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"My apologies for any confusion. We are yet to announce a dividend for TENT, however the Company does anticipate paying quarterly dividends."
They thought I was asking about another triple point investment trust.
Doesn't really answer the question, as in why so late. I am expecting a phone call later.
Worrying.
I have emailed them.
No reply but only emailed Friday or possibly Thursday.
Nothing on the company website since 23 Dec last year. Bit fishy.
Went ex dividend last year 3rd march. Can't find any mention of this quarters dividend?
Only checked Hargreaves Lansdowne.
Anyone know nothing in rns
Agicore
I only have a few of these to date. One reason for buying was 58% of the dividend is streamed as interest. I believe that saves company money and I won't have to pay tax on the streamed bit.
Not directly related but in the same area.
MAST it's building small gas powered generators as back up for the grid when the wind and solar aren't supplying enough.
Government is encouraging it and paying them a set amount just for having them on standby. Any electricity produced is an extra. Have one built and ready to go. 2 more being built and 2 in the planning stage.
Came to market 18 months ago at 15p. Now trading at 1.7p.
I can't find anything wrong with them. Tried hard to find out why but no bad news available or at least I can't find any.
The one built generator is nearly equal in cost to build as the Company’s capitalisation?
Might be worth a look at. I am in small. I may buy more but not going into deep.
Agricore, thanks for your analysis. What is your understanding/expectation of the protection (you mentioned "Senior Debt Finance") in the event of defaults on the debt financing elements? I'm wondering if the risks there are large enough to justify the current discount to NAV and then whilst those debt financing elements remain perhaps we stay at a permanent discount to NAV, albeit with a growing NAV.
Thanks SD you're 100% correct.
Referring to the Q3 factsheet as at 30/09/22: https://www.tpenergytransition.com/investors/72/#investor_documents
The asset mix is CHP 29.8% / Hydro 61.6% / BESS 0.8% / LED 1.2% / Cash 6.6%
And type is 31.8% senior debt finance vs 61.6% equity (and cash 6.6%).
So the hydro is an owned asset while the LED, CHP and BESS are senior debt finance. On reflection this makes sense in that CHP (Tomatoes/Steam) and LED (in 2 Factories) are installations from within someone else's building.
Reading the interim report however the expansion is into BESS (110MW of storage at 4 sites) and the "committed" portfolio changes the composition to:
20% CHP / 41% Hydro / 34% BESS / 1% LED
Because BESS is also debt funded then the mix becomes 55.2% senior debt finance/44.8% equity (+/- cash)
One asset of the 4 is now live which the remainder 12 months away.
Reading Liberum's article about Greencoat and indeed Greencoat's recent NAV increase of ~25% I think there's a strong read across to TENT. In fact the TENT Sep 2022 interim report speaks to key sensitivities of 2.7p NAV per 0.5% inflation (and reading note 9 this is based on a 3% RPI!) and 3.2p NAV per 10% increase in power prices (based on 2 preceding quarters). Seems to me there is scope for something like a 5x2.7p and 5x3.2p = 29.5p increase in NAV offset by a further increase in the risk free rate applied to the DCF of 6.42% in 09/22 (increased from 6.11% in March 2022). Taking a 1% rise the sensitivity says this has a 2x3.07p negative affect. So NAV increase of 23.34p to March 23 maybe? (From 100.26p to 123.6p?). Assuming a read across reversion to SP 10% premium to NAV, then a near double bag to £1.35 seems possible, locking in a 6.7% (and growing) yield.
Also while it's hard to discern yields for all parts of the portfolio, looking at CHP I can see annualised £3.14m loan interest on £29m so that's a gross yield of 10.82%. Compared to a 4.5% fixed cost of debt. So a 6.32% NIY?
There's also £1.2m annualised capital repayments for CHP so these aren't perpetual interest only deals (which would require some element of amortisation). I also note the phrase "Senior Debt Finance" which provides some degree of protection in the event of any default.
GLA
"The Company intends to achieve its investment objective by investing in a diversified portfolio of Energy Transition Assets typically via the acquisition of equity in, or the provision of debt financing to, the relevant Investee Company. The Company may invest in opportunities in the United Kingdom (and the Crown Dependencies) and Europe."
Note the provision of debt financing.
Good spread of assets
51% of dividends will be paid as streamed interest.
So there are loans in the mix otherwise they would not be able to pay some of the dividends as interest.
Thanks for the analysis & comments Agricore, that's really helpful. The fly in the ointment for me is the "fair value" adjustment, and whether it can be sustainable at those kind of levels. Still, looks a good investment case now the dividend is (almost) covered.
Agricore, I got the loan idea from their investor documentation.
e.g. "The Group signed contracts to provide a debt facility 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 assets in the UK. The total facility amounts to £45.6 million and carries a fixed interest rate."
