LONDON, UK: The Board of Directors of Triple Point Energy Efficiency Infrastructure Company has acquired a portfolio of operational, Feed in Tariff (“FiT”) accredited, “run of the river” hydroelectric power projects in Scotland for an aggregate consideration of £26.6 million.
This investment was identified in the IPO prospectus and formed part of the original pipeline.
The Company announced on 29 September 2021 that it had secured exclusivity to acquire a portfolio of Hydro Assets. The portfolio acquired comprises six Hydro Assets with a total installed capacity of 4.1MW, all of which have five years or more of operational performance history.
The Company continues to have exclusivity to acquire a further three Hydro Assets, valued up to £19.7 million and it is expected that these additional projects will be acquired in Q1 2022. The Hydro Assets benefit from the FiT, government supported pricing that provides a payment for every kWh of electricity produced, and a price floor (the “Export Tariff”).
To the extent the Hydro Assets are able secure prices higher than the Export Tariff, they are able to enter power purchase agreements (“PPAs”) with commerical offtakers.
The Hydro Assets were owned by entities advised by the Investment Manager and, as a result, additional measures were implemented and carefully monitored to manage any potential conflict of interest appropriately, including dedicated buy and sell side teams within the Investment Manager and obtaining an independent third-party valuation.
In accordance with the IPO Prospectus, the Board were required to approve the transaction and were satsified by the conflict management procedures put in place.
The Hydro Assets have a remaining FiT period of c.14 years, and a useful life beyond the remaining FiT period of a further 20 years, during which the Hydro Assets would be operated as unsubsidised assets selling power to the grid through PPAs.
Each of the Hydro Assets is subject to a long-term lease with the local landowners, the majority of which are with Forestry and Land Scotland, which cover the expected useful life of the asset, with rent based on a percentage of gross income of the asset. They are also subject to an operations and maintenance contract with Green Highland Renewables, one of the UK’s leading developers and services provider for hydropower schemes.
The Investment Manager has identified a number of opportunities to optimise the efficiency of the Hydro Assets, in particular, to help to regulate the flow feeding existing intake, protecting against periods of unusually high or low rainfall, thus increasing overall generation. Such projects will also be valuable in regulating power generation in the future when the assets are subject only to PPAs.
The Hydro Assets have been assessed to deliver nearly 4,000 tCO2e of avoided emissions per annum based on average generation assumptions and modelling indicates that performance of the assets is relatively robust under climate change scenarios which see increasing seasonality and extremes of precipitation and river flows. The Hydro Assets have also been developed in line with the Scottish Environmental Protection Agency (SEPA) biodiversity standards for “run of the river” hydropower schemes, for example, with relevant measures in place to enable the safe passage of fish.
The transaction is aligned with the Company’s targeted risk/return profile and objective of delivering secure investments that generate a total return for investors comprising sustainable and growing income and capital growth. It also supports the transition to a low carbon economy in accordance with the UK government’s overall environmental targets.
John Roberts, the Company’s Chairman, said: “I am delighted that TEEC has acquired the portfolio of Hydro Assets which were first identified ahead of our IPO. Not only does this portfolio deliver in terms of avoiding carbon emissions, the Investment Manager has identified a number of opportunities to improve the performance of the assets further. We look forward to closing the next phase of this investment soon.”