Company Announcements

24 June 2024

Triple Point Energy Transition plc

("TENT" or the "Company" or, together with its subsidiaries, the "Group")

RESULTS FOR THE YEAR ENDED 31 MARCH 2024

The Board of Triple Point Energy Transition plc (ticker: TENT), announces its audited results for the year ended 31 March 2024.

Company Wind-Down

·    As the broader market environment became increasingly challenging for investment trusts, the Company continued to grapple with trading at a deep discount to NAV. In light of this, and considering shareholder feedback, at the end of 2023 the Board commissioned a third-party review of the Company's strategic options, and concluded that an orderly wind-down of the Company was the best course, both financially and in terms of optimising shareholder value

o  The wind-down proposals subsequently put to shareholders included a renegotiated Investment Management Agreement which aligns the Investment Manager's interests with those of shareholders in the context of the wind-down

·    On 22 March 2024, the wind-down proposals received almost unanimous support from shareholders who voted at the General Meeting

·    As at the date of this announcement, the Group has realised £61.6 million through the disposal of the Boxed LED Facility, the BESS Portfolio and the CHP Portfolio, as well as the repayment of the Innova Development Debt Facility, in aggregate representing 52.2% of Gross Asset Value as at 31 March 2024

o  Disposals to date have realised 92% of the value of those investments

o  The only disposal below par was the CHP Portfolio, which has been refinanced for a total of £17.5 million, comprising £14.5 million which has been received and £3 million which is receivable in three instalments in September 2024, June 2025 and September 2026, against the £23.1 million outstanding. This reflects the deterioration in the credit standing of the onsite counterparty since the interim results

·    Following the disposal of the BESS Portfolio, the proceeds were used to repay the Group's Revolving Credit Facility ("RCF") in full and cancel it on 19 April 2024

·    The remaining assets to be realised are the Hydroelectric Portfolio and the remaining LED receivables finance facility - both are being actively marketed

Dividend forecast and return of proceeds

Given the prompt progress of the realisation of assets, it is the current intention of the Company to make a dividend payment for the quarter ending 30 June 2024 of 1.375 pence per share, which is consistent with prior dividends paid. Future dividend payments will be evaluated on a quarterly basis, taking into account the payout level required for investment trust status, the progress of asset realisations and overall profitability for the period from the remaining income generating assets.

It is also the intention to make an interim return of capital to shareholders in the current financial year, after the disposal of the Hydroelectric Portfolio and in advance of the anticipated members' voluntary liquidation.

Financial Highlights

·    The NAV declined 12.8% to 86.66 pence per share as at 31 March 2024 (31 March 2023: 99.44 pence per share) resulting in a total NAV return of negative 7.3% for year ended 31 March 2024 (31 March 2023: 9.2%). This decline was predominantly driven by the fair value revaluation of the investment portfolio reflecting the increased discount rate applied to the Hydroelectric Portfolio and the impairment of the CHP Portfolio loans

·    Dividends declared in respect of the year ended 31 March 2024 totalled 5.50 pence per Ordinary Share, covered 1.04x by operating cashflow (net of expenses and finance costs for TENT and TENT Holdings, the Company's wholly owned subsidiary, but excluding one off expenditure such as wind-down expenses)

o  Equivalent to a dividend yield of 8% on the share price at 31 March 2024

·    At 31 March 2024, the Group had cash balances of £7.8 million (31 March 2023: £11.2 million) and had drawn £25.4 million of the RCF in TENT Holdings

o  As noted above, the RCF was subsequently repaid in full and cancelled on 19 April 2024

Operational Highlights

·    The Hydroelectric Portfolio generated a total of 16,960MWh over the year, c. 15% below the long-term generation forecast (P50). This was primarily due to:

o  lower-than-average rainfall in Scotland over the period (which does not impact the long-term forecast); and

o  two breakdowns at different sites which have subsequently been repaired and in respect of which insurance claims have been made

·    The construction of the portfolio of BESS assets progressed in line with expectations:

o  The operational 20MW asset at Oldham operated at high availability

o  Gerrards Cross site moved into commissioning and testing at the end of the period

o  Two further BESS assets under construction, Newport (20MW/40MWh) and Auchteraw (50MW/100MWh), are due to be commissioned later this year

o  The assets now benefit from a generation licence, allowing the optimiser to trade efficiently into all available markets

·    The CHP energy service centre companies' operational and power generation performances were in line with forecast for FY24 on the heat export side and slightly below forecast on the power export side due to a temporary power export curtailment at one site over the summer. While all debt payments and covenants were met during the year, the aged debtors of Harvest, Glasshouse and Spark Steam increased, as a function of the deterioration in the credit quality of the on-site tomato grower.

