SDCL Energy Efficiency Income Trust : Proposed Change in Investment Policy

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SDCL Energy Effcncy. - SEIT Proposed Change in Investment Policy Released 07:00 28-Feb-2020

RNS Number : 4116E

SDCL Energy Efficiency Income Tst

28 February 2020

28 February 2020

SDCL Energy Efficiency Income Trust plc

('SEEIT' or the 'Company')

Proposed Change in Investment Policy and Publication of Circular

Further to the Investment Update announced on 11 February 2020, the Board of SEEIT announces that it has today published a circular (the 'Circular') convening a general meeting to be held on 18 March 2020 (the 'Extraordinary General Meeting') in order to seek shareholder approval for a proposed change to the Company's Investment Policy which would remove the 25% minimum exposure limit to UK based Energy Efficiency Equipment investments which was adopted at the time of the Company's IPO (the 'Proposal').

PROPOSED CHANGE TO INVESTMENT POLICY

Current Investment Portfolio and Rationale

The Company aims to assemble a high quality portfolio with diversification across different energy efficiency technologies by entering into a number of contractual agreements with a wide range of counterparties.

Following the acquisition of the Seed Portfolio following the Company's initial public offering in December 2018 (the 'IPO'), SEEIT has made five further acquisitions and currently has a portfolio consisting of investments in 27 Energy Efficiency Projects and committed investment opportunities. SEEIT remains well diversified by project size, contract length, underlying technology and counterparty exposure.

As at 5 February 2020, the geographical distribution of the Company's Portfolio is approximately as follows: (a) 36 per cent of Gross Asset Value is in respect of Energy Efficiency Equipment located in the UK (encompassing other assets including cash at bank); (b) 28 per cent of Gross Asset Value is in respect of Energy Efficiency Equipment located in the United States; and (c) 36 per cent of Gross Asset Value is in respect of Energy Efficiency Equipment located in continental Europe.

As stated in the Company's investment objective and policy, the Company initially focussed its attention on investments in the UK but anticipated that it would make investments in continental Europe, North America and, potentially, the Asia Pacific region.

The current portfolio includes substantial investment within the UK, where the whole of the Seed Portfolio is based. However, as expected at the time of the IPO, the Company has broadened its geographical exposure through the acquisition of four significant portfolios in continental Europe and North America.

Proposed Change

The Board and the Investment Manager expect that the Company will continue to retain significant exposure to UK based investments over the medium to long term. However, taking account of the size and quality of the acquisition pipeline in North America and Continental Europe in particular, the Board intends to seek shareholder approval to remove the 25% minimum exposure limit to UK based investments, as set out in the Circular published today. The removal of the limit would ensure that the Company can benefit from additional flexibility when sourcing and investing in projects with attractive risk-adjusted returns across multiple jurisdictions. The Board believes this increased flexibility to be in the best interests of shareholders.

The Company's investment objective and policy will continue to maintain specific restrictions in relation to any Energy Efficiency Project representing no more than 20% of the GAV of the Company and the Company's maximum exposure to any counterparty not exceeding 20% of the GAV. These restrictions ensure that, irrespective of the project's geography, the Company continues to benefit from a highly diverse portfolio of assets.

Hedging

Notwithstanding any change to the exposure limits, the Company remains focussed on its Sterling based dividend targets and NAV and is therefore committed to having appropriate hedging arrangements in place for its portfolio.

The objective of the Company's hedging strategy is to protect the value of both income and capital elements of the portfolio from a material impact on NAV arising from movements in foreign exchange rates, and to provide stability and predictability of Sterling cash flows.

This is achieved on an income basis by hedging forecast investment income from non-Sterling Energy Efficiency Projects for up to 24 months through foreign exchange forward sales. On a capital basis, this is achieved by hedging a significant portion of the portfolio value through rolling foreign exchange forward sales. The Investment Manager will also seek to utilise corporate debt facilities in the local currency to reduce foreign exchange exposure.

As part of the Company's hedging strategy the Investment Manager will regularly review non-Sterling exposure in the portfolio and adjust the level of hedging accordingly.

The Company expects to continue to implement this currency hedging strategy irrespective of any change to the investment policy restrictions, and to date the impact of movements in foreign exchange rates on the Company has been negligible.

Extraordinary General Meeting

The Proposal is conditional on the approval of Shareholders of an ordinary resolution to be put to the Extraordinary General Meeting, which has been convened for 10.00 a.m. on Wednesday, 18 March 2020. The Notice convening the Extraordinary General Meeting is set out at the end of the Circular.

PUBLICATION OF CIRCULAR AND EXPECTED TIMETABLE

The Circular will shortly be available for viewing on the Company's website at http://www.sdcleeit.com/and on the National Storage Mechanism athttp://www.morningstar.co.uk/uk/nsm.

Expected Timetable of Events

Latest time and date for receipt of Forms of Proxy for the Extraordinary General Meeting*	10.00 a.m. on 16 March 2020
Extraordinary General Meeting	10.00 a.m. on 18 March 2020
Announcement of the result of the Extraordinary General Meeting	18 March 2020
Each of the times and dates in the expected timetable of events may be extended or brought forward without further notice. If any of the above times and/or dates change, the revised time(s) and/or date(s) will be notified to Shareholders by an announcement through a RIS provider. All references to times are to London times. *Please note that the latest time for receipt of the Forms of Proxy in respect of the Extraordinary General Meeting is forty-eight hours (excluding weekends) prior to the time allotted for the meeting.

Capitalised terms shall have the meanings attributed to them in SEEIT's IPO Prospectus dated 22 November 2018 or in the Circular, unless otherwise defined in this announcement.

Dealing codes

Ticker	SEIT
ISIN for the Ordinary Shares	GB00BGHVZM47
SEDOL for the Ordinary Shares	BGHVZM4

For Further Information

Sustainable Development Capital LLP Jonathan Maxwell Eugene Kinghorn Keith Driver	T: [phone]
Jefferies International Limited Gary Gould Tom Yeadon Tom Hovanessian	T: [phone]
TB Cardew Ed Orlebar Lucas Bramwell	T: [phone] M: [phone] E: [e-mail]

About the Company

SDCL Energy Efficiency Income Trust plc 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 acquisition of its seed portfolio following its IPO, the Company has announced further investments in a number of diversified portfolio of energy efficiency assets, including a portfolio of rooftop solar photovoltaic projects for Tesco in the UK and a portfolio of cogeneration assets in north east United States, which were identified as pipeline projects in its IPO prospectus, as well as an additional investment in a portfolio of energy efficiency loans in the United States, a portfolio of cogeneration assets in Spain and a portfolio of recycled energy and cogeneration projects in the United States.

The Company's total assets are currently allocated across the UK, Europe and North America in broadly equal proportions.

The Company aims to deliver shareholders value through its investments 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. The Company is targeting a dividend of 5.0p per share in respect of the current financial year to 31 March 2020 and 5.5p per share in respect of the next financial year to 31 March 2021. SEEIT's last published NAV was 99.0p per share as at 30 September 2019.

Further information can be found on the Company's website at www.sdcleeit.com.

Investment Manager

The Company's investment manager is Sustainable Development Capital LLP ('SDCL' or the 'Investment Manager'), 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 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 [e-mail] or visit www.rns.com.

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Proposed Change in Investment Policy - RNS