TPVC.L Regulatory News (TPVC)

15 November 2021

Triple Point Income VCT plc

(the "Company")

RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021

The Directors of Triple Point Income VCT plc are pleased to announce the unaudited results for the six months ended 30 September 2021.

You may view the Interim Report in due course on the Triple Point website: www.triplepoint.co.uk

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

The Company's LEI is 213800IXD8S5WY88L245

Further information on the Company can be found on its website https://www.triplepoint.co.uk/current-vcts/triple-point-income-vct-plc/s1238/.

Financial Summary

* The final sale price for the hydroelectric assets is being negotiated. The value to be distributed will also be subject to the performance fee payable on distribution, as a result the total return may be lower than indicated in these interim statements for the period to 30 September 2021. Further details on the net proceeds expected to be returned will be provided to Shareholders in due course.

Triple Point Income VCT plc ("the Company") is a Venture Capital Trust ("VCT"). The Investment Manager is Triple Point Investment Management LLP ("TPIM" or "Triple Point"). The Company was incorporated in November 2007 and currently has three classes of issued Ordinary Shares:

· C Ordinary Shares ("C Shares"): these are the shares issued in the Offer that closed on 27 May 2014. A total of £14 million was raised and 13,413,088 C Shares were issued.

· D Ordinary Shares ("D Shares"): these are the shares issued in the Offer that closed on 30 April 2015. A total of £14.3 million was raised and 13,604,637 D Shares were issued.

· E Ordinary Shares ("E Shares"): these are the shares issued in the Offer that closed on 15 May 2017. Just under £30 million was raised and 28,940,076 E Shares were issued.

Key Highlights

· C Shares Cumulative Dividends Paid: 75.25p (a dividend of 1.75 pence per share C Share was paid on 30 July 2021).

· D Shares Cumulative Dividends Paid: 71.75p (a dividend of 1.75 pence per D Share was paid on 30 July 2021)

· E Shares Cumulative Dividends Paid: 15.00p (a dividend of 3.50 pence per E Share was paid on 30 July 2021)

· Total Return per C Share1: 156.81p2

· Total Return per D Share1: 130.32p2

· Total Return per E Share1: 106.38p2

1 Total Return is made up by current Net Asset Value plus Dividends paid to date. Total Return is defined as an Alternative Performance Measure ("APM"). Total Return, calculated by reference to the cumulative dividends paid plus net asset value (excluding tax reliefs received by shareholders), is the primary measure of performance in the VCT industry.

2 The final sale price for the hydroelectric assets is being negotiated. The value to be distributed will also be subject to the performance fee payable on distribution, as a result the total return may be lower than indicated in these interim statements for the period to 30 September 2021. Further details on the net proceeds expected to be returned will be provided to Shareholders in due course.

Chair's Statement

I am pleased to present the Interim Report for the Company for the period ended 30 September 2021.

During the period we have seen the welcome lift of restrictions imposed due to the Covid-19 pandemic, and the refocus of the market onto other globally important issues, including the part that renewable energy has to play in tackling climate change and the role that intermittent energy generation plays to support the rise of renewables. We have also seen volatility of power prices. However, as the majority of our revenues are generated from renewable incentive schemes, the Company's investments in both hydroelectric schemes and rooftop solar companies have not been materially adversely affected by this volatility. The gas fired-energy centre has been impacted by rising gas costs, but has also benefitted from high electricity prices leading to record profits, subject to those engines being operationally available.

Sale of hydroelectric assets

We are pleased to report, and as announced on 29 September 2021, that the Company has entered into a period of exclusivity for the sale of its portfolio of hydroelectric power assets in the C Share Class, and a partial sale of its hydroelectric power assets in the D and E Share Classes. We are exploring options to dispose of the interest in Green Highland Shenval Limited ("Shenval") within the D and E Share Class once a favourable sale price and terms can be achieved, and an update will be provided to D and E Shareholders in due course. This followed shareholder approval of the resolution to revise the Company's Investment Policy to remove the 16-year holding period for the C and D Share Classes at the 2021 AGM. This has allowed the Board to take advantage of favourable market conditions to proceed with a sale of the hydroelectric assets.