John Roberts, the Company's Chair, commented:

"FY24 was another year of robust underlying performance from TENT's diversified portfolio of assets as illustrated by the 1.04x cash dividend cover. Looking ahead, however, our primary goal is to continue the strong progress already made in completing our orderly wind-down in a timely fashion and with diligence. We aim to optimise the value realised from our remaining assets, with the objective of concluding the disposals efficiently and responsibly, and returning value to shareholders."

For further information, please contact:

LEI: 213800UDP142E67X9X28

Further information on the Company can be found on its website: http://www.tpenergytransition.com/

NOTES:

The Company is an investment trust which was established to invest in assets that support the transition to a lower carbon, more efficient energy system and help the UK achieve Net Zero.

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 transition and decentralised energy projects.

On 22 March 2024, shareholders approved the Company's proposed orderly realisation of assets. Details of future divestments or returns of capital will be announced via a Regulatory Information Service in due course.

You may view the Annual Report in due course on the Company's website. http://www.tpenergytransition.com/

Please note that page numbers in this announcement are in reference to the Annual Report.

Strategic Report

Chair's Statement

Dear Shareholder,

I am pleased to present the results for Triple Point Energy Transition plc ("TENT" or the "Company") for the year ended 31 March 2024.

During the year, the Company has confronted a dynamic and evolving macroeconomic landscape. Our target at launch in 2020 was to invest prudently and to deliver attractive risk adjusted asset total NAV returns of 7-8% per year. TENT achieved this for the year ended 31 March 2023 by investing in a diversified and differentiated portfolio that contributed to addressing a variety of the challenges raised by the energy transition (see KPIs on renewable energy generated and avoided carbon for contribution outcomes). This year the diversified portfolio strategy has proven robust in the face of a decline in energy market conditions, with lower wholesale power prices compared to the previous period. Despite these market conditions and slightly lower generation from the Hydroelectric Portfolio, for the year ended 31 March 2024 the Company's cash earnings have again exceeded the dividends paid during the year, with the cash dividend cover being 1.04x (excluding one-off costs).

As the broader market environment became increasingly challenging for investment trusts, the Company, along with many of our peers, continued to grapple with trading at a deep discount to NAV. This persistent undervaluation occurred despite our efforts to engage with the market and expand our shareholder base. Given these market conditions, it was not possible to grow the business through further capital raises, or other corporate actions, meaning that TENT has not been able to achieve the scale required to provide sufficient liquidity for our investors. The lack of liquidity also made it harder to attract buyers for TENT shares, meaning that the share price did not, in our view, reflect the underlying performance of the Company and its portfolio.

Faced with these realities, the Board, having considered shareholder feedback, commissioned a third-party review of the Company's strategic options. In December 2023, the Board proposed an orderly wind-down of the Company as the best course of action, both financially and in terms of optimising shareholder value. This proposal, reflecting a consensus that it was necessary to return capital to our shareholders in the most efficient manner possible, received almost unanimous support from shareholders who voted at the General Meeting on 22 March 2024. This decision was not taken lightly but was seen as the best way forward in the face of the market headwinds our sector was facing and continues to face.

Immediately following the General Meeting approvals, we embarked on a series of asset disposals. We enlisted the corporate finance advisory expertise of PwC to ensure these transactions are executed proficiently and with the best possible outcomes for our shareholders. To date, we have exited from four investments, representing 52.2% of our Gross Asset Value ("GAV"), which marks substantial progress in our wind-down strategy. The repayment of the £5 million Development Debt Facility by Innova Renewables Limited ("Innova Facility"), followed by the disposals of the LED receivables financing facility to Boxed Light Services Limited ("Boxed LED Facility") and the £37.0 million debt facility to a subsidiary of Virmati Energy Ltd (trading as Field), to fund a portfolio of four Battery Energy Storage Systems ("BESS") assets ("BESS Portfolio") at their carrying values in an environment of high base rates, is seen as a highly satisfactory outcome for shareholders. The loans to Harvest, Glasshouse and Spark Steam (together the "CHP Portfolio") have been refinanced for a total of £17.5 million, comprising £14.5 million which has been received and £3 million which is receivable in three instalments in September 2024, June 2025 and September 2026, against the £23.1 million outstanding. This is a disappointing outcome which reflects the deterioration in the credit standing of the onsite counterparty since the interim results. The sale of the Hydroelectric Portfolio and the remaining LED receivables finance facility are the only outstanding assets awaiting disposal, demonstrating the efficiency of the Board, Investment Manager and other advisers in progressing the orderly realisation of assets following shareholder approval.

