assess climate-related risks and
opportunities, set targets in line with the Paris Agreement, and develop
effective strategies to support the decarbonisation of society.
The Investment Manager is aware that for certain asset types, such as
hydroelectric schemes or solar power, the majority of CO(2)e emissions that
can be associated with that investment might be generated, and locked up in
the materials used, during the construction phase. When investing into the
construction and ongoing life of an asset, TEEC will endeavour to capture the
emissions associated with this phase where possible and will work with the
chosen technical adviser to achieve the most in depth analysis that is
practically possible. How the Company approaches accounting for construction
emissions will continue to be reviewed and improved.
TEEC's approach to carbon is to reduce absolute emissions through its
selection of investments and to collect and report on the required data to
demonstrate this, but that we do not currently intend to offset any
outstanding carbon emissions, in line with industry expectation. If possible
and appropriate TEEC may seek to offset at the project level, but not the fund
level.
Energy Efficiency Evidence
To demonstrate the energy efficiency of assets, the Company has committed to
tracking and reporting on a selection of energy data points.
Sustainability Table 4: TEEC investments operating energy efficiency
performance from point of investment to the reporting year end 31 March 2022.
Asset type CO(2) Avoided (tCO(2)) Renewable Energy Generated (MWh) Energy Saved (MWh)
Hydroelectric 3,578 9,425 -
CHP 13,496 - 7,113
Energy Storage * - -
TOTAL 17,074 9,425 7,113
* this is currently an investment commitment and no assets are yet operational
Based on average annual UK household electricity consumption, the combined MWh
of renewable energy generated and MWh of energy saved would be enough to power
5,335 homes.
Based on the average UK petrol car travelling the average annual mileage the
avoided carbon dioxide is the equivalent to taking 8,951 cars off the road for
a year.
For more detail on the avoided emission and energy calculations please refer
to the Methodology Principles provided in Annex 1 of the Annual Report.
Contributing to a Sustainable Energy Transition
The provision of energy efficiency solutions contributes to the energy
transition, a critical contributor in tackling climate change and providing
cleaner, safer and more secure sustainable sources of energy for use
throughout society and the economy. Such benefits, if realised, also align
with a number of the UN Sustainable Development Goals ("SDGs").
In 2015, world leaders gathered at the UN to adopt 17 SDGs to achieve several
objectives by 2030 including to: end poverty, promote prosperity and
well-being for all, and protect the planet. The UN SDGs have been adapted by
193 countries. TEEC's asset selection helps to address SDGs 7, 9, 11, 12 and
13. The below table details how TEEC assets can contribute.
Sustainability Table 2: TEEC asset's SDG alignment opportunity
UN SDG UN SDG UN SDG Target UN SDG Target How TEEC contributes to this Goal and Target TEEC assets that can align
7 Affordable & Clean Energy: Ensure access to affordable, reliable, 7.2 By 2030, increase substantially the share of renewable energy in the global Investing in renewable energy assets which feed into the electricity grid Hydroelectric Portfolio
sustainable and modern energy for all energy mix contributes to the renewable energy mix.
BESS Portfolio
Investing in energy storage technology provides greater supply consistency,
acts as an enabler to grid decarbonisation and can contribute to reduced
wasted renewable electricity in the event of overproduction.
7.3 By 2030, double the global rate of improvement in energy efficiency Our combined Heat and Power plants provide a route for the efficient use of CHP Portfolio
the fuel burnt, to provide usable heating solutions alongside the electricity
production
7.a By 2030, enhance international cooperation to facilitate access to clean The investment strategy of TEEC has been conceived with the express purpose of All assets
energy research and technology, including renewable energy, energy efficiency contributing to energy efficiency and transition solutions.
and advanced and cleaner fossil-fuel technology, and promote investment in
energy infrastructure and clean energy technology
9 Build resilient infrastructure, promote inclusive and sustainable 9.4 By 2030, upgrade infrastructure and retrofit industries to make them The investment strategy of TEEC has been conceived with the express purpose of All assets
industrialization and foster innovation sustainable, with increased resource-use efficiency and greater adoption of contributing to energy efficiency and transition solutions, which can be
clean and environmentally sound technologies and industrial processes, with applied to existing industry and infrastructure to reduce their reliance and
all countries taking action in accordance with their respective capabilities use of carbon-based fuels.
11 Sustainable Cities & Communities: Make cities and human settlements 11.6 By 2030, reduce the adverse per capita environmental impact of cities, Clean energy solutions such as the Company's hydroelectric assets, reduce the All assets
inclusive, safe, resilient and sustainable including by paying special attention to air quality and municipal and other need for more polluting energy sources.
waste management
Energy efficiency solutions such as our CHPs, reduce the amount of energy used
for industrial processes reducing pollution created
energy storage contributes to the efficiency of a decarbonised grid and
creates resiliency in the energy system
12 Responsible Consumption & Production: Ensure sustainable consumption and 12.2 By 2030, achieve the sustainable management and efficient use of natural Investing in responsibly managed and sustainable assets that enable other All assets
production patterns resources manufacturers to improve their production efficiency contributes to a
reduction in natural resource use.
Seeking best practice in circular economy production and end of life in our
assets.
13 Take urgent action to combat climate change and its impacts 13.2 Integrate climate change measures into national policies, strategies and Investing in assets which support national ambitions to reduce GHGs in All assets
planning economic activity contributes to action on climate change
2. ESG integration and the investment process
ESG integration delivers value during the initial investment decision-making
process and on an ongoing basis.
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.
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 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 save 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's approach to responsibility and ability to promote a
corporate governance structure that is accountable and responsive to
stakeholders by addressing issues such as Boards & Trustees, pay
structure, ownership and accounting practices. Examination of governance also
reveals important information on a company's business ethics, and we look for
evidence of best practice in approaches to tax policy, management of bribery
and corruption, conflicts of interest and appropriate senior level ownership
of ESG issues.
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.
Possible impacts of climate change on the strategy's assets are accounted for
through scenario analysis, which combines the investment team's carbon
analysis work with the ESG integration work to test the resilience of a
project based on potential changes to the physical and regulatory environment
they operate within. This process looks to quantify how future climate change
could impact an assets performance over the short, medium and long term.
Details on our approach to date in the management of climate risk and
opportunity are captured in our Task Force on Climate-related Financial
Disclosure ("TCFD") report in the Annual Report.
3. Asset Optimisation and Sustainability Outcomes
Continued improvements in the sustainability credentials of the Company's
assets are an important aspect of portfolio management undertaken by the
Investment Manager. Any improvement in assets is driven through the Operations
and Management ("O&M") provider, as the assets commonly have no employees.
Asset optimisation requires long-term commitments and outcomes are not
typically quick. The assets within the portfolio are currently undergoing a
review to establish where we can implement optimisation. To date,
opportunities have emerged within our BESS Portfolio and Hydroelectric
Portfolio; we have detailed this potential and how the action would create
further alignment to the SDGs.
Optimisation potential
Integrating sustainable behaviours in the BESS Portfolio.
Energy Storage plays a crucial role in enabling the decarbonisation of the
electricity grid. The supply of renewable energy is intermittent and weather
dependent and as traditional synchronous generation sources go offline, the
resiliency of the grid to changes in frequency is reduced.
Batteries can respond to these challenges by storing energy generated when
supply is high and demand is low - on nights experiencing high volumes of
wind, for example. The carbon saving credentials of an energy storage system,
however, are dependent on the way the system is run. To encourage the most
sustainable behaviours in the borrower and set clear expectations on carbon
saving requirements, in the BESS Portfolio, the Investment Manager negotiated
a carbon-ratchet mechanism in the debt facility. This financially incentivises
carbon avoidance through responsible use of the assets. We believe this to be
a market-first.
The borrower will only receive interest rate reductions if they perform well
on the carbon arbitrage metric - a maximum reduction of up to 25bps can be
achieved. Maximum reductions are only awarded, for example, if the average
Field trade is within 17% of the maximum available carbon arbitrage.
