SDCL Energy Efficiency Income Trust plc (LON:SEIT) has announced that it has sold its UK onsite solar portfolio, UU Solar, to UK Power Networks Services Holdings Limited, the private networks business of UK Power Networks Group, for a consideration of £90.8 million. The agreed price represents a 4.5% premium to the Company’s 30 September 2023 valuation.
The UU Solar investment was made in mid-2022. UU Solar supplies substantially all the existing on-site renewable electricity, through solar, wind, mini-hydro and other technologies, for the leading UK water company, United Utilities. The investment represented a long-term, contracted portfolio with an investment grade counterparty that contributed to SEEIT’s portfolio construction and its objectives to secure income and preservation of capital.
Since the time of investment, financial markets have been characterised by higher interest rates and levels of inflation which have increased the total return that SEEIT is seeking from its portfolio. At the same time SEEIT is seeking to maintain the strength of its balance sheet by keeping debt at moderate levels during a period in which it is not issuing new equity. The sale of UU Solar creates liquidity for SEEIT that can be applied to strengthen its balance sheet, to help to meet its investment objectives, and to optimise portfolio construction at this time.
The sale proceeds will be used to reduce short term borrowings under SEEIT’s revolving credit facility (RCF). The Investment Manager continues to take steps to improve the total return from SEEIT’s portfolio and the disposal provides capacity to recycle capital into existing platform investments, which represent SEEIT’s proprietary and ‘organic’ pipeline and that offer opportunities for higher returns. Strength of balance sheet remains a focus and good progress is being made with further asset disposals and co-investment partnership opportunities as referenced in its Interim Update Statement on 19 March.
UK Power Networks Services has a long history of successfully managing large asset portfolios for clients with critical national infrastructure. It is active in the water and renewables sector and views UU Solar as a natural fit with its existing portfolio. UK Power Network Services is part of the wider UK Power Networks group, which delivers electricity to homes and businesses across London, the South-East, and the East of England.
Jonathan Maxwell, CEO of the Investment Manager, SDCL Energy Efficiency Income Trust, said: “The sale is positive news for SEEIT as it makes a meaningful contribution to its objectives to reduce short term borrowings, to improve liquidity and to focus on investment in higher yielding assets that support SEEIT’s total return objectives.
The agreed price represents a premium to the Company’s last published valuation, which supports the approach that SEEIT seeks to take to its portfolio valuations. Proving the valuation through realisations should hopefully help to enhance market confidence in the net asset value of the Company’s portfolio. The Board and Investment Manager of SEEIT remain committed to helping improve the liquidity and marketability of SEEIT shares.
UK Power Networks Services represents an excellent strategic buyer for a high-quality portfolio serving an important client. We hope to build on our relationship with both United Utilities and UK Power Networks Services in the future to deliver new opportunities for SEEIT.”