At the General Meeting, shareholders approved the revised Investment Management Agreement, introducing a fee structure that aligns the management team's incentives with shareholder interests. The new terms include a base fee based on average market capitalisation and a success fee that depends on the overall net realisation value achieved for shareholders, with the aggregate fees payable to the Investment Manager capped at £1.351 million. This ensures the Investment Manager's commitment to achieving the highest possible sale values while maintaining cost efficiency. Further detail can be found on page 48 of the Annual Report.

Financing

As at 31 March 2024 the Group, via its wholly owned subsidiary, TENT Holdings Limited ("TENT Holdings"), had a £40 million Revolving Credit Facility ("RCF") with TP Leasing Limited ("TPLL"). The interest rate on this facility was a fixed rate coupon of 6% pa on drawn amounts.

As at 31 March 2024, £25.4 million was drawn under the facility (31 March 2023: £nil). The facility was utilised to fund the BESS Portfolio, which was subsequently sold for par and the proceeds were utilised to fully repay the RCF facility and the RCF was then cancelled on 19 April 2024.

Dividends

The Board is pleased to confirm the dividend in respect of the quarter to 31 March 2024 of 1.375 pence per share, payable on or around 19 July 2024 to holders of Ordinary Shares on the register on 5 July 2024, bringing the total annual dividend to the target of 5.50 pence per share.

Given the prompt progress of the realisation of assets, it is the current intention of the Company to make a dividend payment for the quarter ending 30 June 2024 of 1.375 pence per share, which is consistent with prior dividends paid. Future dividend payments will be evaluated on a quarterly basis, taking into account the payout level required for investment trust status, the progress of asset realisations and overall profitability for the period from the remaining income generating assets.

It is also the intention to make an interim return of capital to shareholders in the current financial year, after the disposal of the Hydroelectric Portfolio and in advance of the anticipated members' voluntary liquidation.

Financial Results

During the year, TENT reported a total loss of £7.3 million (31 March 2023: profit of £8.8 million). The loss reported is predominately driven by the fair value decline of £12.2 million relating to the investments in the Hydroelectric and CHP Portfolios. Further information on financial performance can be found on pages 74 to 100 of the Annual Report.

The Company reported a NAV decline of 12.8%, resulting in a total negative NAV return of 7.3%. The NAV per share was 86.66 pence per share as at 31 March 2024 (31 March 2023: 99.44 pence per share). The decline has predominately been driven by the fair value revaluation in the investment portfolio.

TENT has delivered a dividend of 5.50 pence per share for the year, which was 1.04x cash dividend covered excluding one-off costs, such as wind-down expenditure, costs associated with the Capital Markets Day and commissions related to new investments (31 March 2023: 1.2x excluding one-off costs such as Premium Segment listing fees and commissions related to new investments).

Environmental, Social and Governance ("ESG")

Since IPO, and under the previous strategy, the Company adopted an approach to ESG that reflected the importance of sustainability and which sought to add value to the portfolio. 

As the Company enters wind-down, the focus is on continued efficiency of all assets and taking a responsible approach to disposals.

In consultation with the Investment Manager, disclosures in this report have been minimised to include only those required for regulatory purposes and we note the decision to no longer disclose as an Article 8 fund. The Company is aware of the incoming Sustainability Disclosure Requirements (SDR) and labelling rules, yet to take effect, and will apply a proportionate approach which takes into consideration the orderly wind-down. The Company does not anticipate applying for a label under SDR. 

The Board continues to engage on this important topic to ensure it is treated proportionately and appropriately in the changing context of the Company. The Sustainability Report is set out on pages 19 to 21 of the Annual Report.

Summary & Outlook

Looking ahead, our primary goal is to continue the strong progress already made in completing our orderly wind-down in a timely fashion and with diligence. We aim to optimise the value realised from our remaining assets, with the objective of concluding the disposals efficiently and responsibly, and returning value to shareholders.

On behalf of the Board, I would like to express our appreciation for the continued support of our shareholders through this period of transition. We have taken significant steps to ensure the strategic decisions made during this process are in the best long-term interests of all our stakeholders. As we continue the orderly wind-down, we are committed to clear and consistent communication, ensuring that you remain informed of our progress.

John Roberts

Chair

21 June 2024

Strategy and Business Model

Changes to the Company's Investment Policy

At a General Meeting on 22 March 2024, shareholders approved various resolutions including proposed amendments to the Company's Investment Objective and Investment Policy. The changes to the Investment Objective and Investment Policy enable the Company to proceed with the orderly wind-down of the Company.