Optimisation potential
Peat Restoration at three sites in the Hydroelectric Portfolio: Cheanna Mhuir,
Ladaidh and Choire a Bhalachain
Sustainability outcomes linked to SDG 13 (Climate action: take urgent action
to combat climate change and its impacts) and SDG 15 (Life on Land: Protect,
restore and promote sustainable use of terrestrial ecosystems, sustainably
manage forests, combat desertification, and halt and reverse land degradation
and halt biodiversity loss). Following the acquisition of the hydro sites we
are exploring the potential to optimise the flow from the catchment area
through the implementation of natural capital solutions to provide a better
generation profile for the assets. A particular solution being explored for
viability being the re-instatement of peatland which has associated
environmental benefits related to biodiversity and carbon sequestration.
5. Transparency and Governance
There is a strong approach to information sharing and oversight for
sustainability across Triple Point and TEEC.
The Investment Manager as AIFM has determined that TEEC is subject to Article
8 of the EU Sustainable Finance Disclosure Regulation. Article 8 applies where
a financial product promotes, among other characteristics, environmental or
social characteristics, or a combination of those characteristics, provided
that the companies in which the investments are made follow good governance
practices. We continue to monitor the portfolio and the emerging details of
this regulation to determine if we will amend our disclosure to Article 9. Our
full disclosure is on our website: https://www.tpenergyefficiency.com/
(https://www.tpenergyefficiency.com/) .
Responsibility for the ESG integration strategy across Triple Point sits with
the Head of Sustainability, Lindsay Smart, who leads the Triple Point
Sustainability Team. 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.
Triple Point operates a Sustainability Group which consists of senior partners
and managers from across the Investment Manager. This Group meets monthly to
discuss Sustainability initiatives and concerns from across the company. The
Group is chaired by Triple Point's Co-Managing Partner; and both Managing
Partners sit on the Group. The Sustainable Investment Subgroup reports to this
Group. The subgroup consists of senior investment team members from across
Triple Point's investment strategies. This Group meets every eight weeks to
share best practice, latest industry activity and ESG ideas from across the
business. This Group can also be called to review a deal which has received a
critical level of ESG flag at the due diligence stage, or to act as a sounding
board for critical debate should a deal present a complex sustainability
profile.
The Sustainability Team conducts an annual ESG monitoring programme to assess
the effectiveness of ESG integration across each of Triple Point's strategies,
including TEEC. Each strategy is subject to a review of their adherence to
their strategy's ESG integration policy, and opportunity for development and
evolution. The findings of this audit are presented to the Sustainability
Group for discussion and further action if appropriate.
The Sustainability Team are also subject to quarterly risk reviews by the risk
team, and any identified sustainability risks are recorded on the Triple Point
Group risk register, which is reviewed quarterly by the Group's Risk
Committee.
The Head of Sustainability also sits on the Risk Committee to ensure that the
Group outlook for risk appropriately considers sustainability issues.
The Board are also kept informed of sustainability risks and opportunities
facing portfolio companies through updates provided by the investment team and
Triple Point's Head of Sustainability, including deep dives into
sustainability integration, engagement, target setting and performance.
For further details on Governance please refer to the Corporate Governance
Report in the Annual Report.
The transparency of TEEC's sustainability activities is an important aspect of
the Investment Manager's commitment. The data provided reflects energy
efficiency commitments and the disclosure expectations the Investment Manager
responds to in relation to EU Taxonomy requirements and those associated with
being subject to Article 8 of the EU Sustainable Finance Disclosure Regulation
(SFDR). The SFDR has set out a series of KPIs which it expects aligning
entities to disclose against. The list of KPIs is set and to conform with the
disclosure we present the list in the exact way the disclosure prescribes.
Sustainability Table 3. SFDR-aligned KPIs. Where investments were made during
the reporting year, data presented is for TEEC assets from the point of
investment to 31 March 2022. Where investments were made during previous
reporting years, data presented is for the full reporting year. All energy use
and emissions occur within the UK.
Climate and other environment-related indicators
Greenhouse gas emissions Avoided emissions(6) 17,074 tCO(2)
Total Energy Consumption 206,634 MWh
GHG emissions(7) Scope 1 GHG 37,855 tCO(2)e
Scope 2 GHG (location-based) 79 tCO(2)e
Scope 2 GHG (market-based) 117 tCO(2)
Total GHG 37,933 tCO(2)e
Emissions intensity 215 gCO(2)e/kWh generated
Exposure to companies active in the fossil fuel sector Share of investments in companies active in the fossil fuel sector 0%
Share of non-renewable energy consumption and production(8) 96%
Biodiversity Activities negatively affecting biodiversity-sensitive areas 0%(9) ( )
Water Emissions to water 0%
Waste Hazardous Waste 0%
(6) Avoided emissions for this reporting period are as a result of the
operating activities of the Hydroelectric Portfolio and CHP Portfolio
(7) GHG emissions for this reporting period are as a result of 3.34 tonnes of
scope 2 (location-based) emissions from the imported energy for the
Hydroelectric Portfolio, and the remainder from the CHP Portfolio. As the BESS
Portfolio that we have committed to fund is not yet operational, no emissions
are currently tracked.
(8) The Hydroelectric Portfolio is located within or close to a number of
biodiversity sensitive areas, notably: Easter Ness Forest SSSI, West
Inverness-shire Lochs SPA and Drimnin to Kilundine Woods SSSI. Strict
protections from the Scottish Environmental Protection Agency (SEPA) ensure
that the activities of these sites do not negatively affect the local ecology.
(9) Percentage of total energy production and consumption that is from
non-renewable sources. Energy consumption is defined as the energy in the
natural gas burned by the CHP assets, and the electricity drawn from the grid
as parasitic load by the CHP and hydroelectric assets. Both of these sources
are assumed to be 100% non-renewable. Energy production is defined as the
energy produced by hydroelectric generation and exported to the grid, which is
100% renewable. Heat and electrical energy generated by the CHPs are excluded
to avoid double-counting.
For further details on assumptions associated with the reporting of these
indicators please refer to Reporting Principles and Methodologies detail in
Annex 1 of the Annual Report.
In accordance with the TCFD we also collate and report our approach to climate
risk management. Our TCFD disclosure is contained within the Annual Report.
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.
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, through
regulatory oversight 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.
Section 172(1) Description
a. The likely consequences of any decision in the long term The aim of the Board and of the Investment Manager is to ensure the long-term
sustainable success of the Company. As a result, the likely long-term
consequences are also a key consideration in decision making.
b. The interests of the Company's employees As a closed-ended investment company, the Company does not have any employees
and so this matter is not applicable.
c. the need to foster the company's business relationships with The Company's primary suppliers are our service providers, principally the
suppliers, customers and others Investment Manager and Administrator. The Board engaged regularly with both,
including at its Board meetings.
Further detail on the Board's approach is described under 'Stakeholder
Engagement' below.
d. The impact of the company's operations on the community and the Having a positive environmental impact is central to the Company's operations,
environment given that it its strategy is to invest in assets support the transition to a
lower carbon economy and help the UK achieve Net Zero.
Please refer to the Sustainability Report for further information.
e. the desirability of the company maintaining a reputation for high The Directors have a duty to promote the success of the Company for the
standards of business conduct benefit of shareholders. As such they are dedicated to ensuring the
maintenance of high standards of business conduct and corporate governance.
f. the need to act fairly as between members of the company During the period, the Investment Manager conducted a roadshow offering to
meet with investors.
Further detail on the Board's approach is described under 'Stakeholder
Engagement' below.
Stakeholder Engagement
Stakeholder Shareholders
Why is it important to engage? Shareholders and their continued support is 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 in the
Corporate Governance Report of the Annual Report.
What were the key topics of engagement? During the year, the Investment Manager met with the majority of existing
shareholders as well as prospective investors to discuss Company's investment
thesis and forward looking strategy.
What was the feedback obtained and the outcome of the engagement? During those meetings, discussions were held to establish whether there was
appetite for TEEC investing in BESS assets. The feedback was positive.
