SDCL Energy Efficiency Income (SEIT)

SDCL Energy Efficiency Income (SEIT) invests in portfolio companies and assets that are focussed on energy efficiency, typically in an industrial or commercial setting. SEIT’s portfolio of companies work with their customers to provide assets and services that can significantly improve efficiency. These can be broadly categorised as energy savers or energy generators. The former covers assets that help more efficient use of existing energy, the latter generates energy efficiently and reduces transmission losses by locating energy generation close to where it is consumed. SEIT has specific ESG goals and is an Article 9 trust under SFDR.

SEIT derives returns from its equity ownership and through contracted returns attached to efficiency assets, usually structured in a similar manner to infrastructure contracts. Thus, SEIT combines equity upside with predictable long-term cashflows to provide both income and the potential for capital growth. SEIT’s returns aren’t reliant on power prices and are predominantly unsubsidised.

SEIT’s largest single country exposure is the US, c. 60%, with holdings focussed on industrial efficiency across several sectors, including the strategically important US steel industry. The main balance of the portfolio is invested in Europe and the UK, with currency hedging employed to remove most of the currency risk. SEIT has a concentrated portfolio with the top five holdings and associated projects making up over 75% of the portfolio by value.

SEIT was geared at c. 35% LTV as of 30/09/2024 including both project-level and top-company debt, a lower level than is common in traditional infrastructure, balancing the fact that SEIT’s counterparties are mainly corporate rather than government.

SEIT trades at a c. 47% discount, wider than the peer group average of c. 34%. The discount means that the trust currently yields c. 13%, with the dividend fully covered. SEIT has paid a progressive dividend for the last five years and is on target to increase its dividend again in the year ending 31/03/2025.