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SDCL Energy Efficiency powers ahead

SDCL Energy Efficiency Income Trust has announced its financial results for the year ended 31 March 2022. The NAV total return for the period was 11.2%. Earnings per share of 10p (up from 7p) comfortably cover a dividend of 5.62p (as does cash generated by the portfolio which covered the dividend 1.2x). The dividend target for next year has been set at 6.0p, up 7%.

Fundraises totaling £350m combined with the investment performance have pushed assets through the £1bn mark. £305m was deployed into 12 investments during the year. The ongoing charges ratio reduced to 1.00 % (2021: 1.13%), benefitting from spreading costs across a larger net assets base.

Geographically, the trust added new investments to its portfolio in the United States, which now covers nearly every State. In Europe, it gained exposure to a new country, Portugal, through its acquisition of an operational green combined heat and power (CHP) system from, and establishment of a strategic partnership with, Sonae Group.

By technology, the trust expanded its portfolio of lighting and green CHP projects, so further diversifying its supply chain and end markets. In addition, it added exposure to new markets by funding the energy efficiency measures for the first certified net zero multi-family residential building in the United States and entered the United States biogas market, serving the Californian low carbon transport fuels market by financing the generation of green gas upstream, reducing emissions from dairy farms. Since the year end, the trust has also added new investments in geothermal district energy, liquid cooling for datacentres and rare-earth free energy efficient motors.

The portfolio achieved carbon savings of 1,060,617 tCO2, and it also produced 2,455,305 MWh of electricity.

The case for energy efficiency is cast iron. This is an extract from the manager’s report – “Alongside the terrible human tragedy associated with the loss of life, suffering and displacement resulting from the war in Ukraine, Europe has been confronted with a critically challenging question: how to replace the 40% of natural gas that it sources from Russia. The answers are uncomfortable. 80% of the world’s energy is generated from natural gas, oil, and coal. Replacing Russian gas, and oil, with alternative sources of conventional and clean energy takes time and substantial investment.

Meanwhile, the world is wasting much of the energy it is producing. The World Economic Forum demonstrated that in 2019, the United States lost some 70% of its original energy through conversion, generation, transmission, and distribution losses before getting to the point of use. This is another uncomfortable truth, but one that we believe is crucial to address. However, there are encouraging signs that international governments have recognised the vital role that energy efficiency can play are encouraging. For example, the Glasgow Climate Pact signed at COP26 called for energy efficiency, for the first time, alongside clean power generation. The European Commission increased prioritisation of its “energy efficiency first principle” in a recast Energy Efficiency Directive and guidelines on its application.”

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