SDCL Energy Efficiency Income Trust’s (SEEIT’s) interim update (for the six months to 30 September 2024) has highlighted that its operational assets, on a consolidated basis, are performing in line with management’s expectations and that the portfolio is well positioned for growth. SEEIT is actively pursuing additional financing, co-investment and disposal opportunities to support the capital needs of Onyx and EVN, which are growing ahead of budget. Surplus capital will be used to pay down SEEIT’s revolving credit facility (RCF). Management believes SEEIT is on track to deliver its target dividend of 6.32p per share for FY25 (10% current yield), which is fully covered by net operational cash received from investments.

SDCL Energy Efficiency Income Trust (SEEIT) recorded a 9% increase in cash from investments in FY24, generating £92.5m (FY23: £85.1m), ensuring its DPS of 6.24p was fully covered by cash 1.1x. The board guided a target dividend of 6.32p per share for FY25 (9.5% prospective yield). The portfolio valuation stood at £1,117m (4.8% increase from H124 and 1.6% from FY23). Both SEEIT’s NAV and NAV per share remained flat for FY24, at £982m and 90.5p/share, compared to H124, with the majority of the reduction from FY23 (£1,125m and 101.5p/share) arising from the unrealised impact of increased discount rates applied in the first half of FY24. SEEIT currently trades at a 26% discount to NAV with a 9.4% dividend yield, and management has made strong progress in addressing the discount to NAV through proving its asset valuations.

In this note we examine five key questions investors have raised regarding SDCL Energy Efficiency Income Trust (SEEIT), prior to the release of its full-year results (for the year ended March 2024) at the end of June 2024 and provide our answers and analysis. The questions focus on dividend security, discount to NAV, management’s strategies for closing the discount, asset valuations and where SEEIT differs to its peers. SEEIT is an investment trust focused on delivering energy and energy efficiency as a decentralised service directly to end users, rather than supplying into the broader power grid. Its income comes from a range of services and is driven by cutting losses in energy generation, transmission and use. SEEIT offers an attractive dividend yield (9.15%) and upside from narrowing of the discount (c 26% or c 35% upside if closed).