REG - SDCL Energy Effcncy. - Interim Update Statement

SDCL Energy Efficiency Income TrustAnnouncement

19/03/2024 07:00

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RNS Number : 3206H  SDCL Energy Efficiency Income Tst  19 March 2024

19 March 2024

SDCL Energy Efficiency Income Trust plc

("SEEIT" or the "Company")

 Interim Update Statement

 

The Board of SEEIT announces an Interim Update Statement for the period from 1
October 2023 to 18 March 2024 (the "Period").

Jonathan Maxwell, CEO of the Investment Manager, SDCL, said: "Both the Board
and the Investment Manager are pleased to see an improvement in SEEIT's share
price over the last month which has been helped by our ongoing efforts to
improve the liquidity and marketability of SEEIT's shares. SEEIT's diversified
portfolio of energy efficiency investments has been performing in line with
expectations, helping us to meet our investment objectives as we continue to
seek to improve the capital value, as well as the cash flow, from our
portfolio. As previously disclosed,  we are progressing a number of disposal
initiatives and we have now selected a preferred bidder for one of SEEIT's
larger assets. We intend to use prospective proceeds to pay down the Company's
shorter term revolving credit facility ("RCF") and to support organic
investments that enhance our existing assets and that deliver value for
SEEIT's shareholders."

Portfolio performance

Overall for the Period, the portfolio continued to perform in line with the
guidance provided in the Interim Report for the period ended 30 September 2023
(the "Interim Report"), reflecting the quality and diversity of the underlying
assets. Highlights include:

·      The portfolio aggregate EBITDA has outperformed budget for the
calendar year 2023 1 ;

·      An exercise to refinance the debt at Primary Energy continues to
progress well with the final outcome expected to enhance post debt service
cash flow;

·      The building of the CHP cogeneration plant at Red Rochester
progresses in line with plan and once operational in 2025 will improve margins
and cash flow generation;

·      EBITDA at Oliva was significantly above budget in 2023, in line
with previous projections, although production levels were below forecasts
owing to intermittent strategic stoppages (to optimise profitability during
short term periods of unfavourable market economics) and an unplanned turbine
outage; and

·      There have been some notable developments within SEEIT's
investment allocation to developers, managers or operators of energy
efficiency projects designed to support its organic pipeline. At the EV
Network ("EVN"), SEEIT's investment in fast electric vehicle charging
infrastructure for clients such as bp pulse, good progress is being made on
both new project delivery and overall profitability. Rondo, supported by
investment from SEEIT, Microsoft and others, has signed an up to 2GW agreement
with the major European utility, EDP, to roll out its breakthrough heat
battery technology and solution.

Investment and Disposals

As previously indicated, the Company has continued to make selective
investments to fund committed construction activities and the growth of
selected platforms in line with the Company's Capital Allocations Policy.
During the Period SEEIT made investments totalling £52 million, all of which
was organic investment into existing assets under development or construction
predominantly in Red Rochester and Onyx where the Company anticipates strong
double-digit internal rate of returns.

The Company's development platforms, the largest of which are Onyx (onsite
solar) and EVN require further capital to enable the management platforms to
be scaled up and value created in both the platform and the associated project
pipeline.  With a view to maximising the opportunity whilst conserving the
portfolio's current prudent gearing levels, discussions with select
prospective co-investment partners have been initiated.

The Company noted in its Interim Report, that a disposal programme was
underway.  The Investment Manager has selected a preferred bidder for one of
the Company's larger investments and aims to select a partner for another in
the coming months. We intend to update shareholders with material progress on
disposals between now and the release of the annual results, expected in late
June, where we will also provide further updates on the ongoing focus on
capital allocation.

Gearing

The RCF is expected to be circa £155 million drawn at 31 March 2024. This is
expected to reduce in the near term as the proceeds from disposals are used to
pay down the RCF.