Investment Objective

To conduct an orderly realisation of the assets of the Group, to be effected in a manner that seeks to achieve a balance between returning cash to Shareholders promptly and maximising value, while maintaining an income return for so long as the Group continues to own assets generating sufficient income.

Investment Policy

The Company's investments will be realised in an orderly manner, that is, with a view to achieving a balance between returning cash to Shareholders promptly and maximising value.

The Company may not make any new investments save that: (a) investments may be made to honour existing documented contractual commitments to existing portfolio companies, as appropriate; and (b) realised cash may be invested in line with the Company's cash management policy pending its return to Shareholders in accordance with the Company's investment objective.

Any return of proceeds to the Shareholders will be subject to compliance with any existing gearing facilities and hedging arrangements, payment of expenses and maintenance of reserves for potential liabilities.

Notwithstanding the requirement to spread investment risk, the Company will continue to comply with all the requirements of the Listing Rules in order to maintain the Company's admission to the Official List under Chapter 15 of the Listing Rules.

Cash management

The Company may hold cash on deposit for working capital purposes and pending return to Shareholders and, as well as cash deposits, may invest in cash equivalent investments, which may include government issued treasury bills, money market collective investment schemes, other money market instruments and short-term investments in money market type funds ("Cash and Cash Equivalents"). There is no restriction on the amount of Cash and Cash Equivalents that the Company may hold and there may be times when it is appropriate for the Company to have a significant Cash and Cash Equivalents position.

Any further material change to the revised investment policy would require FCA approval and Shareholder approval by an ordinary resolution in accordance with the Listing Rules.

Key Performance Indicators ("KPIs")

The Company sets out below KPIs before the Company entered wind-down, which were used to track the performance of the Company over time against its previous investment objective.

The Board believes that the KPIs detailed below were relevant in the financial year, before the Company entered wind-down and should provide shareholders with sufficient information to assess how effectively the Company met its objectives.

The Investment Manager

Jonathan Hick has a 15-year track record in investment in the energy transition sector, from origination through to execution and asset management. His previous experience was as an investment director at Armstrong Capital (and investment management in the clean energy sector) and prior to that companies including KPMG, Social and Sustainable Capital and PwC. He holds a degree in Management with Chinese from Nottingham University, a master's in finance from London Business School and is a chartered accountant.

Christophe Arnoult joined the Investment Manager in June 2022 as portfolio director. He is an experienced portfolio director in the renewable energy sector covering all major technologies and has a strong background in the waste and bioenergy industry, ranging from operation to development, design and construction. He was previously head of projects at enfinium, senior asset manager at Equitix Energy Efficiency Fund and Energy Saving Investment and delivery coordination manager at the Cornwall Energy Recovery Centre for Vinci.

Ariane Brunel joined the Investment Manager as an investment director in October 2022.  Prior to that, she was an associate director in the energy team of the European Bank of Reconstruction and Development ("EBRD") in London. Ariane has over 12 years of experience investing in or financing sustainable infrastructure assets internationally. She is a graduate of ESSEC Business School (Paris & Singapore).

Chloe Smith is the Fund Finance Director at the Investment Manager and has over 10 years of experience in the financial services sector. She spent 8 years at Close Brothers responsible for the Asset Finance division Financial Control and later Financial Planning & Analysis and Investments, before moving to Kvika Banki, where she led the UK finance team and held a board position for a bridging lender. Chloe is fellow of ACCA and qualified in audit.

Investment Manager's Report

During the initial part of the reporting period, TENT was actively engaged in making strategic investments aimed at enhancing the portfolio's value and generating robust returns. Key investments, made in the period, included a £5 million debt facility provided to Innova Renewables Limited to support their expansion plans and the £2.3 million Boxed LED Facility. These projects delivered stable, predictable returns and aligned with the energy transition theme of the Company.

TENT also reduced its commitment to the BESS Portfolio, following a successful equity raise by Field from DIF Capital Partners. The facility was resized from £45.6 million to £37.0 million, secured over the assets of the four BESS assets identified previously. This provided an opportunity for the Company to deploy the balance into higher returning pipeline opportunities.

As market conditions evolved and became significantly more challenging, the Board commissioned a third-party assessment of the Company's strategic options, which resulted in the proposal to conduct an orderly wind-down, which was approved by shareholders in March. In line with the strategic direction set by the Board for the orderly wind-down, TENT amended its Investment Objective and Policy to focus solely on the managed disposal of assets. This marked a transition from active investment to prioritising asset management and disposal, effectively halting new investments unless contractually required. This strategic shift aimed to streamline operations, manage costs, and address potential liabilities.

