SDCL Energy Efficiency Income Trust plc
(“SEEIT” or the “Company”)

Interim Update Statement

The Company announces an Interim Update Statement for the period from 1 April 2024 to 30 September 2024 (the “Period”).

Jonathan Maxwell, CEO of the Investment Manager, SDCL, said:

“The operational assets in SEEIT’s portfolio are performing in line with expectations, on a consolidated basis. The portfolio is also well positioned for growth.

Two of our largest investments, Onyx, which is one of the most established providers of distributed clean energy solutions to commercial and industrial customers across the United States, and EVN, which is one of the most successful electric vehicle charging platforms in the UK, are growing fast and ahead of budget. Both platforms require further capital. Therefore, we are actively pursuing financing, co-investment and disposal opportunities to support their growth and secure value for SEEIT shareholders.  Surplus capital raised will be used to pay down our Revolving Credit Facility (RCF).

Interest rate cuts in the US and UK are likely to have a positive impact on the value of SEEIT’s portfolio on a discounted cash flow basis. While this may in due course reduce SEEIT’s weighted average discount rate, we view it as prudent to materially absorb decreases in risk free rates through increases in risk premiums for the September 2024 valuation due to ongoing economic and geopolitical uncertainty.

The Board and the Manager remain highly focused on SEEIT’s share price discount to NAV, as well as keeping its gearing levels well within limits, and we continue to prioritise taking actions described below in line with the Manager’s six-point plan set out in the March 2024 Annual Report.”

Operational performance

On a consolidated basis, operational performance is generally in line with expectations. Noteworthy updates for the Period are included below.

Onyx, now the largest SEEIT portfolio investment, which provides on-site generated solar power to commercial and industrial sectors across 14 US states, continues to create and convert significant pipeline through its development activity. Onyx has already hit its 70 MW Notice to Proceed (NTP) target for the year and is on track to meet or exceed its annual Power Purchase Agreement (PPA) target. It is also on track to meet its Commercial Operation Date (COD) target for this year. COD is the point at which these new projects begin generating revenue.

EVN, the electric vehicle (EV) charging infrastructure development company, continues to see strong demand for ultra-fast EV charging stations across the UK and has successfully brought a further 3 sites operational, bringing the total to 26.

Oliva is currently performing ahead of budget, and we expect this will continue due to the successful management of the cost of gas by their in-house procurement team, maximising operating margins.

RED, one of North America’s largest district energy systems, has multiple workstreams underway, including:

·    Current negotiations of tariff amendments are expected to significantly improve EBITDA performance, correcting current underperformance in part resulting from lower demand from one of its key customers. The Manager forecasts that RED will miss 2024 budget EBITDA by c.17% but considering the upcoming tariff amendments, it sees the underperformance as predominantly a short-term timing matter.

·    As previously reported, Li-Cycle, an existing customer, is significantly expanding its facilities with the construction of a new hub processing centre that will increase their demand for services from RED. The additional funding Li-Cycle needs to restart construction continues to be expected before the end of 2024, as previously announced.

·    Meanwhile, RED’s cogeneration project is progressing as planned and remains on schedule to come online by Q1 2025.

As announced on 25 July 2024, the Manager has successfully renegotiated the loan facility for Primary Energy, a portfolio of on-site energy recycling, cogeneration and process efficiency projects, servicing blast furnaces, including the largest steel blast furnace in North America. This includes an improved margin of 350bps over Secured Overnight Financing Rate (SOFR), down from c.425bps and restructuring the debt to improve yields for SEEIT. 

Dividend

The Company is on track to deliver its target dividend of 6.32p per share for the financial year to 31 March 2025, covered by net operational cash received from investments.