Subsequently, the Group completed its first investment into BESS assets in
March 2022.
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.
What were the key topics of engagement? During the year there were a number of additional meetings held to consider
various matters, including Spark Steam, the Hydroelectric Portfolio and the
RCF which were all transactions where other parts of the Triple Point Group
were involved. As a result, the Board considered the conflict management
procedures and approved the transactions to ensure the fairness and
reasonableness to TEEC shareholders.
What was the feedback obtained and the outcome of the engagement? Following feedback from the Board, various pieces of work were undertaken by
third-party advisers to provide additional assurances that the transactions
were priced fairly and ultimately in the best interests of TEEC shareholders.
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? The Board and Investment Manager engaged with the Company's brokers and
financial advisers in respect of the Company's share price discount to NAV and
proposed strategies to increase the share price.
What was the feedback obtained and the outcome of the engagement? Following advice from the brokers and financial advisers, the Investment
Manager met with the majority of existing shareholders as well as prospective
investors to discuss Company's investment thesis and forward looking strategy.
Stakeholder Asset-level 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? A 100-day asset management integration plan has been implemented for the
Hydroelectric Portfolio which will seek to make improvements based on
recommendations from the due diligence process.
What was the feedback obtained and the outcome of the engagement? The 100-day asset management integration plan has raised the need to carry out
further investigation into the potential to optimise the flow from the
catchment area through the natural capital solutions to provide a better
generation profile for the assets. A particular solution being explored for
viability being the re-instatement of peatland which has associated
environmental benefits related to biodiversity and carbon sequestration.
Stakeholder Investee Companies/Borrowers
Why is it important to engage? Investee companies and borrowers are companies in which TEEC 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 a Board observer position on Harvest and
Glasshouse and holds Board positions on the Hydroelectric Portfolio.
Each investee company and borrower has certain reporting obligations to the
Group.
What were the key topics of engagement? The Investment Manager engaged with the boards and management of the
investee companies to discuss the relationship going forward, including
frequency of reporting.
What was the feedback obtained and the outcome of the engagement? During the year the Board have provided feedback on what portfolio reporting
they expected to see and the investee companies have worked to fulfil those
expectations.
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.
Conflicted transactions
During the year the Group acquired Spark Steam and the Hydroelectric
Portfolio. In both circumstances the transactions involved other Triple Point
managed entities and as such the Board had to consider the conflict of
interest that existed and whether the measures put in place by the Investment
Manager were sufficient to mitigate the conflict of interest.
The Group entered into a loan facility agreement for a £40 million RCF with
TP Leasing Limited. The RCF was deemed to be a "smaller related party
transaction" for the purposes of LR11.1.10R of the Listing Rules. The Company
obtained a fair and reasonable opinion from a qualified, independent adviser
and the Board satisfied itself that the conflict management procedures in
place were effective.
The engagement from the Board on these matters (supported by third party
advice as appropriate) provided assurance that the Investment Manager acted
appropriately and that the transactions terms were fair and reasonable and
were in the best interests of shareholders.
Investment into BESS Portfolio
As has been discussed throughout the Report, there is significant opportunity
to invest in energy storage assets and this was something the Company were
keen to embrace. The Board and Investment Manager held extensive discussions
as to whether energy storage was an appropriate investment for TEEC as it was
not a sector specifically referenced within the Company's Investment Policy.
The Investment Manager held investor meetings, during which shareholder
appetite for the Company investing into BESS assets was discussed. The
feedback was positive and in March 2022 the Group committed £45.6 million to
four projects.
RISK MANAGEMENT
Risk is described as the potential for events to occur that may result in
damage, liability or loss. Should these events occur, the Company may well
be adversely impacted, potentially leading to the disruption of the
Company's business model, as well as potential damage to the reputation or
financial standing of the Company.
The benefit of a risk management framework is that it allows for potential
risks to be identified in advance and may enable these risks to either
be mitigated or possibly even converted into opportunities. The Directors
have identified below what they consider to be the current top risks to the
Company and the mitigations in place.
As an externally managed Investment Company the Company delegates portfolio
management and risk monitoring activities to the Investment Manager and
Administrator, therefore the Company places reliance on the controls of
service providers. In the normal course of business,
each individual investment will have developed a rigorous risk management
framework including a comprehensive risk register that is reviewed and updated
regularly and approved by the investee company board.
Risk appetite
The Board is responsible for setting the Company's risk appetite
supplementing on the Investment Policy and investment restrictions. During
the period, the Board focused on clarifying its views on technology risk. An
initial articulation of broader risk appetite was then discussed and agreed
at the Board meeting in May 2021. It sets the amount of risk the Company is
willing to take, and the upper and lower limits which the Board determines
that the Investment Manager must operate within.
Identification, assessment and management of risk are integral aspects
of the Investment Manager's and the Administrator's work in both managing
the existing portfolio on a day-to-day basis and pursuing
new investment opportunities. The Board approved risk appetite,
together with the Investment Policy and restrictions provides the
framework for the Company and how the Investment Manager deploys the
available funds in order to meet the
Company's Investment Objectives. Adherence to the risk limits is reported
regularly to the Board through the quarterly AIFM risk management report.
As a full scope UK AIFM, the Investment Manager has established a Risk and
Valuation Committee that meets on a quarterly basis to discuss, amongst other
matters, the risk framework of the Group and investee companies including
processes for identifying, assessing and managing risks.
Principal Risks and Uncertainties
It is not possible to eliminate all risks that may be faced by the Company.
The objective of the Company's risk management framework and
policies adopted by the Company is to identify risks and enable the Board
to respond to risks with mitigating actions to reduce the potential impacts
should any of the risks materialise.
The Board regularly reviews the Company's risk register, with a focus on
ensuring appropriate controls are in place to mitigate each risk. Taking
considered risk is the essence of all business and investment activity. The
Board is ultimately responsible for setting the risk appetite and for the
oversight of the Company's system of internal control and for reviewing the
effectiveness of the Company's system of internal control in the light of the
risks identified.
Procedures to identify principal or emerging risks:
In order for the Company to capture new and emerging risks and their
potential implications the Administrator, Company Secretary and Investment
Manager consider risk as a matter of good practice; and report these to the
Board at the quarterly Board meetings. The AIFM has responsibility
for identifying potential risks at an early stage, escalating risks or
changes to risks and any other relevant considerations to the Board for
recording in the Company's risk register. Where relevant the financial model
will be stress tested against the likelihood of occurrence and graded
suitably. The Board regularly reviews the risk register to ensure grading and
mitigations remain appropriate and it reflects all relevant risks.
The AIFM undertakes risk management functions for the Company as defined under
the AIFM Directive, including but not limited to the provision of the
following risk management services to the Company:
· implementing adequate risk management systems to identify, measure,
manage and monitor risks relevant to the Company's investment strategy and to
which the Company may be exposed;
· reviewing the performance of the portfolio management function and
reporting to the Board of the Company in respect of the performance;
· ensuring that the risks of each investment of the Company and its
effect on the portfolio can be identified, measured, managed and monitored on
an on-going basis, including the appropriate stress test modelling;
· implementing an appropriate, documented and routinely updated due
diligence policy and procedure which is followed by all relevant parties in
the making of investment decisions relating to or on behalf of the Company
according to the investment strategy, the objectives and risk profile of
the Company;
· regularly monitoring the compliance by the portfolio management
function with the Investment Objective and limitations and restrictions and
the Board approved risk appetite and reporting any instances of
non-compliance promptly to the Board;
· identifying and proposing qualitative risk limits for the Company
appropriate for all relevant risks and subject to Board approval, establishing
and implementing such limits; and
· periodically reviewing the risk management systems described
above to ensure that any modifications necessary are implemented.
The Board considers the following to be the principal risks faced by the
Company along with the potential impact of these risks and the steps taken to
mitigate them.
