Triple Point Energy Transition — FY23 results show fully covered 9% yield

Triple Point Energy Transition (LSE: TENT)

Last close As at 12/06/2024

66.70

−0.40 (−0.60%)

Market capitalisation

67m

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Research: Investment Companies

Triple Point Energy Transition — FY23 results show fully covered 9% yield

Triple Point Energy Transition’s (TENT’s) cash dividend cover ratio was 1.1x (1.2x excluding one-off listing expenses) for FY23, up from 0.14x a year ago when the portfolio was not fully deployed. TENT’s relatively strong dividend yield (9%) and high discount to NAV (32%) have been difficult to explain and have become more anomalous now the dividend is clearly covered by ongoing cash flows. TENT’s 1.1x dividend coverage was ahead of our estimate of 1.0x and our forecasts are now under review. NAV per share was 99.44p, up from 99.12p a year ago, and virtually flat on September 2022 (99.53p), with a total NAV return of 9.2% for the year.

Written by

Andrew Keen

MD - Head of Content, Energy & Resources, Industrials

Investment Companies

Triple Point Energy Transition

FY23 results show fully covered 9% yield

Investment companies

Renewable energy infrastructure

20 June 2023

Price

61.5p

Market cap

£62.5m

AUM

£98.2m

NAV*

99.44p

Discount to NAV

32%

Yield

9%

Ordinary shares in issue

100m

Code/ISN

TENT/GB00BMCBZL07

Primary exchange

LSE

AIC sector

Renewable Energy Infrastructure

52-week high/low

92.8p

60.5p

100.3p

95.6p

Gearing

Net cash at 31 March 2023

0%

Fund objective

Triple Point Energy Transition (TENT) aims to invest in assets that support the transition to a lower-carbon, more efficient energy system. It targets predominantly UK assets and seeks to generate an attractive, long-term income stream with a positive impact for its shareholders.

Analysts

Andrew Keen

+44 (0)20 3077 5700

Harry Kilby

+44 (0)20 3077 5724

Triple Point Energy Transition is a research client of Edison Investment Research Limited

Triple Point Energy Transition’s (TENT’s) cash dividend cover ratio was 1.1x (1.2x excluding one-off listing expenses) for FY23, up from 0.14x a year ago when the portfolio was not fully deployed. TENT’s relatively strong dividend yield (9%) and high discount to NAV (32%) have been difficult to explain and have become more anomalous now the dividend is clearly covered by ongoing cash flows. TENT’s 1.1x dividend coverage was ahead of our estimate of 1.0x and our forecasts are now under review. NAV per share was 99.44p, up from 99.12p a year ago, and virtually flat on September 2022 (99.53p), with a total NAV return of 9.2% for the year.

FY21*

FY22

H123

H223e

FY23e

FY24e

FY25e

DPS (p)

2.00

5.50

2.75

2.75

5.50

5.50

5.50

Dividend cover (x)

0.98

1.02

1.00

1.07

1.20

Source: Triple Point Energy Transition data, Edison Investment Research. Note: *Year of IPO. Financial year end is March. Forecasts are under review.

Benefiting from inflation linkage and deployment

TENT has clearly benefited from inflation linkages in its hydroelectric portfolio (equity, 41% of portfolio). TENT’s portfolio is based on nine run-of-the-river hydroelectric assets in Scotland and benefited from feed-in tariffs being raised by 13.4% in 2023. TENT’s forecasts are based on Office for Budget Responsibility estimates (3% for 2024–31 and 2.4% thereafter), so there is scope for valuation uplifts if RPI continues to surprise on the upside and outstrips rises in discount rates (portfolio discount rate assumptions were 5.6–8.3%, up from 5–8% at end FY22).

TENT’s battery energy storage systems (BESS; debt, 34.5% of portfolio) continue to roll out. The first asset, in Oldham, commenced operation in December 2022 and its second, in Gerrards Cross, is expected to be completed in late 2023 (£6.2m of lending drawn at end FY23 and a further £3.9 post balance sheet date). The remaining two assets (in Scotland and Wales) are expected to be started in summer 2023 and to be operational in 2024. TENT’s £40m revolving credit facility was undrawn at 31 March but will be used to fund this growth in FY24.

TENT still sees a healthy pipeline (£545m) of high-return investments (8.8%) in both debt and equity and so can still scale its business model by concentrating on higher-return subsegments of energy transition. Its targets include BESS (although in discussing the results, TENT did note that returns and the technology in BESS are maturing), onsite generation and low-carbon energy consumption. Emerging technologies such as green hydrogen and carbon capture are also being assessed.

Clearing 1.0x dividend cover by a 20% margin to 1.2x (including one-off listing costs 1.1x) is clearly a good result. TENT has set a target of a 5.5p dividend for 2024, which is flat on 2023, but given the 9% yield and continued attractive risk-adjusted yields in its pipeline, seem a sensible strategy. Given the long-term (92% contracted over 10 years) and inflation-protected (47% linked to inflation) nature of its income, TENT shares trade at an unwarranted discount to NAV in our view.

General disclaimer and copyright

This report has been commissioned by Triple Point Energy Transition and prepared and issued by Edison, in consideration of a fee payable by Triple Point Energy Transition. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Triple Point Energy Transition and prepared and issued by Edison, in consideration of a fee payable by Triple Point Energy Transition. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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