Disposal Process Update

Following the approval of the orderly wind-down, our priority has become both managing existing investments and preparing the portfolio for divestment, to maximise shareholder returns.

The Board will determine the most efficient way to return capital to shareholders as the disposals progress. It is the current intention of the Company to make an interim return of capital to shareholders in the current year, following the sale of the Hydroelectric Portfolio and prior to entering a members' voluntary liquidation.

BESS Portfolio Disposal

Significant steps in TENT's disposal strategy included the approval by shareholders of the sale of the BESS Portfolio to TPLL for £37.0 million, which matched its carrying value and included accrued interest. This transaction facilitated the full repayment and subsequent cancellation of TENT's Revolving Credit Facility, eliminating TENT's debt exposure.

Boxed LED Facility Disposal

TENT successfully executed the sale of the LED Facility to Boxed for its carrying value of £2.1 million also to TPLL following shareholder approval, in a strategic move that underscores TENT's ability to execute disposals adeptly under the revised strategy.

CHP Portfolio Disposal

In June 2024, the Company refinanced the three CHP loans, which as at 31 March 2024 had an outstanding loan balance of £23.1 million including accrued loan interest. The total repayment was £17.5 million, £14.5 million of which has been received and £3 million of which is receivable in three equal instalments in September 2024, June 2025 and September 2026. The impairment of £6.1 million reflects the increase in the aged debtor profile of receivables from the primary heat offtaker, as communicated in our circular to shareholders in March 2024, as well as a narrowing of the spark spread and the reduced attractiveness of gas fired generation assets to investors in the energy transition.

Innova Facility Repayment

In accordance with the terms of the loan agreement, the Innova development loan facility was repaid in full in March 2024.

So far, TENT has realised in excess of £61.6 million from asset disposals and exits, representing the majority of its asset base, within 3 months of the orderly wind-down being approved by shareholders.

Hydroelectric Portfolio Disposal

Following detailed preparations, the Hydroelectric Portfolio sales process formally commenced in May 2024 and the Company has been encouraged by the interest from a diverse range of bidders, as demonstrated through the receipt of a number of non-binding offers for the assets. The Company is currently shortlisting a small number of bidders to take through to the next round of the process which will require the submission of binding offers and completion of due diligence over the next few months.

LED Receivables Finance Facility Disposal

TENT is exploring options for disposing of the remaining LED receivables finance facility and is in active discussions with a number of parties.

Portfolio performance

CHP Portfolio

The CHP energy service centre companies (Harvest, Glasshouse and Spark Steam) reported operational and power generation performances in line with forecast for FY24 on the heat export side and slightly below forecast on the power export side due to a temporary power export curtailment at Harvest over the summer. As a lender, rather than an equity investor, the Group is well protected from performance variance against budget and all debt payments in the year, falling due in July 2023 and October 2023, were met as well as the covenant tests.

Gas and electricity prices are normalising slowly from the previously witnessed historic highs. The spark spread - the net margin between the costs of generation and the revenues - remains positive, however, meaning that the companies generate gross profit from exporting electricity to the grid but at a lower margin than in 2022/23. This increases the reliance of the business model on the other revenue stream coming from the sale of heat to the tomato grower on the sites.

Since the half year, the aged debtors of Harvest, Glasshouse and Spark Steam increased, reflecting the deterioration in the credit quality of the heat offtaker. P3P Partners LLP is the owner of the heat offtaker and also of Harvest, Glasshouse and Spark Steam. 

Hydroelectric Portfolio

The total generation for the year ended 31 March 2024 was 16,960MWh. This is circa 15% below the long-term generation forecast (P50). This is primarily due to lower-than-average rainfall during the period and secondarily from breakdowns affecting some of the sites in Q2 and Q3. The long-term forecast remains unaffected.

The first breakdown was the result of an isolation fault at Elementary Energy Limited in July 2023, requiring the equipment to be taken offsite for repair. The generator was reinstalled, and the plant restarted full production in September 2023.

The other breakdown related to the bearing of one of the two turbines at Ladaidh was damaged due to high vibration detected in September 2023. The relevant components were repaired and reinstalled with some improvements to prevent reoccurrence of the incidents. The turbine was restarted in January 2024. The second turbine, which represents 50% of the total installed capacity remained online during that period.

Insurance claims for both breakdowns have been logged. The generator claim at Elementary Energy Limited has been settled since the year end.

