www.sdcl-ib.com introduction to SDCL Energy Efficiency Income Trust Plc Sustainable development Annual Results Presentation: Period to 31 March 2019 capital
Contents Investment Manager Presentation Team • Co-founder of SDCL •Charted accountant with over 15 years’ 1. Overview and Highlights experience in financial services with a focus on portfolio management and • 20 years of experience in international financial control financial markets, with 11 years focused on energy efficiency • Experience in listed and unlisted 2. Investment Strategy infrastructure and PE Funds focusing on • Experience in infrastructure, real social and renewables estate, private equity and listed securities, including co- leading HSBC’s • Spent 11 years at InfraRed in portfolio listing of HICL (2006) 3. Portfolio Update management and financial control Jonathan Maxwell Eugene Kinghorn CFO CEO 4. Financial Results 5. Appendices • Over 20 years of experience in finance • 15 years of experience in private equity and infrastructure fund investment and • Extensive experience in the fundraising development and project management of energy efficiency projects • Experience across both managed fund and direct investment opportunities • Previous roles include energy efficiency investment, portfolio management and • Previous infrastructure investment corporate finance roles at the Green experience with Pantheon including Investment Bank, Ares and GE development of the first infrastructure fund-of-funds (2008) Keith Driver Miles Alexander Investment Director Head of Investor Relations 2
Overview and Highlights 3
Overview and Financial Highlights Following IPO in December 2018, SEEIT is the first publicly listed investment trust focused on energy efficiency ▪ Seed portfolio: December 2018 – 12 predominantly operational assets and investment opportunities Investment Activity ▪ Northeastern US CHP 1 : March 2019 – 71% interest in a portfolio of 8 operational CHP units in the USA ▪ UK Rooftop Solar: June 2019 – agreement to deliver a portfolio of up to 15MW of rooftop solar for Tesco ▪ The net asset value (“NAV”) per share was 98.4p at 31 March 2019 Financial Performance ▪ Investment cashflows from the portfolio during the period of £1.7 million ▪ 14 May 2019 SEEIT announced its first interim dividend of 1.0p per share from IPO to the 31 March 2019 Distributions ▪ £100 million IPO completed on 11 December 2018 Funding ▪ £72 million additional placing on 16 April 2019 ▪ Strong and experienced Board: Tony Roper (Chair), Helen Clarkson and Chris Knowles Board and Corporate Governance ▪ The Board has put in place an appropriate corporate governance framework for the investment company ▪ Healthy pipeline of attractive opportunities across both technology and geographies, in particular CCHP and Outlook rooftop solar in both Continental Europe and in the USA 1. Combined Heat and Power (“CHP”) 4
Investment Strategy 5
Energy Efficiency and Decentralised Energy: the Opportunity The energy industry is going through substantial change. We may only need 25% of the energy we use. Current energy usage is characterised by inefficiency and wastage, with up to 75% of original energy resources lost in generation, transmission & distribution The Future: decentralised and efficient The Past: centralised and inefficient Energy Efficiency Decentralised Energy ▪ ▪ LED lighting Combined heat and power, rooftop solar PV ▪ ▪ Heating Ventilation and Air Conditioning (HVAC) Grid efficiency, flexibility, capacity markets, storage ▪ ▪ Building management systems and controls (BMS) Infrastructure efficiency, interconnectors and repowering ✓ ✓ Can reduce energy demand in buildings by 35% – 65% depending on Can reduce grid generation, transmission and distribution losses technology from c.65% to c.15% ✓ ✓ Can result in significant reductions in greenhouse gas emissions Energy security and resilience through independence from grid ✓ ✓ Reduced energy and maintenance costs, creating significant savings Can create cleaner, lower carbon heat and power on site ✓ ✓ Can improve both economic productivity and help to drive revenues Lower cost heat and power supply over the medium to long term Key drivers will lead to rapid market expansion in the near-term 6
Benefits of Energy Efficiency and Decentralised Generation Reducing energy demand, boost cost savings and provide environmental and infrastructure improvements Financial performance Environmental performance Infrastructure performance Projects require no capex from the host Delivering measurable greenhouse gas Commercially proven solutions upgrading company and result in lower opex emission reductions and energy security infrastructure to drive revenues Key benefits to host company ✓ No upfront capital investment for the host company ✓ Off-balance sheet solutions ✓ Risk transfer during installation and operation ✓ Lower energy, operation and maintenance costs ✓ State of the art technology and services ✓ Energy infrastructure upgrades ✓ Performance contracts based on energy saving or output ✓ Specialist deal structuring and legal contracting ✓ Market standards for availability, performance and maintenance ✓ Medium to long term investments and contracts Providing proven and quantifiable, long-term benefits to host companies 7
SEEIT Focuses on Operational Assets Predominantly UK investment, with North American exposure and scope to expand ▪ Operational projects offer immediate exposure to regular cash yield with limited or zero ramp-up ▪ Significantly reduces investment risk by eliminating construction exposure Target operational phase for income and low risk Construction - Construction and installation management Lower risk/ - Performance to specification reward - Project expansion or upgrade Operational phase Development - Regular cash generation - Capital budget, time and defects control - Project identification - Ongoing management, innovation and - Conception and securing options improvement - Approval, permitting and planning consent - Negotiation Higher risk/ reward Project life SEEIT predominantly invests in operating projects, generating an immediate cash yield 8
Energy Efficiency Investment: Risks and Mitigants SEEIT has established a risk management framework, which includes systems and procedures designed to ensure that all applicable risks can be identified, monitored and managed Risk Description Mitigant ▪ Qualitative and quantitative credit assessment The host’s ability (or Counterparty willingness) to make the ▪ Credit enhancement (if appropriate and available) Credit Risk contracted payments ▪ Securing of parent company guarantees (where appropriate) The energy efficiency solution Performance ▪ Performance guarantees from energy service companies (ESCOs) delivered does not result in Risk ▪ For smaller energy service companies, qualitative risk assessment is undertaken the expected savings Limited liquidity in the shares, ▪ Closed-ended fund, with gearing limited to 35% investments are typically Liquidity Risk illiquid and the Company may ▪ Assets typically offer immediate positive cashflows, benefitting potential portfolio liquidity have debt ▪ Operations & maintenance (O&M) counterparties with strong track records Energy efficiency equipment Operating and ▪ O&M contract matching the life of the performance guarantee, with operational failure is not maintained resulting in Maintenance covered by the performance guarantee equipment failure and Risk financial loss ▪ The inability of the host company to meet the terms of the O&M contract is covered under the terms of the energy service agreement (ESA) and may result in termination Risks relating to changes in ▪ Where feedstock is required, the host will have supply arrangements in place tax laws and regulations, any Country/Region ▪ If required, SEEIT contracts with established suppliers with local presence and strong credit unhedged currency exposure and other international Risk ▪ In case of any shortage in supply, pre- determined payments or ‘liquidated damages’ are political risks, such as to Brexit payable by the supplier under a feedstock supply agreement 9
Portfolio Update 10
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