Risk Identified Risk Description Risk Impact Mitigation Post Mitigation
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 majority of the Company's investments should benefit from fixed price 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 arrangements.
affected by a variety of factors, profitability, the Net Asset Value, the Company's earnings and returns
Moderate
to shareholders.
including market demand for electricity, the generation mix of power plants,
government support for various forms of power generation, as well In addition, the Group believe that the transition to a low carbon economy,
as fluctuations in the market prices of commodities and
increased usage of smart grids and residential participation in renewable Likelihood
To the extent that the Group enters into contracts to fix the price that it energy generation should all positively impact demand levels and patterns
foreign exchange. receives on the for electricity. Moderate
electricity generated or enters into derivatives with a view to hedging
against fluctuations in power prices, the Group will be exposed to risk
related to delivering an amount of electricity over a specific period. If The Group aims to spread credit risk by putting in place PPAs with a range of Change in year
there are periods of non-production the Group may need to pay the counterparties.
difference between the price it has sold the power at and the market price at Stable
that time.
Ability to raise additional finance Ability to raise additional finance, either debt or equity, may limit the Without sufficient funding, the Group will be unable to pursue suitable The Board keeps liquidity under constant review to ensure that we have a level Impact
Group's ability to grow and achieve a fully covered dividend. investments in line with its Investment Policy. This would significantly of protection in the event of adverse fundraising conditions and dividend
impair the Group's ability to pay dividends to shareholders. cover is also closely monitored. Moderate
When raising debt finance, the Group adopted a flexible approach involving Likelihood
speaking to multiple funders offering various rates, structures and
tenors. This allowed the Group to maintain maximum competitive tension Moderate to High
between funders and obtain the best debt possible.
Change in year
Increase
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 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 Group. notice not being served before the fourth anniversary of the date of Admission High
the energy efficiency market.
(which was October 2020).
The departure of any of the key personnel of
Likelihood
the Investment Manager without adequate replacement may also have a The Board regularly reviews and monitors the Investment Manager's performance.
material adverse effect on the Group's performance. In addition, if any such In addition, the Board meets regularly with the Investment Manager to ensure Moderate
personnel were to do anything or were alleged to have done something that may that we maintain a positive working relationship.
be the subject of public criticism or other negative publicity or may lead
to investigation, litigation or sanction, this may have an adverse impact on
Change in year
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 Stable
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.
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 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 changes to law and regulation that renders an investment obsolete could the technology, regulatory environment, potential future regulatory changes Moderate
threaten the profitability of such an investment, in particular due to the and the robustness of any Government subsidy. In particular, the Group
which a service or product is delivered or alter the return profile of an financing projections that are dependent on an extended project life. If such considers how to manage the risk of carbon pricing through using carbon price
investment. a change were to occur, these assets would have very few alternative uses forecasts and offsetting carbon cost risk to off-takers where possible. The
should they become obsolete. Group monitors government guidance and is looking to build the portfolio in Likelihood
line with this guidance.
Moderate to High
In addition, environmental
regulators may seek to impose injunctions or other sanctions on The Group's Investment Strategy focuses on a diverse range of assets across
an investment's operation due to changes in laws or regulations that may various energy efficiency sub-sectors, which reduces the impact on the Group Change in Year
have a material adverse effect on its financial condition. Carbon pricing is should any such changes impact any one sector.
a particular risk.
Stable
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 The Investment Manager will look to Impact
the Group is exposed to the financial strength of the counterparties to such early termination of
projects and their ability to meet their contractual payment obligations.
build in suitable mechanisms to protect the Group's income stream from the Moderate
an investment due to insolvency, may materially affect the value of the relevant investment, which may include parent guarantees and liquidated
portfolio and could have a material adverse effect on the performance of the damages payments on termination.
Group, the Net Asset Value, the Group's earnings and returns
to shareholders. Likelihood
The Group's exposure to defaults may be further mitigated by contracting Moderate
with
counterparties who are public sector or quasi-public sector bodies or who are
able to draw upon government subsidies to partly fund contractual Change in year
payments.
Stable
As part of the Group's acquisition process, the Investment Manager conducts a
thorough due diligence process on all projects that includes a credit check
on counterparties. Following asset acquisitions, the Investment Manager puts
in place, and follows, an ongoing management plan tailored to the specific
asset.
Geopolitical changes causing economic disruption Geopolitical changes - including the war in Ukraine - could affect economies Rising energy costs and inflation could result in the deterioration of the High gas prices have been accompanied by high electricity prices, resulting Impact
worldwide, including the UK economy, by, for example, pushing up energy prices credit quality of the Group's counterparties through increasing their input in some of the Group's assets trading ahead of budget. In addition, the
and causing inflation. prices, which increases the risk of underperformance or the financial Ukraine war is putting greater focus on the need for energy cost reduction and Moderate
difficulty of the Group's counterparties. energy security which has raised the need for implementation of energy
efficiency and distributed energy solutions.
Likelihood
Moderate
Change in year
New
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 Impact
concentrated in any one technology type. performance in the event of a change in legislation or regulation, or being monitored and a variety of technologies in its investment pipeline.
mechanical breakdown, or obsolescence caused by disruptive technologies. This Moderate
would affect their ability to perform as well as expected, causing detriment
to the revenues and Net Asset Value of the Group.
Likelihood
Moderate
Change in year
New
Significant abortive costs in terms of financial cost and time The Group may spend significant time and money on assets that are ultimately If the Group expends time and money on assets which are not acquired, this All due diligence expenditure must be approved by the Investment Committee. Impact
not acquired. affects the Group's returns to investors as well as distracting the Group from The risk of aborts is monitored as part of transaction sourcing and the due
acquiring other assets. diligence process. Internal due diligence is completed before external Moderate
advisers are paid to conduct due diligence.
Likelihood
Moderate
Change in year
New
Target returns are not met The Group's targeted returns are targets only, based on estimates and Paying returns which are lower than the targeted returns will reduce the There are regular reviews of the investment environment, competition, the Impact
assumptions which are subject to significant uncertainties, including income due to investors, and could affect the share price of the Company, pipeline, the portfolio, and future cash flow focused on enabling the Group to
competitive market pricing being lower than targeted returns, and actual which would affect its ability to raise further finance. meet its targeted returns. The Group has the flexibility to structure Moderate
returns may be materially lower than targeted returns.
investments to be as competitive as possible through the overall terms of a
funding solution rather than just on price.
Likelihood
In addition, the Group's Revolving Credit Facility has given the Group access Moderate
to funding with a cheaper cost of capital which will help the Group achieve
its target returns.
Change in year
New
The valuation of investments is subject to uncertainties The valuation of assets is inherently subjective leading to uncertainty Changes in values attributed to investments during each six-month period may The Investment Manager is responsible for carrying out the fair market Impact
about how projects are valued from period to period. These uncertainties arise result in volatility in the Net Asset Values that the Group reports from valuation of the Group's investments, but the Group engages external
from project valuation assumptions and as well as macro-economic factors, such period to period. independent valuers to assess the validity of these valuations, with Moderate
as inflation and interest rates, which feed into operating assumptions and six-monthly reviews and annual audits. Valuations are prepared using external
discount rates, with higher discount rates leading to lower Net Asset Values. market benchmarks and externally-sourced power market curves from reputable
providers or a blend from more than one. The fair valuation of investments is
calculated in accordance with IPEV (International Private Equity and Venture Likelihood
Capital) valuation guidelines.
Moderate
Change in year
New
Since the last Annual Report, the following risks have been removed from the
Principal Risks table:
· Portfolio of new assets acquired which may include risks not fully
identified in due diligence process;
· Risks relating to installing, operating, and decommissioning energy
efficiency equipment;
· Lack of availability of suitable investments; and
· Cyber and other security risks.
Each of these risks are still being actively managed through our risk
management process.
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.
Physical effects of climate change
While efforts to mitigate climate change continue to progress, the physical
impacts are emerging in the form of changing weather patterns. Extreme weather
events can result in flooding, drought, fires and storm damage, which
may potentially impair the operations of borrowers and future portfolio
companies at a certain location or impacting locations of companies within
their supply chain.