BESS Portfolio

During FY24, the construction of the portfolio of BESS assets continued to progress in line with the planned timescales. The construction of the second asset at Gerrards Cross moved into commissioning and testing at the end of the period and Newport (20MW/40MWh) and Auchteraw (50MW/100MWh), the last two assets and largest of the portfolio, are due to be commissioned later this year. 

Oldham, the first asset to be commissioned, has been operating since December 2022. In FY24 it benefitted from high operational availability. The revenues of this asset have been affected by the general trading headwinds faced by the industry but performed in line with the fleet of 1h storage duration operating in the UK. All four BESS assets now benefit from a generation licence, allowing the optimiser to trade efficiently into all available markets. There was a noticeable increase in revenues in the final quarter thanks to improved access to the balancing mechanism.

Following the year end, the BESS Portfolio was fully divested on 19 April 2024.

LED Portfolio

The portfolio of receivable finance assets continued to perform as per budgets with payments made on time.

The Boxed LED Facility provided to refinance an existing portfolio of 54 LED projects at Places for People Homes Limited sites was sold at its carrying value of £2.1 million, to TPLL on 28 March 2024.

The second portfolio is a £1.1 million receivable finance facility provided to a logistics company for the installation of LEDs at three of their sites. It is being repaid with interest in line with its terms on a monthly basis and the Investment Manager is actively looking for buyers.

Innova

The underlying asset base grew in value over the life of the loan. All interest and capital repayments were received as scheduled prior to full repayment on 26 March 2024.

Portfolio Valuation

The Investment Manager is responsible for conducting the fair market valuation of the Group's investments. The Company engages Mazars LLP as an external, independent valuer to assess the validity of the discount rates used by the Investment Manager in the determination of fair value.

For non-market traded investments (being all the investments in the Group), the valuation is based on a discounted cash flow ("DCF") methodology and adjusted in accordance with the International Private Equity Valuation ("IPEV") Guidelines where appropriate to comply with IFRS 13, given the special nature of portfolio investments.

The valuation of each investment within the portfolio is determined through the application of a suitable discount rate, which accounts for the perceived risk to the investment's future cash flows and by applying this discount rate, the present value of the investment's expected cash flows is derived. The Investment Manager exercises its judgement in assessing the expected future cash flows from each investment based on the project's expected life and the financial model produced by each project entity. In determining the appropriate discount rate, the Investment Manager considers the relative risks associated with the revenues. For the year ended 31 March 2024, the discount rates for assets valued through the DCF methodology range from 6.5% to 8.5% pa. (31 March 2023: range from 5.6% to 8.3%).

Under circumstances where an offer is received for an investment and the Company deems this to be fair market value, the valuation method may change to be based on the offer value. This can be demonstrated in the valuations of the BESS Portfolio and also the CHP Portfolio, which are based on the offer received to refinance these loans repaying a total of £17.5 million, £14.5 million of which has been received and £3 million of which is receivable in three instalments in September 2024, June 2025 and September 2026.

The valuation of the portfolio approved by the Directors as at 31 March 2024 was £83.4 million (31 March 2023: £90.1 million).

Valuation movements

As noted above, the deterioration in the financial position of the tomato grower and a forecast reduction in spark spread led to a reduction in the valuation of the CHP Portfolio. This is reflected in the offer that was accepted in June to refinance the loans, which represents an impairment of £6.1 million.

During the financial year, the Group deployed the remainder of the committed debt proceeds into the BESS Portfolio to reach the £37.0 million by 31 March 2024. The investment is valued at par and was realised at par value in April 2024.

The valuation of the debt financing for the receivables from the LED Portfolio has largely stayed consistent throughout the financial year, with a small change to the portfolio of receivables from the logistics company for the installation of LEDs at their facilities. The discount rate has been increased from 7.5% to 8.5% to reflect the effective discount rate for the value realised on the Boxed LED Facility.

The discount rate used to value the Hydroelectric Portfolio has been increased by 90bps over the period (6.50% at 31 March 2024). The adjustment is mostly driven by the increase of the risk-free rate, with UK gilts increasing by 55bps since 31 March 2023 as well as an increase in discount rates used in comparable renewable energy transactions. Valuation movements driven by changes in power price forecast curves and short-term inflation assumptions are shown in the valuation bridge below.

The remaining movements in the valuation predominantly relate to changes in operating cost assumptions in respect of the Hydroelectric Portfolio and changes in the fair value of TENT Holdings. 

Valuation Movement in the year to 31 March 2024 (£millions)

The opening valuation as at 31 March 2023 was £90.1 million. When considering the in-year cash investments through the Company's wholly owned subsidiary, the rebased valuation was £95.5 million. Each movement between the valuation at the start of the financial year and the rebased valuation is considered in turn below, resulting in a closing valuation at 31 March 2024 of £83.4 million.