As a result of entering into exclusivity for the sale of the hydroelectric assets, the Company is expected to pay the net proceeds of sale to the C, D and E Shareholders.

We will work hard to ensure that funds are paid promptly to Shareholders following the conclusion of the sale process of hydroelectric assets, where a final sale price is being negotiated. The value to be distributed will be subject to the final sale price and to the performance fee payable on distributions; as a result the total return may be lower than indicated in these interim statements. Further details on the net proceeds expected to be returned will be provided to Shareholders in due course.

Investment Portfolio

The Company's funds at 30 September 2021 are invested in a portfolio of VCT qualifying and non-qualifying quoted and unquoted investments.

The Investment Manager's review on pages 13 to 20 gives an update on the portfolio of investments in 17 small unquoted businesses.

Regulation

Legislation introduced through the Finance Act 2018 began to apply to the Company from 1 April 2020, implementing an increase in the qualifying investment test to 80%. The Investment Manager continues to monitor this ratio closely and the Company continues to meet the requirements.

In line with HMRC guidance, any new investments to be made by the Company would be self-assured by the Board and the Investment Manager on a case-by-case basis and always with confirmation from professional advisers that they are Qualifying Investments. Advance Assurance would be sought where there is an element of uncertainty or doubt over the application of the rules.

The Company continued to satisfy all other tests relevant to its status as a Venture Capital Trust.

C Share Class

The C Share Class has investments in three companies in the hydroelectric power sector, which between them own six hydroelectric schemes in the Scottish Highlands.

The C Share Class recorded a small loss over the period of 0.01 pence per share predominately due to management fees and running costs of the VCT exceeding loan interest income.

At 30 September 2021 the net asset value stood at 81.56 pence per share. Adding back the total dividends paid to date of 75.25 pence per share takes the total return, including the net asset value, to 156.81 pence per share.

The original target for the C Share Class was to return 100.00 pence per share by the end of year six, comprising the income tax relief, four annual tax-free dividends of an average 5.00 pence per share, followed by a partial realisation of 50.00p. Thereafter an ongoing dividend of around 3.50p per annum was targeted for a further nine years and a final capital realisation of c.50 pence per share in 2029 following the sale of the Company's hydro projects. The Company has therefore exceeded its original target of 100.00 pence per share by the end of year six, having returned a total of 75.25 pence per share along with the initial tax relief. As set out above, the net proceeds of the sale of hydroelectric assets will be paid to C Shareholders, thereby amending the ongoing target of 3.50p per annum and final capital realisation of 50 pence per share in 2029. An update on the net proceeds expected to be returned to C Shareholders will be provided in due course.

D Share Class

The D Share Class has investments in five companies in the hydroelectric power sector, which between them own six hydroelectric schemes in the Scottish Highlands.

The D Share Class recorded a profit over the period of 0.74 pence per share. At 30 September 2021 the net asset value stood at 58.57 pence per share. Adding back the total dividends paid to date of 71.75 pence per share takes the total return, including the net asset value, to 130.32 pence per share.

The original target for the D Share Class was to return 100.00 pence per share by the end of year six, comprising the income tax relief, four annual tax-free dividends of an average 5.00 pence per share, followed by a partial realisation of 50.00p. Thereafter an ongoing dividend of around 3.50p per annum was targeted for a further nine years and a final capital realisation of c.50 pence per share in 2030 following the sale of the Company's hydro projects. The Company has therefore achieved its original target of 100.00 pence per share by the end of year six, having returned a total of 71.75 pence per share along with the initial tax relief. As set out above, the net proceeds of the sale of hydroelectric assets will be paid to D Shareholders, thereby amending the ongoing target of 3.50p per annum and final capital realisation of 50 pence per share in 2029. An update on the net proceeds expected to be returned to D Shareholders will be provided in due course.

E Share Class

The E Share Class holds a diverse portfolio of investments spanning vertical growing, energy production from a gas fired energy centre, crematorium management, solar and hydro. While the E Share Class is at an earlier stage in its life cycle in comparison to the C and D Share Class, the Board is pleased with its progress to date.

The E Share Class recorded a profit over the period of 0.29 pence per share. At 30 September 2021 the net asset value stood at 91.38 pence per share. The E Share Class declared a third dividend of 3.50 pence per share on 16 July 2021. This dividend was paid to Shareholders on 30 July 2021. This payment takes total dividends paid to E Shareholders to 15.00 pence per share.

