SDCL Energy Efficiency to expand after successful year

SDCL Energy acquires 50% stake in US energy portfolio for $110m

SDCL Energy Efficiency to expand after successful year – SDCL Energy Efficiency Income has announced results for the year ended 31 March 2020 and is looking to expand. The NAV increased from 98.4p at 31 March 2019 to 101.0p at 31 March 2020 and earnings per share were 5.2p and the company paid dividends of 5p in line with forecasts. The ongoing charges ratio reduced to 1.17% from 1.38%, reflecting the economies of scale achieved during the year. Dividends were covered by cash flow 1.5 times. For this year, the company is forecasting a dividend of 5.5p (up 10%) and progressive dividend growth thereafter.

In addition to the seed portfolio acquired shortly after the IPO, the company has now completed five additional investments:

  • The first investment in the year, Supermarket Solar UK, was announced in June 2019. The investment comprises a delivery framework to install, own and operate solar rooftop projects across Tesco’s estate in the UK. The initial commitment to invest is £5 million, with potential for an additional £10 million. This investment was one of three identified in the IPO Prospectus.
  • In September 2019 the company announced a second acquisition, Spark US Energy Efficiency, a $22 million investment, structured as secured senior and subordinated loans, into a portfolio of 264 loans, leases and subscription agreements relating to energy efficiency projects installed across a wide range of industries across the USA. SEEIT acquired the portfolio from Sparkfund, a US energy efficiency development company.
  • In November 2019, the company made its first investment in Continental Europe, Oliva Spanish Cogeneration, the largest portfolio acquisition to date at approximately €150 million. The investment comprises five combined heat and power (CHP) plants, two olive processing plants and two biomass plants, which provide, in aggregate, 125MW of clean and efficient energy generation capacity.
  • The company’s final investment in the year, in February 2020, was the acquisition of a 50% interest in Primary Energy, a portfolio of recycled energy and cogeneration projects located in Indiana, USA which provides, in aggregate, 298 MW of clean and efficient generation capacity. The acquisition involved an equity cash consideration of approximately $110 million.”

COVID-19 impact manageable

Performance across the operational assets in the portfolio has been in line with expectations. The Investment Manager continues to monitor any impact resulting from the COVID-19 pandemic and government restrictions.

The company’s investment in the Oliva Spanish Cogeneration portfolio in Spain, has avoided shut-downs associated with COVID-19 on account of providing energy to the critical food industry and is operating materially as expected. The Investment Manager, alongside the operations manager, Sacyr, continue to actively manage the portfolio. The company’s investment in the Primary Energy portfolio is performing adequately and operations across the portfolio as a whole are continuing, notwithstanding the temporary idling of one of the client’s steel production facilities as a result of the slowdown in demand brought about by the COVID-19 pandemic in March.

The two construction stage assets in the portfolio have been impacted by COVID-19, but currently have no material impact on the company’s financial performance. The commissioning of the Huntsman Energy Centre was delayed due to temporary demobilisation at the construction site with commissioning now expected to complete as access to site resumes. Further work on the installation of rooftop solar projects across Tesco’s estate in Supermarket Solar UK was temporarily paused. To date 6 of the initial batch of 19 installations have been completed successfully and are now operational and income generative.”

Looking for £60m

Today, the company has launched a placing of 57,692,307 shares at 104p to raise £60m. The issue price is a 3% premium to the NAV at the end of March and a 2% discount to the closing price on 17 June. Sustainable Development Capital LLP (the manager) has identified an extensive pipeline of investment opportunities with a value of over £400 million including three projects with a value of over £100 million which are at an advanced stage of negotiation;

  • a pan-European rooftop solar project for an international retailer;
  • an electrical vehicle charging infrastructure network in the UK; and
  • a district energy project in North America.

SEIT : SDCL Energy Efficiency to expand after successful year

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