Power Prices

The valuation as at 31 March 2024 applies long-term, forward looking power prices from a leading third-party consultant. A blend of the two most recent quarters' central case forecasts is taken and applied, consistent with the approach applied in previous periods. The Company adopts this approach due to the unpredictability and fluctuations in power price forecasts. Where fixed price arrangements are in place, the valuation model reflects this price for the relevant time period and subsequently reverts to the power price forecast using the methodology described. The updated power price forecast has led to a reduction of the valuation of the Hydroelectric Portfolio by £1.1 million in the year ended 31 March 2024. The Company notes that the outlook for power prices has declined in respect of the near-term time horizon, but the long-term outlook is above the forecast published in March 2023. The short-term dip in the power curve is mitigated by power price hedging until March 2025. Ultimately, the Hydroelectric Portfolio is underpinned by the Feed-in-Tariff export rate acting as an effective floor on the price received for electricity sales. 

Inflation

During the financial period, the short-term inflation forecasts have declined from a historic spike in 2022/23, but the long-term inflation forecast has been revised upward resulting to a net increase in the portfolio valuation of £0.9 million. The methodology adopted in relation to inflation, for both RPI and CPI, follows the latest available (March 2024) Office for Budget Responsibility forecast for the 12 months from the 31 March 2024 valuation date. Thereafter, a long-term assumption of 3.25% is made in relation to RPI, dropping to 2.65% in 2031 to reflect the 0.60% reduction as RPI is phased out.

The Company's long-term assumption for CPI remains at 2.25%. We also model a power curve indexation assumption, as wholesale power prices are not intrinsically linked to consumer prices, of 3.00% from 2031.

Discount Rates

A range of discount rates are used when calculating the fair value of the portfolio valuations and are representative of the view of the Investment Manager and Board, who benefit from Company's independent valuer's guidance. The discount rates are indicative of the rate of return in the market for assets with similar characteristics and risk profiles. The weighted average discount rate of the portfolio in respect of assets valued through the DCF methodology as at 31 March 2024 is 6.94%.  This excludes the BESS and CHP Portfolios which are held at realisable value.

During the financial year, the discount rate increase has caused a reduction of valuation in the Hydroelectric Portfolio by £3.9 million. The discount rate movement is reflective of the significant increase in gilt yields since the prior financial year, and risk premium on the assets affecting the realisation of the assets.

Financial Review

The Company applies IFRS 10 and qualifies as an investment entity. IFRS 10 requires that investment entities measure investments, including subsidiaries that are themselves investment entities, at fair value except for subsidiaries that provide investment services which are required to be consolidated.

The Company's single, wholly owned subsidiary, TENT Holdings, is the ultimate holding company for all the Company's investments.

At a General Meeting on 22 March 2024, shareholders approved several resolutions, including proposed amendments to the Company's Investment Objective and Investment Policy. These changes allow the Company to proceed with an orderly wind-down. As a result, while the Company remains an investment entity measured at fair value, it will also use the IFRS5 accounting standard to recognise its investments as a current asset held-for-sale.

NAV

The Company's NAV and investment portfolio valuations are now calculated on a bi-annual basis on 31 March and 30 September each year. Valuations are prepared by the Investment Manager and reviewed by Mazars LLP. The other assets and liabilities of the Company are calculated by the Administrator. The NAV is reviewed and approved by the Board. All variables relating to the performance of the underlying assets are reviewed and incorporated in the process of identifying relevant drivers of the DCF valuation.

NAV Bridge for the year ended 31 March 2024 (£millions)

The NAV at 31 March 2024 declined by £12.8 million (31 March 2023: increase of £3.3 million). The NAV decline was mainly driven by the fair value adjustment of £12.2 million. This was partly offset by investment income of £7.4 million representing the interest and dividend income to the Company, via TENT Holdings, the Company's wholly owned subsidiary. The Company incurred fund expenditure of £2.5 million relating to the investment management fees and other expenses (including £0.6 million of expenses related to the wind-down proposal circular and other operating costs associated with asset disposals). Dividends paid to shareholders during the year were £5.5 million.  

The Group will incur additional expenses related to winding down the Company and selling its investments.

Operating Results

The Company made a loss of £7.3 million during the year (31 March 2023: profit of £8.8 million), with losses per share of 7.27 pence (31 March 2023: earnings per share 8.81 pence).

Operating Expenses and Ongoing Charges

The operating expenses for the year ended 31 March 2024 amounted to £2.5 million (31 March 2023: £2.5 million), inclusive of £0.5 million of costs relating to the managed wind-down of the Company.