It is intended that following the sale of the hydroelectric assets, the net proceeds will be returned to E shareholders by way of a special dividend, in lieu of future regular dividends that would have otherwise been paid by the E Share Class. It is expected that any further dividends will not be paid until such time as the Company has realised some or all of the remaining investments within the E Share Class.

With respect to the E Share Class's gas-fired energy centre investment, Green Peak Generation Limited ("Green Peak"), the sales process has been paused whilst operational issues to do with engine defects are rectified. Further information is set out in the Investment Manager's Review.

Our investment in Perfectly Fresh Cheshire ("PFC"), the vertical growing business, has seen a rebound in demand following the lifting of restrictions of the Covid-19 pandemic. Over the summer, an exercise was carried out to identify areas of design improvements that could be implemented to enhance crop yield and reduce running costs. These modifications and improvements will be installed over the coming months during which time production will be temporarily suspended, in consultation with PFC's main customer. In order for the business to pursue its growth ambitions and capitalise on the progress made to date, significant further investment is required, and fundraising will be a focus for the coming period. Further information on this, and the work being undertaken on the infrastructure improvements, can be found in the Investment Manager's Review. 

Outlook

Following the change to our Investment Policy, the Board has taken advantage of the favourable market conditions and demand with a proposed sale of the hydroelectric assets.

The Board will continue to monitor the progress of the sale of hydroelectric assets and the resulting return of capital to investors, along with seeking to dispose of Shenval once a favourable sale price and terms are achieved. Following the sale of the hydroelectric assets the Company will focus on optimising returns on its remaining assets.

If you have any questions or comments, please do not hesitate to contact Triple Point on 020 7201 8990.

David Frank

Chair

15 November 2021

Investment Manager's Review

Sector Analysis

Investments by Sector - C Share Class

Investments by Sector - D Share Class

Investments by Sector - E Share Class

We are pleased to present our interim review of the six months ended 30 September 2021.

The VCT was established to fund small and medium-sized enterprises. As at 30 September 2021 it has three share classes. The overall portfolio comprises investments in 17 small, unquoted companies spanning sectors including crematorium management, electricity generation, SME funding and vertical growing.

At 30 September 2021 the Company continues to meet the condition that at least 80% of relevant funds must be invested in VCT qualifying investments within three years.

Review and Future Developments

In the six months that this Interim Report covers we have seen a lifting of the Covid-19 restrictions and staged reopening of the country. Our portfolio, on the whole, was relatively unaffected by the restrictions imposed due to Covid-19, other than our vertical growing business which was significantly impacted by reduced demand due to changing customer patterns, The vertical growing facility has also been impacted by a decision to temporarily shut down operations in order to effect modifications to improve its resilience to changing demand profiles. Further information on our vertical growing business and all our other assets are set out below.

All Share Classes within the Company remain fully invested. Both the C and D Share Classes are exclusively invested across companies in the hydroelectric power sector. The E Share Class contains investments across the hydroelectric power sector, gas power sector, rooftop solar, crematorium management, SME funding and vertical growing.

Energy Investments - Active Asset Management

Investments across the hydroelectric power, gas power sector and rooftop solar within the C, D and E Share Classes continue to generate electricity.

Pleasingly there have been minimal supply chain disruptions leading to no substantial delays for the majority of any key components for the hydroelectric and solar projects. Unrelated to Covid-19, there have been delays with procurement of replacement parts at the gas fired energy project owned by Green Peak due to operational issues faced by the manufacturer. Triple Point continue to liaise with our Operation and Maintenance contractors, and manufacturers where possible to try and avert any potential future delays in the procurement process.

Triple Point continue to work actively to increase the value of the Company's electricity generation portfolio through operational improvements in the underlying assets. Other areas where hands-on asset management delivers additional shareholder value is the negotiation of major commercial contracts including the Power Purchase Agreements (PPAs) and operation and maintenance agreements.

Triple Point continue to seek to reduce operating costs on a project-by-project basis by, for example, successfully appealing business rates assessments which has delivered significant savings for investee companies.

