Schroder Bsc S. Regulatory News (SBSI)

19 December 2023

Schroder BSC Social Impact Trust plc

Debt Investment in Community Energy Together Limited

Related Party Transaction

The Board of Schroder BSC Social Impact Trust plc (the "Company"), which provides a unique investment opportunity to address UK social challenges, is pleased to announce a £3.6 million debt investment (the "Debt Investment") in Community Energy Together Limited ("CETL"), a community renewable energy project company, which will contribute to 'Just Transition to Net Zero', and re-deploy capital returned to the Company from recent debt repayments and the partial exit from RLPF1 announced in the Interim Report.

The Debt Investment is a direct junior loan to CETL ("Junior Loan"), alongside two other junior lenders: Big Society Capital ("BSC"), the Company's portfolio manager; and Power to Change ("PtC"). The senior lender is abrdn ("abrdn"). The security and loan agent for the Junior Loan is The Charity Bank Limited.

The Junior Loan has a five-year term and carries a fixed coupon of 7 per cent. per annum plus payment-in-kind interest of 1.5 per cent. per annum in years one to three and 2.5 per cent. per annum in years four to five.

Community Energy Together Limited

CETL is a partnership of five community organisations that have acquired seven cross-collateralised solar farm assets across the UK. CETL has acquired these assets from Community Owned Renewable Energy LLP ("CORE") by way of a corporate restructuring. CORE was established in 2017 by BSC, PtC and Finance Earth to acquire and optimise operational solar farms in England and Wales for transfer to community ownership, whilst maximising positive impact within the community.

CETL's portfolio consists of seven solar farms (3-7MW in size each) that benefit from government backed subsidies (Feed in Tariff and Renewables Obligations Certificate schemes), and the assets are funded on a cross-collateralised basis for scale and risk-sharing.

In addition to economic value creation and renewable energy generation, any surplus cash flow after covering costs and debt service obligations is allocated towards community benefit funds. CETL is forecast to generate total community benefit funds in the region of £20 million over the assets' lifetime of 20-25 years.

BSC and PtC funded their original investment in CORE via a mix of senior debt and equity. The senior debt was refinanced by abrdn in 2021, in a landmark first institutional investment in community energy in the UK, which will be transferred to CETL. The equity has been refinanced through a restructuring, effective on 15 December 2023, via a £1.8 million community equity raise by CETL and the provision of a £11.7 million junior loan to CETL from BSC (£6.0 million) and PtC (£5.7 million).

The intention is that the senior and junior loans will be repaid by surplus cash flow generated by the portfolio over the term, in addition to further community equity and bond issuance.

The Debt Investment has been made by way of transfer from BSC of £3.6 million of the Junior Loan to the Company. BSC retains a £2.4m investment in the Junior Loan.

The Debt Investment is strongly aligned with the Company's objectives:

· Strong return expectations, with immediate deployment and no cash drag.

· Investment into an asset with government-backed, inflation-linked cash flows.

· Private debt investment on a held-to-maturity basis with low correlation to public markets.

· Diversified exposure to renewable energy assets with clear impact to underserved local communities.

Commenting on the Debt Investment, Jeremy Rogers, CIO of Big Society Capital, Portfolio Manager, Schroder BSC Social Impact Trust plc, said:

"There is a growing opportunity to invest in assets that can support communities deliver on the Just Transition to Net Zero. Community Energy Together Limited delivers local renewable energy alongside supporting local projects such as in fuel poverty. The investment has been sourced through BSC's platform and offers high quality financial and impact returns for Company's shareholders, with projected local benefit of £20 million over the assets' lifetime."

The Debt Investment is a smaller related party transaction for the purposes of Listing Rule 11.1.10R and this announcement is therefore made in accordance with Listing Rule 11.1.10R(2)(c).

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