Growth of green hydrogen and the potential impact on business cases
Once green hydrogen reaches a substantial supply level, it could displace
other green energy sources that are intermittent and so reduce the demand for
them. The emergence of this technology will be monitored with the portfolio
adapted as necessary.
Changes to energy market regulation and policies
As part the of transition to Net Zero, government policy is likely to evolve
to accelerate the transition whilst mitigating costs to consumers. A number of
potential options are under discussion including regional or nodal pricing,
windfall taxes and the current approach to price setting in the market through
marginal pricing. Many of these potential changes are at very initial stages
of policy development and the Group will monitor how these evolve, as well as
position the Group to adapt to these risks.
For example, if regional or nodal grid pricing is introduced, it will impact
power prices for generation assets depending on the geographic location of
those assets. This could increase or decrease income. The Group will
continue to invest in a geographically diversified portfolio to mitigate this
risk and put in place appropriate offtake agreements.
GOING CONCERN AND VIABILITY STATEMENT
Going Concern
The Directors have adopted the going concern basis in preparing the Annual
report. 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 expense flows.
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 2022, the Company had net assets of £96.1 million including
cash balances of £17.1 million. The Company's sole, wholly owned,
subsidiary TEEC Holdings has a £40 million RCF which is undrawn and a £0.3
million cash balance which, on a Group basis, are sufficient to meet current
obligations, including the £44.9 million investment commitments, 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 Groups investments comprise fixed rate debt investments with contractual
maturities between 2031 and 2035, together with a portfolio of hydroelectric
assets which are fully operational and have remaining economic lives well in
excess of thirty years. As a result, the Group benefits from long-term 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 an upward only RPI linked revenue flow under a UK government
subsidy. The Hydroelectric Portfolio also benefits from fixed price PPAs, with
institutional counterparties, for the next two years. Forecast revenues
thereafter are subject to wholesale power prices which are based upon
qualified independent forecasts.
The major cash outflows of the Group, aside from non-discretionary operating
expenses, are the payment of dividends and costs relating to the acquisition
of new assets, both of which are entirely discretionary.
The Directors do not consider that the effects of Covid-19 have created a
material uncertainty over the assessment of the Company as a going concern.
In late February 2022, Russia began an invasion of Ukraine with devastating
consequences for the country's citizens and major implications for wider
humanity, the global economy and capital markets. The Company does not have
any direct exposure to Russia, however, the Company is monitoring the
potential wider macroeconomic consequences on the Company and its investment
portfolio closely, including energy price volatility and further sanctions.
Please refer to the Investment Manager's review, which illustrates the wider
effects of the Russia Ukraine conflict on the Company and its investments. 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 2027.
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 2027 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 revolving
credit facility, available to TEEC Holdings, which has a contractual maturity
of March 2024, is refinanced for the remainder of the forecast period at the
same rate. Supporting the assumption are 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 subsidy. The Hydroelectric Portfolio also benefits from
fixed price PPAs, with institutional counterparties, for the next two years.
Forecast revenues thereafter are subject to wholesale power prices which are
based upon qualified independent forecasts. The projects are each supported by
detailed financial models. The Directors believe that portfolio
diversification with fixed rate debt in different energy efficiency
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 each year 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.
Sensitivity analysis considers the potential impact of the Group's principal
risks occurring. 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.
The Directors consider the risk to the value of the Company's investments, its
ability to operate its projects and generate revenue, presented by the
Covid-19 pandemic, there has been minor disruption to the business to date and
the risk-mitigating activities have served to reduce the impact.
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 and these 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 2027.
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
23 June 2022
FINANCIAL STATEMENTS
INCOME STATEMENT
For the period ended 31 March 2022
Year Ended Year Ended
31 March 2022 31 March 2021
Note Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment income 5 2,451 - 2,451 57 - 57
Profit/(Loss) arising on the revaluation of investments at the period end 12 - 3,634 3,634 - (113) (113)
Investment return 2,451 3,634 6,085 57 (113) (56)
Investment management fees 4 327 109 436 5 1 6
Other expenses 6 867 21 888 388 71 459
1,194 130 1,324 393 72 465
Profit/(Loss) before taxation 1,257 3,504 4,761 (336) (185) (521)
Taxation 8 - - - - - -
Profit/(Loss) Loss after taxation 1,257 3,504 4,761 (336) (185) (521)
Other comprehensive income - - - - - -
Total comprehensive income/(loss) 1,257 3,504 4,761 (336) (185) (521)
Basic & diluted earnings per share (pence) 9 1.26p 3.50p 4.76p (0.58p) (0.32p) (0.90p)
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 2022
Company Number: 12693305
31 March 2022 31 March 2021
Note £'000 £'000
Non-current assets
Investments at fair value through profit or loss 12 78,952 20,883
Current assets
Trade and other receivables 13 453 201
Cash and cash equivalents 17,144 76,553
17,597 76,754
Total assets 96,549 97,637
Current liabilities
Trade and other payables 14 (412) (149)
(412) (149)
Net assets 96,137 97,488
Equity attributable to equity holders
Share capital 15 1,000 1,000
Share premium 13 -
Special distributable reserve 91,444 97,009
Capital reserve 3,319 (185)
Revenue reserve 361 (336)
Total Equity 96,137 97,488
Shareholders' funds
Net asset value per Ordinary Share 11 96.12p 97.49p
The statements were approved by the Directors and authorised for issue on 23
June 2022 and are signed on behalf of the Board by:
Dr John Roberts
Chair
23 June 2022
The accompanying Notes are an integral part of this statement.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 31 March 2022
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/(loss) for the period - - - 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
Issued capital Share premium Special distributable reserve Capital reserve Revenue reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
For period ended 31 March 2021
Opening balance - - - - - -
Issue of share capital 15 1,000 99,000 - - - 100,000
Cost of issue of shares - (1,991) - - - (1,991)
Transfer to special distributable reserve - (97,009) 97,009 - - -
Total comprehensive income/(loss) for the period - - - (185) (336) (521)
Balance at 31 March 2021 1,000 - 97,009 (185) (336) 97,488
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 £91,603,000 (31 March 21: £96,601,000).
The accompanying Notes are an integral part of this statement.
STATEMENT OF CASH FLOWS
For the year ended 31 March 2022
Year ended Period ended
31 March 2022 31 March 2021
Note £'000 £'000
Cash flows from operating activities
Profit/(Loss) before taxation 4,761 (521)
Profit/(Loss) arising on the revaluation of investments at the period end 12 (3,634) 113
Cash flow generated by/(used in) operations 1,127 (408)
Interest income 5 (2,451) (57)
Interest received 1,646 4
Decrease/(Increase) in receivables 13 34 (148)
Increase in payables 14 263 149
Net cash flow from/(used in) operating activities 619 (460)
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss 12 (56,019) (20,996)
Loan principal repaid 12 2,103 -
Net cash flow used in investing activities (53,916) (20,996)
Cash flows from financing activities
Issue of shares 15 13 100,000
Costs of share issue (1,991)
Dividends paid (6,125) -
Net cash flow generated from financing activities (6,112) 98,009
Net (decrease)/increase in cash and cash equivalents (59,409) 76,553
Reconciliation of net cash flow to movements in cash and cash equivalents
Cash and cash equivalents at beginning of year/period 76,553 -
Net (decrease)/increase in cash and cash equivalents (59,409) 76,553
Cash and cash equivalents at end of period 17,144 76,553
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.
The Company's ordinary shares were first admitted to the premium segment of
the UK Listing Authority's Official List and to trading on the Specialist Fund
Segment of the Main Market of the London Stock Exchange under the ticker TEEC
on 19 October 2020.
The financial statements comprise only the results of the Company, as its
investment in TEEC 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 efficiency investments in the United
Kingdom. The Company, through TEEC Holdings, will invest in a range of
energy efficiency assets which will contribute, or are already
contributing, to energy efficiency in sub-sectors including electricity and
heat generation, distribution, and end user consumption.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
2.
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.
