• SDCL Energy Efficiency Income (SEEIT) has agreed to pay £100m to acquire a 100% interest in Värtan Gas Stockholm (VGSAB), the owner of the established, operational and regulated gas distribution network for Stockholm, Sweden. The consideration will be funded from existing cash reserves (including part of the proceeds from the recent £105m capital raise) and debt facilities, which includes a £30m short term acquisition facility that has been added to SEEIT’s current £40m RCF. VGSAB’s existing project debt finance facilities, which are equivalent to c.£26m, will remain in place. The investment represents c.19.5% of net assets following the recent fundraise.
• The VGSAB group owns and operates Stockholm’s regulated gas grid, the majority of which is sourced from locally produced biogas (c.70%). It supplies and distributes to over 58,000 residential, commercial, industrial, transportation and real estate customers in Stockholm.
• Investment Case: The manager notes that it is an essential infrastructure service that helps to reduce pollution and greenhouse gas emissions by reducing and reusing waste gases both at the point of production. SEEIT intends to work towards increasing the proportion of green gas in the network to 100% over time. The grid is an essential component of an integrated system, aligned with national and regional strategies to attain carbon neutrality by 2040. Revenues are primarily regulated, and predominantly based on fixed tariffs with relatively low sensitivity to customer demand or consumption. The manager also believes that there are opportunities for revenue growth from serving new transport customers, as commercial and municipal vehicle fleets continue to switch to cleaner fuels, including biogas. In addition, there are opportunities to deliver new energy and infrastructure services to customers by developing the network and through vertical integration.
• Numis View: The acquisition was flagged as part of a near term pipeline in the recent capital raise which saw SEEIT issue 100m shares at 105p, raising gross proceeds of £105m, up-scaled from the targeted amount of £80m. Management notes that the investment is expected to meet and exceed SEEIT’s total returns targets (7-8%) and to further support its progressive dividend policy. SEEIT is currently targeting a dividend of 5.5p (5.2% yield) for the year ending 31 March 2021.

Equity investment of c. £100m for a 100% interest in the ultimate owner of the established, operational and regulated gas distribution network for Stockholm, Sweden. The majority of the gas is sourced from locally produced biogas (c.70%) and supplies and distributes to over 58,000 residential, commercial, industrial, transportation and real estate customers in Stockholm. The Company intends to work towards increasing the proportion of green gas in the network to 100% over time. The revenues are primarily regulated and predominantly based on fixed tariffs with relatively low sensitivity to customer demand or consumption, with the manager believing that there are opportunities for growth.

Oversubscription: The placing of New Ordinary Shares pursuant to the existing Share Issuance Programme announced on 13/10/20 has received a strong level of support from investors and has been significantly oversubscribed.

Size increased: Taking into account the strength of the near-term acquisition pipeline, as well as further positive progress with the negotiations to acquire an established, operational and regulated energy network in a major Western European city, the Board has determined to increase the size of the Placing from gross proceeds of £80m to £105m by re-allocating New Ordinary Shares available under the Share Issuance Programme to the Placing. Accordingly, the Placing will result in the issue of 100m New Ordinary Shares at the Placing Price of 105p. As applications for the New Ordinary Shares have exceeded the gross proceeds accepted, a scaling back exercise has taken place. (Analyst: Max Haycock)

SDCL Energy Efficiency Income – £100m Acquisition of Stockholm gas distribution network

Acquisition: The Trust has agreed to acquire a 100% interest in Värtan Gas Stockholm AB (“VGSAB”), the ultimate owner of the established, operational and regulated gas distribution network for Stockholm, Sweden, involving an equity investment of c.£100m.

Biogas: The VGSAB group (the “Group”) owns and operates Stockholm’s regulated gas grid, the majority of which is sourced from locally produced biogas (c.70%). The Group supplies and distributes to over 58,000 residential, commercial, industrial, transportation and real estate customers in Stockholm. SEEIT intends to work towards increasing the proportion of green gas in the network to 100% over time. The Group’s revenues, which are primarily regulated, are predominantly based on fixed tariffs with relatively low sensitivity to customer demand or consumption.

Mkt Cap £452m | Prem/(disc) 9.1% | Div yield 5.2%

Event

SDCL Energy Efficiency Income Trust has agreed a £100m investment in Värtan Gas Stockholm AB, the owner of Stockholm’s regulated gas distribution network. The investment follows the announcement on Friday that the company raised £105m of additional equity (£80m target). 

Locally produced biogas provides 70% of the gas for the network and SEIT’s aim is to increase the proportion of green gas in the network to 100% over time. Värtan Gas Stockholm AB aims to reduce and reuse waste gases at the point of production (e.g. waste water treatment plants) and at the point of use. 

