Coronavirus (COVID-19) Update

RNS Number : 1517K

Triple Point Inc VCT - TPVE

20 April 2020

 

20 April 2020

Triple Point Income VCT plc

(the "Company")

CORONAVIRUS (COVID-19) UPDATE

The Board of Triple Point Income VCT plc provides the following update on the impact of COVID-19 and implications for the portfolio of investments held by the Company.

The valuations of portfolio companies will be kept under review as the situation develops.

Hydro Share Classes

C Shares & D Shares

The majority, by both value and revenue, of the Company's assets are hydroelectric facilities in the Scottish Highlands. Hydroelectric plants, by their nature, require a relatively low level of human presence and we therefore expect to be able to maintain normal commercial operations without significant disruption. The impact of COVID-19, and the Government's response to it, should therefore be relatively limited under normal operations.

The hydroelectric companies benefit from inflation linked Feed in Tariff ("FiTs") income and have each recently signed up to new 12-month fixed price power purchase agreements ("Export") with one of the 'big six' energy providers.

The revenue stack of the hydro assets are currently weighted heavily towards FiT with the balance being Export. Further, a portion of the Export tariff is made up of embedded benefits, which should not be affected by the fall in energy prices. Consequently, we do not expect the hydroelectric companies to be materially impacted by the current volatility we are witnessing in the energy markets.

The most relevant risks are a restriction on the supply chain for spare parts and the availability of technicians to attend on site if any of the hydro assets require significant unexpected repair or maintenance work. These risks are considered to be low and any net asset value ("NAV") impact minimal.

E Share Class

The E Share Class owns a diverse portfolio of investments.

Gas Power

It is expected that due to COVID-19 there will be a drop in annualized power consumption. This will be driven by reduced manufacturing and the heavy impact COVID-19 is having on the services industry. With many people working from home the pattern of domestic electricity consumption has also changed, causing the typical morning electricity "peak" to flatten out.

As a result of this changing demand profile we have already seen wholesale prices decline (carbon prices, power and gas). We have seen spark-spreads (the gross-margin of a gas power plant from selling a unit of electricity, having purchased the fuel required to produce this unit of electricity) begin to narrow, although we note that despite the changing demand profile, it still remains profitable for our gas power asset to run during the evening peak (the typical running hours for these assets). Over the long-term, industry experts believe power consumption and prices will revert to historical norms and therefore we do not currently expect there to be a significant impact on the valuation of these companies based on the long expected life of the assets.

Rooftop Solar

Rooftop solar installations require a relatively low level of human presence and we therefore expect to be able to maintain normal operations without significant disruption and impairment to revenues. There are risks, albeit low, surrounding repair or maintenance work due to potential supply chain constraints. This risk is consistent across the portfolio but is considered minor.

The rooftop solar assets are the beneficiaries of inflation linked income through FITs or Renewable Obligation Certificates. The impact of COVID-19, and the Government's response to it, should therefore be relatively minor on these revenue streams and not materially impact the ongoing NAV of these businesses. 

Vertical Growing

Perfectly Fresh Cheshire Ltd ("PFC") continues to operate despite the current situation, however, its high care nature does bring additional complications. The team have been working around the clock to ensure business continues as normal where possible.

Additional measures have been introduced, a sample of which are:

i.  strict social distancing within the facility;

ii.  a technical administrator is taking temperatures of all staff daily;

iii.  ensuring at least three months' supply of critical stock is on hand; and

iv.  enhanced cleaning of the facility.

PFC has liaised closely with its main customer in its response to COVID-19, and the product continues to be grown and delivered on time and as requested.

Non-Qualifying Investments

Triple Point Social Housing REIT plc ("SOHO")

SOHO   provides homes for vulnerable individuals of working age with care needs who have their rent funded through housing benefit, the UK government has, rightly, put supporting vulnerable people at the top of the political and financial agenda as they tackle COVID-19.

The investment strategy seeks to offer regular dividend income and generate an attractive risk adjusted total return. The properties owned by SOHO provide vulnerable individuals of working age with care needs, with homes (typically for the long term) in their community allowing them to live independently whilst receiving the care and support they need. These individuals benefit from central government's support through the receipt of housing benefit.

The Board of SOHO believe that such investments are well positioned to withstand the current disruption created by COVID-19 because of their essential and long-term nature. It is reassuring that the government has put supporting vulnerable people at the top of the political and financial agenda as they tackle the current disruption and impact on the nation's health.

100% of the SOHO leases have rents that are linked to annual increases in inflation and 54% of the leases have their annual increases applied in April to mirror increases in housing benefit.  As is usual, all of the leases that were due to have rent increases in April have had their rents increased in line with CPI.

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

Triple Point Investment Management LLP (Investment Manager)	Tel: [phone]
Ben Beaton Belinda Thomas

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/ .

 

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