During the majority of the financial year the management fee was calculated as 0.9% of the NAV.

At the Company's General Meeting on 22 March 2024, shareholders approved amendments to the Investment Management Agreement on the terms summarised in Part I of the Circular sent to shareholders on 5 March 2024. Further detail on the terms of the new Investment Management Agreement can be found on page 48 of the Annual Report.

The Company's OCR is 2.06% (31 March 2023: 1.94%), which excludes one-off costs such as wind-down expenditure. The primary factor contributing to the increase is the decline in the Company's NAV. The ongoing charge ratio has been calculated as an annualised ongoing charge (excluding one-off costs such as wind-down expenditure), divided by the average Net Asset Value in the period. With the exception of the management fee, the operating expenses of the Company are predominantly fixed and predetermined.

Cash Dividend Cover

The Company measures dividend cover on a look through basis, by consolidating the income and operating expenses of its sole wholly owned subsidiary, TENT Holdings. The below table summarises the cash income, cash expenses and finance costs incurred by the Company and TENT Holdings in the financial year ended 31 March 2024, excluding one-off costs. The cash flow statement for the Company alone does not capture the total income and expenses of the Group as the interest income, financing costs and further expenses are received and paid for by TENT Holdings.

In the year, the Company has delivered a cash dividend cover of 1.04x (2023: 1.2x). It is important to note that this calculation excludes one-off costs, such as wind-down expenditure, costs associated with the Capital Markets Day and commissions related to new investments (31 March 2023: 1.2x excluding one-off costs such as Premium Segment listing fees and commissions related to new investments).

The below table outlines the cash income and expenditure of the Company and its wholly owned subsidiary TENT Holdings:

Gearing and Liquidity

At the year ended 31 March 2024, the Group had cash balances of £7.8 million (31 March 2023: £11.2 million).

The Group's borrowing position, via an RCF in TENT Holdings, at 31 March 2024 was £25.4 million. This facility was fully repaid in April 2024 and subsequently cancelled.

Summary Outlook

It has been a challenging year for investment trusts operating in the energy transition space, given the listed marketplace conditions, and TENT has not been immune from that. Wider energy market conditions have also been challenging given the lower wholesale power market prices, against a backdrop of higher base rates. Despite that, the TENT portfolio delivered a fully cash covered dividend (excluding one-off costs), reflecting the highly cash generative assets and the diversified approach across our three target segments. This follows on from the robust results we announced a year ago.

The wider market backdrop however led the Board, supported by the Investment Manager, to determine that the best course of action was to recommend a managed wind-down to shareholders during the period, and we were pleased with the near unanimous support for this strategy. Our focus has been to execute on asset realisations in a timely fashion whilst securing best value for shareholders. The progress made in disposing of 52.2% of the assets by GAV within three months of the wind-down being approved shows that we are delivering on that commitment, and with a number of offers being received in respect of the Hydroelectric Portfolio, we remain confident of exiting the remaining assets over the course of the current financial year.

Jonathan Hick

TENT Fund Manager

21 June 2024

Sustainability Report

The Investment Manager is committed to upholding good practice in relation to environmental, social and governance actions.

For example, the Investment Manager has been a signatory to the United Nations' Principles for Responsible Investing ("PRI") since 2019.

In addition, the Investment Manager is a certified B Corp which formalises its consideration of and commitment to take into consideration how actions will impact society and the environment alongside achieving desired financial outcomes.

The assets held by the Company were selected against a range of requirements including the Company's alignment to the energy transition theme. Asset performance relative to this theme has been tracked through the measures of avoided carbon and/or renewable energy generation.

The overall TENT portfolio generated 16,960 MWh of renewable energy and avoided 20,894 tonnes of CO₂ in the year ended 31 March 2024.

The table below breaks down this data by each asset, owned at the time of reporting.

The tCO₂ avoided has decreased compared to end of year 2023, due to continued decarbonisation of the electricity generation mix (the reference point) and a lower generation volume by the Hydroelectric Portfolio, noting real time flow data is captured for the Hydroelectric Portfolio.

On behalf of the Company, the Investment Manager has sought to ensure responsible operations in all assets which are tracked through a range of operational environmental, social and governance metrics. The table below details outcomes per asset for the year.

In the operational ESG performance provided there is no notable change to outcomes compared to the previous year. The CHP Portfolio has chosen not to report the requested data. The Investment Manager's portfolio manager has been in close contact with the CHP Portfolio team throughout the year. The LED Project reporting is provided on the installer, who has not acted on behalf of the Company during the year and therefore data has not been disclosed.