On 31 December 2020, IFRS as adopted by the European Union as adopted at that
date was brought into UK law and became UK-adopted International Accounting
Standards in its Company Financial Statements on 1 January 2021. The change
constitutes a change in accounting framework. However, there is no impact on
recognition, measurement or disclosure in the period reported as a result of
the change in framework.
The financial statements have also been prepared as far as is relevant and
applicable to the Company in accordance with the Statement of Recommended
Practice: Financial Statements of Investment Trust Companies and Venture
Capital Trusts ("SORP") issued in April 2021 by the Association of Investment
Companies ("AIC").
The 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 was incorporated on 23 June 2020. The comparative amounts,
presented in the financial statements and the related note disclosures, cover
the period from 23 June 2020 to 31 March 2021, therefore are not comparable
with the amounts presented for the year ended 31 March 2022.
Estimates and underlying assumptions are reviewed regularly on an on-going
basis. Revisions to accounting estimates are recognised in the period in which
the estimates are revised and future period affected. The significant
estimates, judgement or assumptions for the period are set out below.
Basis of Consolidation
The sole objective of the Company, through its
subsidiary TEEC Holdings, is to make investments, via individual corporate
entities. The Company typically will subscribe for equity in or issue loans
to TEEC 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 TEEC 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, TEEC 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.
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 these for the remainder of their useful life to preserve the capital
value of the portfolio. However, as the energy efficiency 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. 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 expense flows.
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 2022, the Company had net assets of £96.1 million including
cash balances of £17.1. The Company's sole, wholly owned, subsidiary TEEC
Holdings has a £40 million RCF which is undrawn and a £0.3 million cash
balance which, on a Group basis, are sufficient to meet current obligations,
including the £44.9 million investment commitments, 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 Group's investments comprise fixed rate debt investments with contractual
maturities between 2031 and 2035, together with a portfolio of hydroelectric
assets which are fully operational and have remaining economic lives well in
excess of thirty years. As a result, the Group benefits from long-term 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
subsidy. The Hydroelectric Portfolio also benefits from fixed price PPAs, with
institutional counterparties, for the next two years. Forecast revenues
thereafter are subject to wholesale power prices which are based upon
qualified independent forecasts.
The major cash outflows of the Group are the payment of dividends and costs
relating to the acquisition of new assets, both of which are entirely
discretionary.
The Directors do not consider that the effects of Covid-19 have created a
material uncertainty over the assessment of the Company as a going concern.
In late February 2022, Russia began an invasion of Ukraine with devastating
consequences for the country's citizens and major implications for wider
humanity, the global economy and capital markets. The Company does not have
any direct exposure to Russia, however, the Company is monitoring the
potential wider macroeconomic consequences on the Company and its investment
portfolio closely, including energy price volatility and further sanctions.
Please refer to the Investment Manager's review, which illustrates the wider
effects of the Russia Ukraine conflict on the Company and its investments. 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. Management 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 TEEC Holdings, at fair value through profit or loss and any
transaction costs are expensed to profit or loss. The Company will
subsequently, through its investment in TEEC Holdings, continue to measure
all investments at fair value and any changes in the fair value are to
be recognized 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 recognized 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, TEEC Holdings.
The Company's investment in TEEC 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 TEEC 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 TEEC 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 TEEC Holdings and recognised in the Statement of
Comprehensive Income at each semi-annual valuation point.
The Company's loan and equity investment in TEEC Holdings is held at fair
value through profit or loss which is measured by reference to the net asset
value of TEEC Holdings. Gains or losses resulting from the movement in fair
value are recognised in the Company's Statement of Comprehensive Income at
each semi-annual valuation point.
For the year end and half-year accounts 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 TEEC Holdings.
Dividends from TEEC Holdings are recognised when the Company's right to
receive payment has been established.
Investment income comprises interest income and dividend income received from
the Company's subsidiary. Interest income is recognised in the Income
Statement using the effective interest method.
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.
The costs incurred in relation to the Company's IPO were charged to 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 2022, the Company's cash balances were held
in the Company's bank current account.
There are no expected credit losses as the bank institutions have 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.
Investment Management Fees
As per the Company's Investment Objective, it is expected that income
returns will make up the majority of the Company's long-term return.
Therefore, based on the estimated split of future returns (which cannot
be guaranteed), 25% of the investment management fee is charged as a
capital item within 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 for the first time 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 2022:
· A number of narrow-scope amendments to IFRS 3 "Business
Combinations", IAS 16 "Property, plant and equipment", IAS 37 Provisions,
contingent liabilities and contingent assets" and annual improvements on IFRS
1 "First-time Adoption of IFRS", IFRS 9 "Financial instruments, IAS 41
"Agriculture" and illustrative examples accompanying IFRS 16 "Leases".
Effective for accounting periods beginning on or after 1 January 2023:
· 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.
· Amendments to IFRS 17, "Insurance contracts" - this standard replaced
IFRS 4, which currently permits a wide variety of practices in accounting for
insurance contracts.
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.
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
efficiency 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.
For equity investments, entered into by TEEC 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 purposed 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 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 TEEC 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 TEEC Holdings, the cash flows 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.
TEEC 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.
Following the IPO of the Company, no Annual Management Fee was accrued or
charged on the undeployed cash funds arising from the IPO until such time as
75% or more of the net proceeds were deployed. The 75% threshold was reached
on 10 December 2021, following completion of the £19.6 million acquisition of
the final three hydro assets acquired in the year.
Under the terms of the agreement, the Investment Manager must use 20% of
the management fee received 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;
Even though the Annual Management Fee is payable on a monthly basis, Ordinary
Shares are only acquired by the Wider Triple Point Group on a half-yearly
basis. In addition, 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 period ended
31 March 2022 31 March 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Cash element 317 106 423 5 1 6
Equity element 10 3 13 - - -
327 109 436 5 1 6
5. INVESTMENT INCOME
For the year ended For the period ended
31 March 2022 31 March 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Interest on cash deposits 5 - 5 4 - 4
Interest income from investments 2,446 - 2,446 53 - 53
2,451 - 2,451 57 - 57
6. OPERATING EXPENSES
For the year ended For the period ended
31 March 2022 31 March 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment Management fees 327 109 436 5 1 6
Directors' fees* 200 - 200 91 - 91
Company's audit fees:
- In respect of audit services 70 - 70 60 - 60
- In respect of non-audit services 25 - 25 - - -
Other operating expenses 549 21 570 225 71 296
Irrecoverable VAT on Administration & Management fees 23 - 23 12 - 12
1,194 130 1,324 393 72 465
*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 2022 totaled £643 (31 March 2021:
nil).
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 period ended
31 March 2022 31 March 2021
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 period ended
31 March 2022 31 March 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit/(Loss) before taxation 1,257 3,504 4,761 (336) (185) (521)
Corporation tax at 19% 239 666 905 (64) (35) (99)
Effect of:
Capital (gain)/loss not deductible - (690) (690) - 22 22
Interest deductions (239) - (239) - - -
Disallowed expenditure - 12 12
Surrendering of Tax losses to unconsolidated subsidiaries - 24 24 64 1 65
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 TEEC Holdings is held at fair
value. TEEC 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 period ended
31 March 2022 31 March 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit / (Loss) attributable to the equity holders of the Company (£'000) 1,257 3,504 4,761 (336) (185) (521)
Weighted average number of Ordinary Shares in issue (000) 100,004 100,004 100,004 58,156 58,156 58,156
Profit / (Loss) per Ordinary share (pence) - basic and diluted 1.26p 4.76p (0.58p) (0.32p) (0.90p)
3.50p
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 2022 Dividend per share Interest distribution Total dividend £'000
pence per share
pence
Interim dividend for the period ended 31 March 2021 2.00 - 2,000
First quarter interim dividend for year ended 31 March 2022 1.375 - 1,375
Second quarter interim dividend for year ended 31 March 2022 1.375 - 1,375
Third quarter interim dividend for year ended 31 March 2022 0.815 0.560 1,375
5.565 0.560 6,125
Interim dividends declared after 31 March 2022 and not accrued in the year Dividend per share Interest distribution Total dividend £'000
pence per share
pence
Fourth quarter interim dividend for the year ended 31 March 2022 0.678 0.697 1,375
0.678 0.697 1,375
On 14 June 2022, the Board declared a fourth quarter interim dividend of 1.375
pence per share with respect to the period ended 31 March 2022. The dividend
is expected to be paid on or around 8 July 2022 to shareholders on the
register on 24 June 2022. The ex-dividend date is 23 June 2022. The Company
has chosen to designate part of this interim dividend as an interest
distribution. 0.697 pence per share will be paid as an interest payment and
0.678 as an ordinary dividend.
