SDCL Energy Efficiency Income Trust plc, the first UK-listed investment company of its kind to invest exclusively in the energy efficiency sector, has agreed to acquire a portfolio of cogeneration assets in Spain for a total cash consideration of approximately €64 million. For more information see the IDTechEx report on Energy Harvesting Microwatt to Megawatt 2019-2029.
The substantial majority of the portfolio's revenues are investment grade, with nine operational projects providing in aggregate 125 MW of clean and efficient energy generation. The portfolio comprises five combined heat and power (CHP) plants, two olive processing plants and two biomass plants.
The CHP plants together meet the high combined electrical and thermal efficiency standards required by SEEIT from natural gas CHP and generate 100 MW of electricity and heat. Part of the heat generated is sold within the portfolio to two olive processing plants and the remaining heat is sold to external olive processors. The two olive processing plants within the portfolio provide feedstock in the form of olive cake for two biomass plants that are also part of this portfolio, which in turn generate 25 MW of renewable electricity. While heat generated is used by the projects within the portfolio or sold to nearby users, electricity from the projects is sold to the grid in Spain under the regulated energy regime.
The portfolio benefits from long-term contracted revenues, which mitigate exposure to any fluctuations in commodity prices. As a result, revenue and costs are relatively stable and predictable over the medium to long term.
Operations and maintenance on the portfolio will continue to be carried out by the vendor, a major industrial group, and benefit from long-term service agreements with the equipment providers Gestamp Biomass, GE, Rolls Royce, Jenbacher, Mitsubishi and Turbomach.
The Company has agreed to acquire the project equity in the portfolio, which has a weighted average remaining term of approximately 14 years. The Company intends to keep in place existing project debt finance facilities associated with the portfolio which are in compliance with its borrowing limits.
Completion of the acquisition is expected in the coming weeks, subject to the satisfaction of certain customary conditions and consents. Upon completion, SEEIT will control the portfolio of assets through full or majority ownership of the underlying portfolio projects.
Returns from the portfolio are expected to meet SEEIT's total returns targets and further support its progressive dividend policy. The acquisition is to be funded through a combination of existing cash reserves and, if appropriate, available borrowing facilities.
The investment is the Company's fourth acquisition since launch and is consistent with the business plan and investment pipeline outlined in the Prospectus. SEEIT is continuing to review a substantial pipeline of new investment opportunities, a number of which are at an advanced stage.
Commenting on the acquisition, Jonathan Maxwell, CEO and Founder of Sustainable Development Capital LLP, said: "We are delighted to be making our first investment in Continental Europe, consistent with the policy and strategy of the Company. This portfolio achieves high levels of combined electrical and thermal efficiency, as well as producing clean and renewable energy. It represents an investment in a highly cash generative and proven operational portfolio and further diversifies SEEIT, in terms of geography, technology and application. The vendor, from whom we are acquiring the assets and who will continue to operate and maintain the portfolio, is a major industrial group and integrated operator in the CHP and biomass energy generation market. We are confident that this portfolio will make a significant contribution to SEEIT's total returns.''
For Further Information
Sustainable Development Capital LLP
T: +44 (0) 20 7287 7700
Jefferies International Limited
T: +44 (0) 20 7029 8000
T: +44 (0) 20 7930 0777
M: +44 (0) 7738 724 630
SDCL Energy Efficiency Income Trust plc is the first listed company of its kind to invest exclusively in the energy efficiency sector. Examples of the projects in the portfolio include combined cooling/heating and power plants, as well as energy efficiency projects in the UK and the US. Since acquisition of its seed portfolio at IPO, SEEIT has announced investment in a diversified portfolio of energy efficiency assets, including a portfolio of rooftop solar photovoltaic projects for Tesco in the UK and a portfolio of cogeneration assets in north east United States, which were identified as pipeline projects in its IPO prospectus, as well as an additional investment in a portfolio of energy efficiency projects in the United States.
SEEIT aims to deliver shareholders value through its investment in a diversified portfolio of energy efficiency projects which are driven by the opportunity to deliver lower cost, cleaner and more reliable energy solutions to end users of energy.
SEEIT is targeting an attractive total return for shareholders of 7-8 per cent. per annum (net of fees and expenses and by reference to the initial issue price of £1.00 per Ordinary Share), with a stable dividend income, capital preservation and the opportunity for capital growth.
Further information can be found on the Company's website at www.sdcleeit.com .
Source: TB Cardew
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