Perhaps I am misunderstanding the terminology, but that still reads like a loan to me.
No idea where you are getting the idea they "loan money". They don't. They own assets (BESS, Hydro and CHP). They earn an income from those assets. They also borrow to buy more assets to earn even higher income (it's called "leveraging").
I've written this before, but revised the numbers for the recent drop in SP to highlight the value here:
As at 31/3/22
£96m assets
£80m deployed by last year end (31/3/22)
£40m debt facility with 4.5% cost
Targeted return of about 8-9% per annum. Spread over a number of projects and technologies.
Notably Hydroelectric, Battery Storage (BESS), CHP (growing Tomatoes!)
2022 dividend not covered by income. 0.98x covered at midyear FY2023.
Can achieve a 3-4% non-cash "fair value" adjustment (this appears to be in excess to the 8-9% return above)... achieved this in H1 FY2023.
Typically peers trade at a 15-20% premium while TENT is at a 30.1% discount.
So back of a *** packet FY2023 (i.e. as at 31st March 2023):
Assumes average of £120m assets deployed during FY2023 delivering a return of 8% (£9.6m)
Servicing Debt £0.9m
OCF £1.4m
Dividends £6m
Profit £1.4m (plus possibly £3.6m fair value adjustments) = £5m
2024
£145m deployed returning £11.3m
Less debt servicing £1.8m
OCF £1.4m
Dividends £6m
Profit £2.1m plus fair value adjustment £4.5m = £6.6m
The profits could mean higher dividends (potentially double to 15.5% yield at current prices) although there is a stated buy back policy (not yet exercised) where the share is at a discount. Current yield is 7.8%. There's no reason I can fathom for its discount beyond many "green" investments have plummeted.
The bit I was concerned about (uncovered dividend) is now largely covered. I'm also of the mind that compared to say GSF or GRID this offers better protection since it doesn't put all eggs in 1 basket (BESS). Also this is the best hydroelectic power play I think exists in the UK markets (happy to be wrong on this but I think that's accurate). The high electrical prices are a benefit to hydro electric and have the benefit that so long as Scotland is not in drought then there's reliable daily returns from "base power" - more than you could say for wind or solar. Not affected by the windfall taxes.
On 28 October 2022, the Company's shares transferred to trading on the Premium Segment of the Main Market of the LSE - means they can more easily be invested in by funds or ii's. (No evidence this has happened yet)
Based on my PE FY2024 estimate and a "fair" future 5.5% yield on a future target price, then this has scope to triple bag from here.... at low risk.
GLA
Yes, good point Krusty. I was mixing myself up a bit there, as if TENT had to pay out dividends related to the whole fund value, but of course you're right they're not paying dividends out on the new money borrowed as that's not additional investor capital. So I agree, as long as they can balance the rate they're borrowing new money against the energy loans they're handing out (allowing for some project failures) then it should drop to the bottom line as profit.
Presumably also the NAV isn't massively altered either as the amount borrowed should net off against the increased project loans, aside from some organic growth attributed to the marginal difference between the two rates.
I'm still not altogether sure then why this fund is so far below its NAV.
I'm not sure on this one toneman but I'm going to offer a suggestion which you & others are welcome to disagree with.
You could argue that TENT are "borrowing" investor's funds, for which they're paying a fairly hefty premium (dividend), currently c. 8%. They have to cover all the company overheads within this core investment. So the marginal difference between the rate of borrowing and the (substantial) returns they are making lending money in this sector effectively all drops to the bottom line as profit.
I may be missing something obvious in this theory but I'm offering it up for comment anyway.
As far as my understanding goes (and you can correct me if my interpretation is wrong), is that TENT provides the funding for these energy transition projects [i.e. a loan, essentially], and I imagine the interest on these loans is pretty high >10%. After management fees and other costs there is sufficient remainder to cover the fund's reasonably high dividend rate. That all seems fair enough.
Where I'm a little uneasy is the plan that the fund can borrow say 40% of the fund value and subsequently lend that on to projects. There clearly is less available to pay out in dividends if you're first of all paying your own interest rate on borrowed money. If there is sufficient demand for projects to be funded why does TENT even need to do this? Surely instead just raise more capital on the markets and grow the fund value organically. It seems that all the loan facility does is add a huge liability onto the balance sheet and lines the pockets of the third-party lender rather than us shareholders. I think it's a high price to pay simply for an inflated NAV of the projects.
I can understand why a normal investment fund would use this mechanism to invest in, say, growth stocks because you can leverage high gains on growth at the modest cost of fixed rate loan interest. I don't really understand the attraction for TENT, borrowing at one rate to simply lend out at another (hopefully slightly higher) rate. I'm willing to give TENT the benefit of the doubt over this but I'd be interested in other views.
toneman. The nature of the beast is to provide a sustainable dividend stream. I have bought these for income in my ISA and not too concerned about capital appreciation. Horses for courses.