Shareholders in receipt of an interest distribution will be treated for UK tax
purposed 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 2022 31 March 2021
£'000 £'000
Total shareholders' equity (£'000) 96,137 97,488
Number of Ordinary Shares in issue ('000) 100,014 100,000
Net asset value per Ordinary Share (pence) 96.12p 97.49p
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 2022 31 March 2021
£'000 £'000
Fair value at the start of the period 20,883 -
Loans advanced to TEEC Holdings Limited 32,704 20,996
Shareholding in TEEC Holdings Limited 23,315 -
Capitalised interest 519 -
Loan principal repaid (2,103) -
Movement in fair value of investments 3,634 (113)
Total investments as at end of the period 78,952 20,883
Reconciliation of movement in fair value
31 March 2022 31 March 2021
£'000 £'000
Fair value at start of the period 20,883 -
Loan advanced to TEEC Holdings Limited 32,704 20,996
Shareholding in TEEC Holdings Limited 23,315 -
Capitalised interest 519 -
Loan principal repaid (2,103) -
Fair value of portfolio at end of the period 75,318 20,996
Cash held in intermediate holding company 293 80
Fair value of other net assets in intermediate holding company 3,341 (193)
Fair Value of Company's investments as at end of the period 78,952 20,883
Loans advanced to TEEC Holdings in the year totalled £32,704,000, £200,000
was advanced as a working capital loan at a 0% interest rate. £8,032,000,
was advanced at an interest rate of 7.375% to enable TEEC Holdings to complete
the loan investment in Spark Steam Limited on commensurate terms. £24,473,000
was advanced to enable TEEC Holdings to advance shareholder loans into the
Hydroelectric portfolio of £24,473,000, on which TEEC Holdings charges
interest of 5.00% and the Company charges interest of 4.75%.
The Company owns three shares in TEEC Holdings Limited, representing 100% of
issued share capital, allotted for a consideration of £23,315,000. The fair
value of the Company's equity in TEEC Holdings Limited on 31 March 2022 is
£26,836,000 (31 March 21: minus £113,000) and the fair value of the
Company's debt interest in TEEC Holdings Limited at 31 March 2022 is
£52,116,000 (31 March 21: £20,996,000),
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 TEEC Holdings, which
enabled TEEC 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 2022 31 March 2021
£'000 £'000
Portfolio Valuation 78,787 20,996
Intermediate holding company cash 293 80
Intermediate holding company debt* 454 -
Intermediate holding company net working capital (582) (193)
Fair Value of Company's investments as at end of the period 78,952 20,883
*Debt arrangement costs of £454,000 (31 March 2021: nil) which are
capitalised and expensed to profit or loss under amortised cost. At 31 March
2022 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, TEEC Holdings, as an investment at fair value
through profit or loss.
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following 3 levels:
· level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
· level 2 - inputs other than quoted prices included within Level 1
that are observable for the assets or liabilities, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
· level 3 - inputs for assets or liabilities that are not based on
observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires significant
judgement by the Company. Observable data is considered to be market data that
is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market.
The financial instruments held at fair value are the instruments held by the
Group in the SPVs, which are fair valued at each reporting date. The
investments have been classified within level 3 as the investments are not
traded and contain certain unobservable inputs. The Company's investments in
TEEC Holdings are also considered to be level 3 assets.
As the fair value of the Company's equity and loan investments in TEEC
Holdings is ultimately determined by the underlying fair values of the equity
and loan investments, made by TEEC 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 pirce 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 TEEC 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 6.11% (31 March 21: 7.98%).
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 2022 3.33 3,330 78,952 (3,042) (3.04)
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 2022 (3.16) (3,164) 78,952 3,150 3.15
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 2022 (2.16) (2,157) 78,952 2,638 2.64
Inflation
The Hydroelectric Portfolio's income streams are principally subsidy based,
which is amended each year with inflation and power prices, which the
sensitivity assumes will move with inflation. Operating expenses relating to
the Hydroelectric Portfolio, typically move with inflation, but debt payments
on the shareholder loans are fixed. This results in the portfolio returns and
valuations being positively correlated to inflation. The average long-term
inflation assumption across the portfolio are 3.00% for RPI from 2023 to 2030
and 2.40% thereafter, 2.25% for CPI from 2023. The Company also models a Power
Curve Indexation set at 2.75% from 2023, as wholesale power prices are not
intrinsically linked to consumer prices, unlike costs of sales and labour.
The sensitivity illustrates the effect of a 0.5% decrease and a 0.5% increase
from he 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 2022 (2.31) (2,309) 78,952 2,549 2.55
13. TRADE AND OTHER RECEIVABLES
For the year ended For the period ended
31 March 2022 31 March 2021
£'000 £'000
Prepayments 114 148
Other receivables 339 53
453 201
14. TRADE AND OTHER PAYABLES
For the year ended For the period ended
31 March 2022 31 March 2021
£'000 £'000
Accrued expenses 125 72
Other payables 287 77
412 149
15. SHARE CAPITAL AND RESERVES
For the year ended 31 March 2022
Allotted, issued and fully paid: Number of shares Nominal value
of shares (£)
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
For the period ended 31 March 2021
Allotted, issued and fully paid: Number of shares Nominal value
of shares (£)
Opening balance as at 23 June 2020 - -
Allotted upon incorporation
Ordinary Shares of 1p each 1 0.01
Management shares 50,000 50,000.00
Allotted/redeemed following admission to Specialist Fund Segment of the LSE
Ordinary Shares of 1p each 99,999,999 999,999.99
Management shares (50,000) (50,000.00)
Closing balance of Ordinary Shares at 31 March 2021 100,000,000 1,000,000.00
The initial placing of 100,000,000 ordinary shares of £0.01, took place on 19
October 2020, raising gross proceeds of £100,000,000.
The Company issued 14,079 shares of £0.01 each to the Investment Manager in
year ending March 2022 raising proceeds of £13,325 creating share premium of
£13,184 (see note 19).
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
Following admission of the Company's Ordinary Shares 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 year
ending 31 March 2022, the special distributable reserve balance is £91.4m.
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, advances to counterparties through loans to its
subsidiaries. The Company may be exposed to changes in variable market rates
of interest 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. 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 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
Interest bearing Non-interest bearing Total value
£'000 £'000 £'000
For the period ended 31 March 2021
Assets:
Investments at fair value through profit or loss 20,883 - 20,883
Other receivables - 201 201
Cash and cash equivalents 76,553 - 76,553
Total Assets 97,436 201 97,637
Liabilities:
Trade and other payables - 149 149
Total Liabilities - 149 149
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 ensures it maintains adequate reserves and has through TEEC
Holdings put in place a revolving credit facility. 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 TEEC 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 direct subsidiary TEEC
Holdings, is the entity through which the Company holds its investments,
the liquidity of TEEC Holdings is reflective of the investments which it
holds.
Financial assets and liabilities by maturity at the period end are shown
below:
For year ended March 2022 Less than 1-5 years More than Total
1 year 5 years
£'000 £'000 £'000 £'000
Assets:
Investments at fair value through profit or loss - - 78,952 78,952
Receivables 339 - - 339
Cash and cash equivalents 17,144 - - 17,144
Liabilities:
Trade and other Payables (412) - - (412)
17,071 - 78,952 96,023
For period ended March 2021 Less than 1-5 years More than Total
1 year 5 years
£'000 £'000 £'000 £'000
Assets:
Investments at fair value through profit or loss - - 20,883 20,883
Receivables 201 - - 201
Cash and cash equivalents 76,553 - - 76,553
Liabilities:
Trade and other Payables (149) - - (149)
76,605 - 20,883 97,488
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 TEEC 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.