Hydroelectric Power

The Company has investments in seven companies which own, either directly or indirectly, hydroelectric schemes in the Scottish Highlands. The ten hydroelectric schemes are all "run of river" plants and each company benefits from government backed Feed-in-Tariff (FiT) payments based on output and from the sale of the electricity produced to utilities or other power companies under PPAs, thereby, avoiding the volatility continuing to be experienced in power markets to ensure regularity of income.

The primary means of optimising revenue from, and hence capital value of hydroelectric assets, is to ensure the plant is kept available to generate electricity and to increase the revenue per unit produced. For the period to 30 September 2021, the Scottish Highlands has seen exceptionally low rainfall with some schemes performing significantly below expectation. This is not unexpected as rainfall variability has been factored into the 40-year period of generation. We continue to be pleased with the availability of our hydroelectric schemes.

During the six months to 30 September 2021, the hydroelectric companies generated 3,119 MWh of electricity. Based on an average of 3.8 MWh annual use per household, the hydroelectric companies generated enough electricity to power the equivalent of 1,641 homes during the period. In the wider market, power prices are rising and power purchase agreements ("PPAs") entered into by the hydro companies continue to be above the government FiT Export Tariff of 5.50p per kWh. In addition, there continues to be no notable impact of Covid-19 on the maintenance of the hydro schemes and sourcing parts has not been an issue.

As set out in the Chair's Statement, the Company has entered into a period of exclusivity for the sale of its portfolio of hydroelectric power assets in the C Share Class, and a partial sale of its hydroelectric power assets in the D and E Share Classes. A sale at this time enables shareholders to capitalise on the current favourable market conditions reflecting low discount rates, scarcity of in demand hydroelectric assets with inflation-linked FiT income, and a long c.15 year remaining FIT period, making these assets attractive to a buyer. Given that this area of the market is relatively niche, several bidders with a strong understanding of small scale run of the river hydroelectric assets were selected and invited into the sale process to optimise value for shareholders. Pleasingly, offers were received from all those invited to bid and the offers were assessed by the Investment Manager and presented to the Board. Bids were assessed based on reference to key criteria of: consideration; conditionality of the bid, and acceptance of the share price agreement terms, with a preferred bidder being chosen. The Investment Manager was pleased with the outcome of the process and will work together with the Board and the preferred bidder with a view to completing the transaction as soon as possible.

Crematorium Management

The Company has an investment in a business that provides crematory and mercury abatement services for the crematoria of a London Borough. This investment receives revenues from local authorities and has consistently generated a steady return over the years it has been held.

Solar

The solar portfolios are performing slightly below expectations due to low irradiance period. However, availability has improved across the majority of the portfolio in the six-month period.

Vertical Growing

The E Share Class has invested in PFC, a company which has constructed a pioneering vertical growing facility. Vertical Growing is the practice of producing food in an indoor growing amenity where all inputs (water, light and nutrients) meet the optimum needs of the crop. Vertical Growing facilities are designed to have a sealed environment, meaning that the product is grown in a controlled manner, with positive air pressure to prevent any contaminants entering the facility. This ensures that insects and other pests cannot access the crop, thus removing the need to use pesticides on the crop being grown. A large variety of produce can be grown, such as herbs and salad leaves.

PFC has made significant progress over the past year, particularly in relation to the strength of its customer base and technological and system developments. Over the coming months various design improvements will be implemented at the facility, with particular focus on irrigation and air movement which should reduce losses through driving improved yields, reducing running costs and lowering energy usage. Production has been temporarily paused whilst the works are carried out, which has been agreed with its customers who are willing to pay a premium for the quality of the product and a desire to have all future yield that can be produced.

The capital-intensive nature of the business means that, even with the support of a key customer and increased certainty of being able to sell substantial volumes of premium product, the company's ambitions can only be realised by securing significant additional third-party funding. Therefore, PFC is now exploring the potential of raising third party finance to fund the build out of a new facility that can meet the increased level of customer demand.

Gas Power

The Company has an investment in Green Peak which has constructed a gas fired energy centre. During the six-month period to 30 September 2021, the energy centre generated 5,766 MWh of electricity. Based on an average of 3.76 MWh annual use per household, this was enough electricity for 3,067 homes during the period.