The revenues are primarily regulated and are mainly based on fixed tariffs with low sensitivity to customer demand of consumption. The manager is also aiming to drive revenue growth in opportunities such as serving new transport customers. The acquisition will be funded from existing cash resources and debt facilities. Värtan Gas Stockholm AB also has project debt of £26m. 

In addition to the £100m investment, the manager is in advanced negotiations to acquire £150m of assets including a portfolio of commercial and industrial on-site solar projects in the US and high efficiency combined heat and power projects for commercial, industrial and public sector buildings in the UK. 

SDCL Energy Efficiency’s placing raised £105m at 100p per share against its target of £80m. Even with the expanded target, the issue was significantly oversubscribed. The announcement on Friday said that there had been “further positive progress with the negotiations to acquire an established, operational and regulated energy network in a major Western European city“.

It turns out that the fund has now agreed to spend £100m to acquire a 100% interest in Värtan Gas Stockholm, the ultimate owner of the established, operational and regulated gas distribution network for Stockholm, Sweden.

Värtan Gas Stockholm owns and operates Stockholm’s regulated gas grid, the majority – about 70% – of which is sourced from locally produced biogas. The group supplies and distributes to over 58,000 residential, commercial, industrial, transportation and real estate customers in Stockholm. It helps to reduce pollution and greenhouse gas emissions by reducing and reusing waste gases both at the point of production, for example at municipal waste water treatment plants and, at the point of use, through the displacement of natural gas in buildings and diesel in transport. SDCL Energy Efficiency intends to work towards increasing the proportion of green gas in the network to 100% over time. This will help Stockholm and Sweden towards their goal of being carbon neutral by 2040.

Revenues are mostly regulated and are predominantly based on fixed tariffs with relatively low sensitivity to customer demand or consumption. The manager believes that, in addition to existing revenues, there are opportunities for growth, for example from serving new transport customers, as commercial and municipal vehicle fleets continue to switch to cleaner fuels, including biogas. In addition, there are opportunities to deliver new energy and infrastructure services to customers by developing the network and through vertical integration.

The investment is expected to meet and exceed SEEIT’s total returns targets and to further support its progressive dividend policy.

The deal will be funded using a £30m short term acquisition facility, that has been added to SEEIT’s current £40m revolving credit facility, and cash (including some of the cash raised last week). Värtan Gas’s existing project debt finance facilities, which are equivalent to about £26m, will remain in place.

SDCL Energy Efficiency Income Trust, a UK-listed investment company that invests exclusively in the energy efficiency sector, has agreed to acquire a 100% interest in Värtan Gas Stockholm AB (“VGSAB”), the ultimate owner of the established, operational and regulated gas distribution network for Stockholm, Sweden, involving an equity investment of approximately £100 million.

It is an essential infrastructure service that helps to reduce pollution and greenhouse gas emissions by reducing and reusing waste gases both at the point of production, for example at municipal waste water treatment plants and, at the point of use, through the displacement of natural gas in buildings and diesel in transport. SEEIT intends to work towards increasing the proportion of green gas in the network to 100% over time. The grid is an essential component of an integrated system, aligned with national and regional strategies to attain carbon neutrality by 2040.

The Group’s revenues, which are primarily regulated, are predominantly based on fixed tariffs with relatively low sensitivity to customer demand or consumption. The Investment Manager believes that, in addition to existing revenues, there are opportunities for growth, for example from serving new transport customers, as commercial and municipal vehicle fleets continue to switch to cleaner fuels, including biogas. In addition, there are opportunities to deliver new energy and infrastructure services to customers by developing the network and through vertical integration.

The investment is expected to meet and exceed SEEIT’s total returns targets and to further support its progressive dividend policy. The acquisition will be funded from existing cash reserves and debt facilities, which include the capital raised in the recent equity fundraising and a £30 million short term acquisition facility that has been added to SEEIT’s current £40 million revolving credit facility. VGSAB’s existing project debt finance facilities, which are equivalent to c.£26 million, will remain in place.

Completion of the acquisition is expected in the coming weeks, after satisfaction of certain customary conditions and consents.

CEP Staff, 19 October 2020

SDCL Energy Efficiency Income Trust plc (SEEIT), managed by Sustainable Development Capital LLP, has raised £105 million in an expanded issuance of new ordinary shares, owing to the ‘strong support’ demonstrated by investors.

Find article here (paywalled): https://cleanenergypipeline.com/news/seeit-raises-105-million-acquires-swedish-green-gas-network/

Sophie Mellor, 19 October 2020

LSE-listed SDCL Energy Efficiency Income Trust (SEEIT) has acquired Swedish gas distribution firm Värtan Gas Stockholm

Full article here (paywalled): https://ijglobal.com/articles/150738/seeit-acquires-swedish-gas-distributor