Same silverknight, I made several opening purchases and all of them were marked up here as sells. Regarding being overlooked, I wonder if the worry here is with the proposed gearing given the higher interest rate environment we're in. Still willing to give it a punt. I like the general investment targets of this fund.
Me too. Buys showing as sells? seems to be overlooked unless we are missing something.
I've taken an initial position here too toneman. It's been on my watchlist since the TEEC days, and with the big discount to NAV and secure dividend of c. 7.5% now all but covered, it seems like a great opportunity to invest. Let's see - good luck! K
So I've just made an investment in TENT. I can't see the justification for such a high discount to NAV. Is it simply due to general market conditions in our new higher interest rate environment? If it is then I'm fine with that, I'd rather have cash invested in environmental projects. Otherwise perhaps someone could fill me in on what I might have missed reading through all the reports and RNSs.
https://www.investorschronicle.co.uk/news/2023/01/31/where-renewable-energy-trusts-are-investing
Comment from Investors Chronicle on TENT:
"Some names will offer bigger yields and wider discounts, albeit that’s sometimes because recent performance has suffered: Triple Point Energy Transition (TENT), which launched in 2020, has landed investors with a paper loss of nearly 19 per cent in the year to 27 January, offering some explanation for a 7.5 per cent yield and a discount of more than 28 per cent."
The annoying thing is the article suggests that TENT is loss making when it is not. What the article says (badly in my view) is that the share price is down 19% YOY so represents a juicy 7.5% versus a 5.3% yield from Greencoat which the author seems to tout as a better alternative on the basis of wholesale price exposure (TENT has 50% exposure). In other words quite lazily written, in my view.
TRIG's and Greencoat's wind exposure is seen as a great thing. But BESS, Hydroelectric, Energy Efficiency, CHP are all more consistent earners and are much less weather dependent. (Well, subject to drought conditions for Hydro I suppose)
As Wind Generation continues to build out I question the wisdom of wholesale price exposure. Surely you are supplying into a market during a time of feast (i.e. low prices) and unable to do so during famine (i.e. high prices) while consistent earners continue to generate earnings during famine.
The IC article only serves to validate the investment thesis here not diminish it. Yet, unless someone questions the facts as presented the danger is they overlook the opportunity here, which is a pity.
Liberum says wholesale power prices are well supported:
https://*********************/companies/uk/asset-management/macau-property-opportunities-fund-limited/research/liberum/liberum-alternatives-daily-energy-transition-and-infrastructure-mpo-apax/1_a1I3z00000IU1M8EAL
TENT themselves are well exposed in this area (Liberum do not cover TENT):
"Investing in projects with RPI inflation-linked cash flows, such as our hydro-electric assets, and long-term contracts with less exposure to market volatility, can provide investors with diversification beyond the traditional bond and equities markets.
Approximately 50% of TENT’s income over the next 10 years is contractually linked to RPI via government backed Feed in Tariff agreements. Higher energy prices, resulting from gas price inflation, also drive income for TENT's investees.
So, it is an opportune time to invest in a diversified portfolio that benefits from an inflationary environment and that seeks to respond to the challenge of net zero whilst improving energy security and lowering energy costs for businesses.”
This is an interview with TENT on the markets of vox website:
https://lnkd.in/d8MECKqH
Triple Point Energy Transition PLC on Friday reported a growing net asset value, and a positive outlook that is buoyed by elevated energy prices.
At September 30, NAV per share stood at 100.26 pence, climbing 6.1% from 94.50p a year before. NAV total return in the six months to the end of September improved to 7.2% from 0.4% in the same period a year before. It was also higher than 4.9% for the financial year 2022 that ended on March 31.
The London-based investment trust focused on low carbon energy efficiency in the UK cited ‘an improved outlook for power forecasts, by independent market advisors, along with the higher inflation expectations’.
Triple Point declared an unchanged interim dividend of 2.75 pence per share.
Worth waiting for.
Hi Archie, I’ve averaged down today and remain pretty positive about TENT. Cop27 is around the corner and under Jeremy Hunt we appear to have a more balanced thoughtful approach to the economy. I saw there are plans (finally) to encourage Energy efficiency. This should be positive here.
Thank you Agricore for kicking off this thread. I've been tracking this under its previous guise, as TEEC, for some time. The price dropped sufficiently for me to finally buy in yesterday at £0.83 combined with news of loosening of onshore wind planning restrictions (I persuaded myself that this may enable TENT to deploy some of the capital without having to overpay). I'm already 3.5% down, but I'm prepared to average down another drip of the price drops 5%.