The gas fired energy centre was commissioned in May 2018 and consists of containerised gas combustion engines that generate electricity for onward sale, especially at times when there is high demand for power. Although renewable energy makes an increasing contribution to the supply of energy in the UK, the irregular nature of its production means that other sources will continue to be required to make up the deficit. The fast start up times and low running costs of the gas fired energy centre allow them to take advantage of increased energy market volatility caused by the continued penetration of irregular renewables onto the grid. For example, if there is a sudden lull in wind output, prices begin to spike and the energy centre can quickly take a profitable advantage, whilst simultaneously helping balance the grid.

There have been operational challenges during the period causing Green Peak to underperform compared with the expected level of energy generation. One of the three engines operated by Green Peak has been offline caused by damage due to a water ingress issue. The damage to this asset has been evaluated by the original manufacturer who will be carrying out the necessary repairs as soon as practically possible. Green Peak has notified its insurers for both the property damage and business interruption for the downtime of the engine. We and the Board are monitoring the progress of repairing the engine and the outcome from the insurers closely.

That said, the electricity market has been very favourable over the period, and the company was able to trade its operating engines successfully. Notably Green Peak, with only two operational engines, has returned to achieving gross profits of marginally below the level we would expect with three engines over the six months.

Outlook

We remain committed to seeking to improve generation and returns of the assets within all share classes and achieving an optimal value for the sale of the hydroelectric assets.

If you have any questions, please do not hesitate to call us on 020 7201 8990.

Jonathan Parr

Partner, Head of Energy

Triple Point Investment Management LLP

15 November 2021

Investment Portfolio Summary

Principal Risks and Uncertainties

The Audit Committee, which assists the Board with its responsibilities for managing risk, considers that the principal risks and uncertainties as presented on pages 22 and 23 of our 2021 Annual Report were unchanged during the period and will remain unchanged for the remaining six months of the financial year.

Directors' Responsibility Statement

The Directors have elected to prepare the Interim Financial Report for the Company in accordance with International Financial Reporting Standards ("IFRS").

In preparing the Interim Financial Report for the six month period to 30 September 2021, the Directors confirm that, to the best of their knowledge, this condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union and that the Chair's statement on pages 6 to 11 includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure and Transparency rules of the United Kingdom's Financial Conduct Authority namely:

a) the Interim Financial Report includes a fair review of important events during the period and their effect on the Financial Statements and a description of specific risks and uncertainties for the remainder of the accounting period;

b) the Interim Financial Report gives a true and fair view in accordance with IFRS of the assets, liabilities, financial position and of the results of the Company for the period and complies with IFRS and the Companies Act 2006;

c) the Interim Financial Report includes a fair review of related party transactions and changes therein. There were no related party transactions for the accounting period; and

d) the Directors believe that the Company has sufficient financial resources to manage its business risks in the current uncertain economic outlook.

The Directors have reasonable expectations that the Company has adequate resources to continue in operational existence for at least the next 12 months. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

This Interim Financial Report has not been audited or reviewed by the Company's auditor.

David Frank

Chair

15 November 2021

Unaudited Statement of Comprehensive Income

The Total column of this statement is the Statement of Comprehensive Income of the Company prepared in accordance with International Financial Reporting Standards (IFRS). The supplementary Revenue Return and Capital columns have been prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. This Statement of Comprehensive Income includes all recognised gains and losses.

The accompanying notes are an integral part of this statement.

Unaudited Balance Sheet

The Statements were approved by the Directors and authorised for issue on 15 November 2021 and are signed on their behalf by:

David Frank

Chair

15 November 2021

The accompanying notes are an integral part of this statement.

Unaudited Statement of Changes in Shareholders' Equity

The capital reserve represents the proportion of Investment Management fees charged against capital and realised/unrealised gains or losses on the disposal/revaluation of investments. The unrealised capital reserve, share redemption reserve and share premium reserve are 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.

At 30 September 2021 the total reserves available for distribution were £8,021,000. This consisted of the distributable revenue reserve, net of the realised capital loss, plus the special distributable reserve.

Unaudited Statement of Cash Flows

The accompanying notes are an integral part of this statement.

Unaudited Non-Statutory Analysis - The C Share Fund