The aggregate of borrowings by the Company's portfolio investments, excluding
the RCF, is forecast to be around £325 million at 31 March 2024 (£334m at 30
September 2023). The balance reflects investment activity at Onyx and RED
Rochester net of amortisation across the remaining facilities.

Financial performance and valuation

The Company is on track to deliver fully cash covered aggregate dividends of
6.24p per share for the financial year to 31 March 2024.

The Investment Manager notes that risk free rates have reduced in all relevant
territories (between 30 and 60bps) since the September 2023 valuation date.
These movements, taken in isolation, would suggest an increase in valuations
as at 31 March 2024 (all other things being equal). As noted in the Interim
Report, a discount rate reduction of 0.5% across the portfolio would increase
NAV per share by 3.9 pence.

The Investment Manager is evaluating other comparable data and will take a
prudent view in calculating the portfolio valuation, noting that it may be too
early to reflect some or all of the benefit of the movements in risk free
rates in the Company's net asset value as at 31 March 2024.

Actual inflation in the Period has been broadly in line with the September
2023 valuation projections and no significant changes to forecast assumptions
are currently anticipated. The Company's exposure to inflation is mostly in
the United States.

Outlook

The Company's portfolio appears well positioned to continue to deliver strong
levels of cash flow as well as opportunities for growth. The Board and
Investment Manager remain focused on protecting and improving the value of the
portfolio, on careful capital allocation, on reducing its RCF through
disposals and on maintaining a prudent approach to gearing in the medium term.

 

 

 

 For Further Information

 Sustainable Development Capital LLP  T: +44 (0) 20 7287 7700

 Jonathan Maxwell

 Purvi Sapre

 Eugene Kinghorn

 Ben Griffiths

 Tom Hovanessian

 Jefferies International Limited      T: +44 (0) 20 7029 8000

 Tom Yeadon

 Gaudi le Roux

 TB Cardew                            T: +44 (0) 20 7930 0777

 Ed Orlebar                           M: +44 (0) 7738 724 630

 Henry Crane                          E: SEEIT@tbcardew.com (mailto:SEEIT@tbcardew.com)

 

About SEEIT

 

SDCL Energy Efficiency Income Trust plc is a constituent of the FTSE 250
index. It was the first UK listed company of its kind to invest exclusively in
the energy efficiency sector. Its projects are primarily located in North
America, the UK and Europe and include, inter alia, a portfolio of
cogeneration assets in Spain, a portfolio of commercial and industrial solar
and storage projects in the United States, a regulated gas distribution
network in Sweden and a district energy system providing essential and
efficient utility services on one of the largest business parks in the United
States.

The Company aims to deliver shareholders value through its investment in a
diversified portfolio of energy efficiency projects which are driven by the
opportunity to deliver lower cost, cleaner and more reliable energy solutions
to end users of energy.

The Company is targeting an attractive total return for shareholders of 7-8
per cent. per annum (net of fees and expenses and by reference to the initial
issue price of £1.00 per Ordinary Share), with a stable dividend income,
capital preservation and the opportunity for capital growth. The Company is
targeting a dividend of 6.24p per share in respect of the financial year to 31
March 2024. SEEIT's last published NAV was 90.6p per share as at 30 September
2023.

Past performance cannot be relied on as a guide to future performance.

Further information can be found on the Company's website
at www.seeitplc.com (http://www.seeitplc.com/) .

Investment Manager

 

SEEIT's investment manager is Sustainable Development Capital LLP ("SDCL"), an
investment firm established in 2007, with a proven track record of investment
in energy efficiency and decentralised generation projects in the UK,
Continental Europe, North America and Asia.

SDCL is headquartered in London and also operates worldwide from offices in
New York, Dublin, Madrid, Hong Kong and Singapore. SDCL is authorised and
regulated in the UK by the Financial Conduct Authority.

Further information can be found on at www.sdclgroup.com
(http://www.sdclgroup.com/) .

 

 1  The majority of the Company's investments report on a calendar year basis.

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