Alliance News: SDCL Energy Efficiency Snaps Up Stockholm Gas Distribution Network

General/ 19 October 2020

Paul McGowan, 19th Oct 2020

(Alliance News) – SDCL Energy Efficiency Income Trust PLC said Monday it has agreed to buy 100% interest in Vartan Gas Stockholm AB, the ultimate owner of the gas distribution network for Stockholm, Sweden.

SDCL said the deal will cost about GBP100 million. The acquisition will be funded from existing cash reserves and debt facilities, which include the capital raised in its recent GBP105 million equity fundraising and a GBP30 million short term acquisition facility that has been added to SDCL’s current GBP40 million revolving credit facility.

Vartan owns and operates Stockholm’s regulated gas grid, the majority of which is sourced from locally produced biogas.

“The group supplies and distributes to over 58,000 residential, commercial, industrial, transportation and real estate customers in Stockholm,” SDCL added.

It continued: “It is an essential infrastructure service that helps to reduce pollution and greenhouse gas emissions by reducing and reusing waste gases both at the point of production, for example at municipal waste water treatment plants and, at the point of use, through the displacement of natural gas in buildings and diesel in transport.”

SDCL said it hopes to increase the proportion of green gas in the network to 100% “over time”. The grid is an “essential component of an integrated system”, SDCL said, and is aligned with national and regional strategies to attain carbon neutrality by 2040.

SDCL said Vartan’s revenue, which are primarily regulated, are predominantly based on fixed tariffs with “relatively low sensitivity to customer demand or consumption”.

“The investment manager believes that, in addition to existing revenues, there are opportunities for growth, for example from serving new transport customers, as commercial and municipal vehicle fleets continue to switch to cleaner fuels, including biogas,” SDCL said.

“In addition, there are opportunities to deliver new energy and infrastructure services to customers by developing the network and through vertical integration.”

SDCL believes the investment will meet and exceed its total returns targets and further support its progressive dividend policy.

The deal is expected to complete in the coming weeks.

Shares in SDCL Energy Efficiency Income Trust were 0.3% higher in London on Monday at 106.30 pence each.