Investment in US energy efficiency portfolio
30 December 2019
SDCL Energy Efficiency Income Trust plc
("SEEIT" or the "Company")
New investment in US industrial energy efficiency portfolio
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 50% interest in Primary Energy, a portfolio of recycled energy and cogeneration projects located in Indiana, USA, from a consortium led by Fortistar LLC (''Fortistar'') for an equity cash consideration of approximately $110 million.
The 298MW portfolio consists of five operating projects which generate low-cost, efficient energy: - three recycled energy projects, one natural gas combined heat and power project and a 50% interest in an industrial process efficiency project.
The portfolio projects are located within the Indiana Harbor Works, which comprises the Indiana Harbor Works East and Indiana Harbor Works West steel mills, two of the most efficient and advanced steel mills in the United States, owned by ArcelorMittal S.A. and Midwest Steel mills (a subsidiary of United States Steel Corporation) respectively. The projects are fully integrated into the steel mill facilities, including fuel handling and emissions control equipment and systems that are critical for the operations of the facilities.
At completion, the existing investor consortium will continue as a 50% shareholder in the portfolio alongside SEEIT. Operations and maintenance on the portfolio will continue to be carried out in-house by Primary Energy, as well as in partnership with the steel mill owners that are the off takers for the projects. Primary Energy also benefits from a project development pipeline involving recycled energy and energy efficiency projects with industrial clients, in which SEEIT will have the opportunity to participate.
Portfolio revenues are contracted via long-term offtake agreements with the steel mill owners, with an average remaining contract life of c.10 years. The majority of revenues are sourced from investment grade counterparties. The strong environmental benefits of the assets qualify the projects for Renewable Energy Certificates which are equivalent to those generated by 536 MW of solar or 374 MW of wind 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 existing cash reserves, including the capital raised in the recent equity fundraisings. Existing project debt finance facilities of approximately $206 million will remain in place post acquisition. The relevant proportion of these facilities will be taken into account in the calculation of SEEIT's own gearing ratios and borrowing restrictions.
Completion of the acquisition is expected in the coming weeks, subject to the satisfaction of certain customary conditions and consents.
Commenting on the acquisition, Jonathan Maxwell, CEO and Founder of Sustainable Development Capital LLP, said:
"This opportunity involves a portfolio of industrial energy efficiency projects with strong environmental benefits. The portfolio includes projects that recycle energy from waste heat and gases from steel mills that would have otherwise been vented and also generates efficient combined heat and power. The projects are able to produce energy at a cost that is lower than the marginal price of alternative energy sources. This investment in a proven operational portfolio further diversifies SEEIT's portfolio, in terms of geography, technology, counterparty and application. We are confident that this portfolio will make a significant contribution to SEEIT's total returns.''
For Further Information
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Sustainable Development Capital LLP Jonathan Maxwell Keith Driver
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T: +44 (0) 20 7287 7700
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Jefferies International Limited Gary Gould Tom Hovanessian
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T: +44 (0) 20 7029 8000
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TB Cardew Ed Orlebar Joe McGregor |
T: +44 (0) 20 7930 0777 M: +44 (0) 7738 724 630 |
About SEEIT
SDCL Energy Efficiency Income Trust plc (the "Company") 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 IPO, the Company has invested in a diversified portfolio of energy efficiency assets, including the seed portfolio, a portfolio of rooftop solar PV projects for Tesco in the UK, a portfolio of cogeneration assets in the USA, a portfolio of energy efficiency loans in the USA and a portfolio of cogeneration assets in Spain.
The Company 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.
The Company 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.
Investment Manager
SEEIT's investment manager is Sustainable Development Capital LLP ("SDCL"), an investment firm established in 2007, with a proven track record of investment in energy efficiency and decentralised generation projects in the UK, Continental Europe, North America and Asia.
SDCL is headquartered in London and the group also operates worldwide from offices in New York, Dublin, Hong Kong and Singapore. SDCL is authorised and regulated in the UK by the Financial Conduct Authority.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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