Sdcl Ef. Inc Tr Regulatory News (SEIT)

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

TRADING UPDATE

The Board of SDCL Energy Efficiency Income Trust (ticker: SEIT) is pleased to provide the following trading update ahead of the publication of the Company's results for the year ended 31 March 2020, which are expected to be published on or around Monday 15th June 2020.

CAPITAL STRUCTURE

· The Company's portfolio is characterized by predominantly long-term contracted cash flows and current performance remains in line with expectations.

· The Company's total assets have increased to over £380 million, compared to c. £100 million at IPO in December 2018.

· The capital value of the Company's portfolio has remained stable, notwithstanding the downturn in global markets in conjunction with the COVID-19 pandemic.

· The Investment Manager expects the Company's dividend target to be covered by earnings and investment cash flows.

· Total Group-level borrowings were c.£63 million as at 31 March 2020 (30 September 2019: £0 million).

· The Company aims to maintain a conservative level of structural gearing, while ensuring capital efficiency and enhancing returns. It also utilizes short-term borrowing facilities to minimise cash drag when making acquisitions. £39 million of the Company's borrowings is repayable in July 2020 which, absent any refinancing, would be payable from the Company's existing cash reserves which totaled £70 million as at 31 March 2020. The remaining debt is not due to expire until June 2022.

PROGRESSIVE DIVIDEND POLICY

· The Company remains on track to achieve the target dividend of 5.0p per share for the year ended 31 March 2020 and expects to declare its next interim dividend during May 2020.

· The Board remains confident in the projected future portfolio cashflows which allows it to reiterate the previously published dividend guidance of 5.5p per share for the current financial year to March 2021 and for progressive dividend growth thereafter.

PORTFOLIO

· The Company's investment portfolio as at 31 March 2020 consists of essential energy services to key counterparties with the following attributes:

o Well-diversified portfolio of 26 energy efficiency investments;

o The Company's portfolio investment clients include the public sector as well as well as a spread of commercial and industrial counterparties, with the largest project accounting for 13% of the portfolio by value;

o Weighted average project term across of the portfolio of 11.5 years;

o 93% of the assets in operational phase with 7% of assets under development or construction;

o Geographically diversified with c.35% of the portfolio by value in Europe, c.35% in the UK (including cash) and c.30% in the USA; and

o Diversified across different sub-sectors of the energy efficiency market with 55% of the portfolio focused on CHP, 19% Biomass, 10% Lighting and the remaining 16% spread across technologies including boilers and rooftop solar projects.

· The Group's assets are predominantly availability or capacity-based with any offtake agreements typically structured on pre-determined terms. The portfolio's value is therefore not expected to be materially impacted by any reduced demand for goods or services that may arise as a result of COVID-19 linked restrictions. The majority of the portfolio can be operated remotely and/or is largely automated, so we do not foresee significant impact in the operations, maintenance or management of the existing assets. To date, none of the Company's counterparties have raised any COVID-19 project specific concerns that are material to the Company's current performance. However, reduced site access will result in short-term delays in the construction and commissioning of the two portfolio investments which are not fully operational.

INVESTMENT ACTIVITY AND PIPELINE

· The Company has a track record of being able to source new investments effectively in advance of any fundraise and minimise cash drag post an equity issue by deploying equity proceeds quickly and efficiently. Following the December 2019 equity issuance the Company acquired a 50% interest in Primary Energy for an equity cash consideration of approximately $110 million.

· The investment market for high-quality energy efficiency assets which deliver lower cost, cleaner and more reliable energy solutions remains active notwithstanding the challenges associated with COVID-19.

· The Company is seeking to build a balanced portfolio, diversified by technology as well as by counterparty, geography and suppliers. The Investment Manager is currently analysing and performing diligence on a number of nearer-term potential opportunities with a total value in excess of £100 million. There is also an extensive larger pipeline of longer-term potential opportunities, with the assets remaining subject to due diligence and negotiation. The acquisition opportunities include assets in CHP, local area network solutions, rooftop solar, storage and charging infrastructure, lighting, heating, cooling and other solutions.

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

"In spite of the unprecedented global situation around COVID-19, SEEIT's portfolio continues to perform in line with expectations and deliver cheaper, cleaner and more reliable energy solutions to clients and provide stable, predictable cash flows to the Company.

The benefit of the Company's focus on long-term contracted cash flows, and limited correlation to the wider equity markets, is brought into sharp relief in the current market environment. We have a healthy pipeline of new projects and we will look to continue to source and execute on additional investment opportunities where we can secure value for the Company."

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