The Company had no derivatives during the period and the Company's cash
balances were held in the Company's current account.
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 the 31 March 2022, the Company held nine
indirect investments through its intermediary holding company, TEEC Holdings.
The value of the investments held by TEEC 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 semi-annually 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 2022
TEEC 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 2021
TEEC Holdings* UK 100.00%
*Direct shareholding in a financial services investment holding company.
** Indirect shareholding in an electricity production company.
19. RELATED PARTY TRANSACTIONS
Directors Fees
The amounts incurred in respect of Directors fees during the period to 31
March 2022 was £200,000 (31 March 2021: £91,026). These amounts have been
fully paid at 31 March 2022. The amounts paid to individual directors during
the period were as follows:
For the year ended 31 March 2022 For the period ended 31 March 2021
Dr John Roberts (Chair) £75,000 £34,135
Rosemary Boot £45,000 £20,481
Sonia McCorquodale £40,000 £18,205
Dr Anthony White £40,000 £18,205
Directors Expenses
The expenses claimed by the Directors during the period to 31 March 2022 was
£643 (31 March 2021: nil). These amounts have been fully paid at 31 March
2022. The amounts paid to individual directors during the period were as
follows:
For the year ended 31 March 2022 For the period ended 31 March 2021
Dr John Roberts (Chair) £551 -
Rosemary Boot £51 -
Sonia McCorquodale - -
Dr Anthony White £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
2022 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 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 2022, management fees
of £436,478 (31 March 2021: £6,213) were incurred of which £207,765 (31
March 2021: £6,213) was payable at the period end.
No annual management fee can accrue or be charged on any undeployed cash
funds until such time as 75% or more of the IPO proceeds have
been deployed. For these purposes, "Deployed" shall mean invested in the
acquisition or development of assets. From 10 December 2021, following
completion of the £19.6 million acquisition of the final three hydro assets
acquired in the year, the Management fee has been charged by reference to the
Company NAV.
In June 2021, the Company completed a £8.0 million senior debt investment in
Spark Steam Limited, a company that owns and operates a CHP asset which was
part of the pipeline identified at IPO. The transaction followed on from
similar investments made in March 2021 in Harvest Generation Services Limited
and Glasshouse Generation Limited. The transaction refinanced debt previously
provided in part by investees of other funds under the management of the
Investment Manager and was approved by the Board in line with the Company's
conflict of interest procedures.
In November 2021 and December 2021, the Company acquired a portfolio of
operational, Feed in Tariff accredited, hydroelectric power project for a
total consideration of £46.5 million. The acquisition included the purchase
of the entire equity interest from Triple Point 2011 VCT plc and Triple Point
Income VCT plc who are managed by Triple Point Investment Management. The
transaction followed a full conflicts process, with two separate teams within
the Investment Manager dealing with the sale and purchase, The two teams were
segregated, with distinct independent reporting lines and separate access to
the electronic files relevant to the transaction. The transaction was
approved by the Board in line with the Company's conflict of interest
procedures.
Investment Managers Interest in shares of the Company
On the 18 June 2021, the Company issued 675 Ordinary Shares to the Investment
Manager 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 issue price
per Investment Management Ordinary Share was £0.9749 (being the prevailing
Net Asset Value per share), in accordance with the terms of the Investment
Management Agreement.
On the 16 December 2021, the Company issued 13,404 Ordinary Shares to the
Investment Manager 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 issue
price per Investment Management Ordinary Share was £0.9450 (being the
prevailing Net Asset Value per share), in accordance with the terms of the
Investment Management Agreement.
On the 7 February 2022, the Investment Manager purchased, on the secondary
market, 158,882 ordinary shares of £0.01 each in the capital of the Company
at an average price of £0.9440 pence per share.
Details of the interests of the Investment Manager, held by an entity within
the Wider Triple Point Group, in the ordinary shares of one pence each in the
Company as at 31 March 2022 were as follows:
Number of Shares % of Issued share Capital
Perihelion One Limited 672,962 0.67%
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 TEEC Holdings Limited and TP Leasing Limited. The RCF was
entered into on the 29 March 2022 and is undrawn.
TP Leasing Limited is an established private credit and asset leasing business
which is managed by the Investment Manager and, as a result, is deemed to be a
related party as defined in the Listing Rules. The RCF is deemed to be a
"smaller related party transaction" for the purposes of LR11.1.10R. As set out
in the IPO Prospectus, the Company has adopted a related party policy pursuant
to which, prior to entering into the Facility Agreement, (i) the RCF was
approved by the Directors and (ii) the Company obtained a fair and reasonable
opinion from a qualified, independent adviser. The Board was satisfied with
the conflict management procedures put in place, including team segregation
within the Investment Manager and obtaining independent third-party pricing
validation.
On the 31 March 2022, TEEC Holdings entered into a £45.6 million investment
commitment, to fund the build of a portfolio of four geographically diverse
BESS assets in the UK. £44.9 million of the commitment is outstanding and due
to be deployed during the year ending 31 March 2023. The commitment is
expected to be funded via the undrawn £40 million RCF available to TEEC
Holdings and cash reserves of the Company.
20. EVENTS AFTER THE REPORTING PERIOD
On 9 June 2022, the Company's sole wholly owned subsidiary, TEEC Holdings
Limited, entered into an agreement to fund its first energy efficient lighting
opportunity. The Company has committed to fund £1 million to a lighting
solutions provider who will install efficient lighting and controls at a
logistics company.
Dividend
On 14 June 2022, the Board declared a fourth quarter interim dividend of 1.375
pence per share with respect to the period ended 31 March 2022. The dividend
is expected to be paid on or around 8 July 2022 to shareholders on the
register on 24 June 2022. The ex-dividend date is 23 June 2022. The Company
has chosen to designate part of this interim dividend as an interest
distribution. 0.697 pence per share will be paid as an interest payment and
0.678 as an ordinary dividend.
21. 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
CCC Climate Change Committee
CHP Combined heat and power
CHP Portfolio A total debt investment of £29 million into Harvest and Glasshouse and Spark
Steam
The Company Triple Point Energy Efficiency Infrastructure Company plc (company
number 12693305).
DCF Discounted Cash Flow
ESG Environmental, Social and Governance
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
ITC Investment Trust Company
Investment Manager Triple Point Investment Management LLP
IPO The admission by the Company of 100 million Ordinary Shares to trading on the
Specialist Fund Segment of the Main Market, which were the subject of the
Company's initial public offering on 19 October 2020
IPO Prospectus The Company's Prospectus for its initial public offering, published on 25
August 2020.
kWh Kilowatt-hour
LED Light-emitting Diode
Listing Rules Financial Conduct Authority Listing Rules
MW Megawatt
MWh Megawatt-hour
NAV The net asset value, as at any date, of the assets of the Company after
deduction of all liabilities determined in accordance with the accounting
policies adopted by the Company from time-to-time.
Net Zero A target of completely negating the amount of greenhouse gases produced by
human activity, to be achieved by reducing emissions and implementing methods
of absorbing carbon dioxide from the atmosphere
OCR Ongoing charges ratio.
PPA Power Purchase Agreement.
PRI Principals for Responsible Investing
Project SPV Special Purpose Vehicle in which energy efficiency assets are held.
RES Renewable Energy Systems
SDG Sustainable Development Goals.
SFDR Sustainable Finance Disclosure Regulation
SONIA Sterling Overnight Index Average
SORP Statement of Recommended Practise.
Spark Steam Spark Steam Limited
TCFD Task Force on Climate-related Financial Disclosures.
TEEC Holdings The wholly owned subsidiary of the Company: TEEC Holdings Limited (company
number 12695849).
Wider Triple Point Group Triple Point LLP (company number OC310549) and any subsidiary undertakings
from time to time.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAFKDASLAEAA