Paul McGowan, 19th Oct 2020

(Alliance News) – SDCL Energy Efficiency Income Trust PLC said Monday it has agreed to buy 100% interest in Vartan Gas Stockholm AB, the ultimate owner of the gas distribution network for Stockholm, Sweden.

SDCL said the deal will cost about GBP100 million. The acquisition will be funded from existing cash reserves and debt facilities, which include the capital raised in its recent GBP105 million equity fundraising and a GBP30 million short term acquisition facility that has been added to SDCL’s current GBP40 million revolving credit facility.

Vartan owns and operates Stockholm’s regulated gas grid, the majority 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,” SDCL added.

It continued: “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.”

SDCL said it hopes to increase the proportion of green gas in the network to 100% “over time”. The grid is an “essential component of an integrated system”, SDCL said, and is aligned with national and regional strategies to attain carbon neutrality by 2040.

SDCL said Vartan’s revenue, 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,” SDCL said.

“In addition, there are opportunities to deliver new energy and infrastructure services to customers by developing the network and through vertical integration.”

SDCL believes the investment will meet and exceed its total returns targets and further support its progressive dividend policy.

The deal is expected to complete in the coming weeks.

Shares in SDCL Energy Efficiency Income Trust were 0.3% higher in London on Monday at 106.30 pence each.

SDCL Energy Efficiency Income Trust (SEEIT), the first UK-listed investment company of its kind to invest exclusively in the energy efficiency sector, has agreed to acquire a 100 per cent 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 GBP100 million.

VGSAB 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 per cent 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 GBP30 million short term acquisition facility that has been added to SEEIT’s current GBP40 million revolving credit facility. VGSAB’s existing project debt finance facilities, which are equivalent to cGBP26 million, will remain in place.

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

Commenting on the acquisition, Jonathan Maxwell, CEO and Founder of Sustainable Development Capital, says: “SEEIT is making an investment in an important infrastructure asset for the City of Stockholm. It provides an attractive opportunity for SEEIT to invest in an established energy network that helps with greenhouse gas emission reductions and for SEEIT to help make it greener. The operational investment offers the opportunity for an attractive level of income and for significant growth over the medium to long term. We are pleased to agree this investment immediately following our successful fund-raising.”

PRESS RELEASE

SDCL Energy Efficiency Income Trust (SEEIT) has agreed to pay £100 million ($129 million) to acquire a 100 percent interest in Vartan Gas Stockholm AB (VGSAB), the owner of the established, operational and regulated gas distribution network for Stockholm, Sweden.

The VGSAB group owns and operates Stockholm’s regulated gas grid, 70 percent of which is sourced from locally produced biogas. The group supplies and distributes to more than 58,000 residential, commercial, industrial, transportation and real estate customers in Stockholm.

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 wastewater treatment plants — and at the point of use, through the displacement of natural gas in buildings and diesel in transport.

SEEIT intends to work toward increasing the proportion of green gas in the network to 100 percent, 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 and opportunities to deliver new energy and infrastructure services to customers by developing the network and through vertical integration.

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 ($38 million) short-term acquisition facility that has been added to SEEIT’s current £40 million ($51 million) revolving credit facility. VGSAB’s existing project debt finance facilities, which are equivalent to £26 million ($33 million), will remain in place.

“SEEIT is making an investment in an important infrastructure asset for the City of Stockholm,” said Jonathan Maxwell, CEO and founder of Sustainable Development Capital. “It provides an attractive opportunity for SEEIT to invest in an established energy network that helps with greenhouse gas emission reductions and for SEEIT to help make it greener.”

SEEIT is the first U.K. listed company of its kind to invest exclusively in the energy-efficiency sector. Since the IPO, SEEIT has now made nine investments and commitments in a diversified portfolio of distributed generation and energy-efficiency projects totaling £500 million ($645 million).The projects are primarily located in the United Kingdom, Europe and North America, and they include inter alia, a portfolio of cogeneration assets in Spain; a portfolio of recycled energy and cogeneration projects in the United States; and, most recently, investments and commitments in operational and construction assets in the United Kingdom and Singapore.

BY IPE STAFF 19 OCTOBER 2020

SDCL Energy Efficiency Income Trust is buying Swedish regulated gas distribution network company Värtan Gas Stockholm for £100m (€109m).

The UK-listed investment firm said the acquisition will be funded from existing cash reserves and debt facilities, which include the capital raised in the recent equity fundraising and a £30m short term acquisition facility that has been added to SDCL’s current £40m revolving credit facility.

Värtan Gas owns and operates Stockholm’s regulated gas grid, the majority 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.

Jonathan Maxwell, CEO and founder of SDCL’s investment manager Sustainable Development Capital, said: “SDCL is making an investment in an important infrastructure asset for the City of Stockholm. It provides an attractive opportunity for SDCL to invest in an established energy network that helps with greenhouse gas emission reductions and for SEEIT to help make it greener.

“The operational investment offers the opportunity for an attractive level of income and for significant growth over the medium to long term. We are pleased to agree this investment immediately following our successful fund-raising.”

By Sam Kerr 19 Oct 2020

SDCL Energy Efficiency Income Trust (SEEIT), the UK listed energy efficiency investor, is buying Swedish regulated gas distribution network Värtan Gas Stockholm, with the acquisitive firm already completing an increased £105m equity sale and small debt raise to part finance the purchase.

Last week SEEIT set out to raise £80m for the acquisition of “an established, operational and regulated energy network in a major Western European city”.

The acquisition turned out to be Värtan Gas Stockholm.

The Swedish firm owns and operates Stockholm’s regulated gas grid, around 70% of which is sourced from locally produced biogas, and supplies and distributes to over 58,000 customers in Stockholm.

The capital raise was opened on Tuesday, October 13, and closed on Friday, October 16. Jefferies was sole global coordinator in the deal.

The company was inundated with investor interest over the three days of bookbuild and as such decided to grow the offering to £105m.

The decision to grow the offering is the latest sign of huge investor demand for any EMC transaction with an M&A angle.

“There are a lot of capital raises left to come, and while rescue rights issues are a big part of the pipeline, anything with a growth or acquisition angle is still proving to be very popular among shareholders,” said a senior ECM syndicate banker.

The new shares were sold at a fixed price of £1.05 a share a 5.4% discount to SEEIT’s closing price on October 12 but a 4% premium to its net asset value.

Not only was the deal popular because of the use of proceeds, the offering was also attractive for yield hunting investors.

SEEIT is targeting a dividend target of 5.5p per share for the financial year ending March 31, 2021, which represents a dividend yield of 5.2% for investors who took part in the capital raise.

Companies that still aim to pay out a regular dividend have been hugely popular in equity capital markets this year because of the huge number of FTSE companies that have either suspended or delayed dividend payments to shareholders.

The VGS deal will be funded from existing cash reserves and debt facilities, which include the capital raised in last week’s equity fundraising as well as a £30m short term acquisition facility that has been added to SEEIT’s current £40m revolving credit facility.

VGS’s existing project debt finance facilities, which are equivalent to around £26m, will remain in place.

“We are grateful for the strong support we have received from both new and existing investors. Given the strength of investor demand and the progress we have made with our near-term acquisition pipeline, we have increased the amount raised to £105m from £80m,” said Tony Roper, chairman of SDCL Energy Efficiency  Income Trust last week

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A sub-sector in energy efficiency funds has emerged with Triple Point Energy Efficiency Infrastructure Company (TEEC) raising £100m and confirming it will list on the London Stock Exchange on Monday.

The new investment trust will sit alongside SDCL Energy Efficiency Income Trust (SEIT) which raised the same amount in December 2018 when it became the first investment company to specialise in running projects that save companies energy bills and cut their carbon emissions.

Not to be outdone by its new rival, yesterday the now £452m SEIT announced its third share issue since launch. It wants to raise £80m for its pipeline of new investments and is offering with new shares at 105p, a 4% premium to the last reported net asset value on 31 March and a 5.4% discount to their closing price on Monday.

Although Triple Point failed to hit its upper target of £200m it will be relieved to have achieved half that given the current stock market uncertainty and the fact that increasingly trusts below £100m fail to attract wealth managers which are the sector’s biggest buyers.

Like SEIT, TEEC is primarily an income fund, aiming to generate a 5.5% dividend yield on its 100p share price in its first year, as part of an annual total return to shareholders of 7-8%.

The successful flotation of another ‘alternative income’ fund contrasts with the Tellworth UK smaller companies trust which had to postpone its launch this month after failing to attract £100m, extending a trend of recent years which has seen infrastructure, debt and specialist property trusts attract much more money than conventional equity funds.

A total of 100m TEEC shares will start trading in London on Monday after the initial public offer (IPO) organised by RBC Capital Markets, Winterflood Securities and Akur Capital.

Although fund manager Triple Point is best known for its Social Housing (SOHO) real estate investment trust,  currently seeking to raise £70m in a fund raising, it has a ten-year record of investing in energy efficiency where it currently manages over £1.5bn in combined heat and power (CHP) projects, hydroelectricity, solar power and reserve peaking plants, areas where the new trust currently has a list of nearly £300m of eligible investments it could make.

For his part SEIT fund manager Jonathan Maxwell said he had over £100m of investments on which he was in exclusive talks and a further £150m at an advanced stage of due diligence.

Chairman Tony Roper said: ‘This proposed capital raise builds on the strong momentum SEIT has achieved over the last two years. Energy efficiency is critically important in global efforts to address the climate emergency and has become an increasing focus for investors. The proceeds of this placing will allow SEIT to continue to invest in this important and growing market whilst also delivering additional scale and diversification to shareholders.’

Investors who buy shares in the placing will be entitled to receive the next quarterly dividend declared in November. SEIT has a dividend target of 5.5p per share for the financial year to 31 March 2021, which offers a dividend yield of 5.2% at the 105p placing price.

Stifel analyst Max Haycock was surprised at the timing of the equity issue a month before half-year results that would have up-to-date financial information. ‘This is SDCL’s third equity issue in a year and the clear message is don’t buy the shares in the market on a high premium when there could be an equity issue around the corner. The shares traded at 111p yesterday [Monday] and the equity issue is at 105p. This habit of frequent equity issuance may temper the premium going forward.

The shares are half a penny up at 106.5p this morning.

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• Placing: SDCL Energy Efficiency Income is seeking to raise £80m through the issue of 76.2m new ordinary shares at 105.0p. The issue price represents a 5.4% discount to last night’s closing price of 111p and an 8.1% premium to the 31 March NAV, after adjusting for two interim dividends totalling 3.8p paid since March. The proceeds will be used to fund further acquisitions from the manager’s pipeline of investment opportunities, of which more than £100m of opportunities are under exclusivity and a further £150m is at advanced stages of due diligence. The manager expects 30 September asset valuations to be similar to those at 31 March, given the portfolio has performed in line with expectations since March. New shares form the placing will be entitled to receive the third quarter dividend which is expected to be declared in November.
• Background: SDCL Energy Efficiency Income last raised capital in June with a £110m placing that was upscaled from an initial target of £60m to meet investor demand. Since this point the company has committed £50m to electric vehicle charging infrastructure in the UK, in addition to acquiring a portfolio of CHP projects for an initial £5m and an energy efficiency project in Singapore for £2m. The fund has grown through a series of placings since it launched with IPO proceeds of £100m in December 2018. As a result, it now has a market cap of £473m. Energy efficiency and storage remains an in vogue sector with investors, particularly those with a sustainability focus. We note that Triple Point recently announced its intention to raise £200m for the IPO of a new investment company, Triple Point Energy Efficiency Infrastructure, which will invest in a diversified portfolio of energy efficiency assets in the UK that have a positive environmental impact and facilitate the transition to a low carbon economy.