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A sub-sector in energy efficiency funds has emerged with Triple Point Energy Efficiency Infrastructure Company (TEEC) raising £100m and confirming it will list on the London Stock Exchange on Monday.

The new investment trust will sit alongside SDCL Energy Efficiency Income Trust (SEIT) which raised the same amount in December 2018 when it became the first investment company to specialise in running projects that save companies energy bills and cut their carbon emissions.

Not to be outdone by its new rival, yesterday the now £452m SEIT announced its third share issue since launch. It wants to raise £80m for its pipeline of new investments and is offering with new shares at 105p, a 4% premium to the last reported net asset value on 31 March and a 5.4% discount to their closing price on Monday.

Although Triple Point failed to hit its upper target of £200m it will be relieved to have achieved half that given the current stock market uncertainty and the fact that increasingly trusts below £100m fail to attract wealth managers which are the sector’s biggest buyers.

Like SEIT, TEEC is primarily an income fund, aiming to generate a 5.5% dividend yield on its 100p share price in its first year, as part of an annual total return to shareholders of 7-8%.

The successful flotation of another ‘alternative income’ fund contrasts with the Tellworth UK smaller companies trust which had to postpone its launch this month after failing to attract £100m, extending a trend of recent years which has seen infrastructure, debt and specialist property trusts attract much more money than conventional equity funds.

A total of 100m TEEC shares will start trading in London on Monday after the initial public offer (IPO) organised by RBC Capital Markets, Winterflood Securities and Akur Capital.

Although fund manager Triple Point is best known for its Social Housing (SOHO) real estate investment trust,  currently seeking to raise £70m in a fund raising, it has a ten-year record of investing in energy efficiency where it currently manages over £1.5bn in combined heat and power (CHP) projects, hydroelectricity, solar power and reserve peaking plants, areas where the new trust currently has a list of nearly £300m of eligible investments it could make.

For his part SEIT fund manager Jonathan Maxwell said he had over £100m of investments on which he was in exclusive talks and a further £150m at an advanced stage of due diligence.

Chairman Tony Roper said: ‘This proposed capital raise builds on the strong momentum SEIT has achieved over the last two years. Energy efficiency is critically important in global efforts to address the climate emergency and has become an increasing focus for investors. The proceeds of this placing will allow SEIT to continue to invest in this important and growing market whilst also delivering additional scale and diversification to shareholders.’

Investors who buy shares in the placing will be entitled to receive the next quarterly dividend declared in November. SEIT has a dividend target of 5.5p per share for the financial year to 31 March 2021, which offers a dividend yield of 5.2% at the 105p placing price.

Stifel analyst Max Haycock was surprised at the timing of the equity issue a month before half-year results that would have up-to-date financial information. ‘This is SDCL’s third equity issue in a year and the clear message is don’t buy the shares in the market on a high premium when there could be an equity issue around the corner. The shares traded at 111p yesterday [Monday] and the equity issue is at 105p. This habit of frequent equity issuance may temper the premium going forward.

The shares are half a penny up at 106.5p this morning.

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SDCL Energy Efficiency Income Trust PLC – London-based energy efficiency investor – Announces proposed GBP80 million placing priced at 105.0 pence per share. Plans to place approximately 76.2 million shares with the 105.0p price representing a 4.0% premium to its March 31 net asset value and 5.4% discount to its Monday closing price of 111.0p. Portfolio performing as expected, with asset valuations as at September 30 likely to be similar to Mach 31. Currently progressing opportunities with investments under exclusivity having a GBP100 million aggregate equity value and investments at advanced stages of due diligence or in bilateral negotiation having a GBP150 million aggregate equity value. Dividend target 5.5 pence per share for financial year ending March 2021.

Chair Tony Roper: “This proposed capital raise builds on the strong momentum [SDCL Energy Efficiency Income Trust] has achieved over the last two years. Energy efficiency is critically important in global efforts to address the climate emergency and has become an increasing focus for investors. The proceeds of this placing will allow SEEIT to continue to invest in this important and growing market whilst also delivering additional scale and diversification to shareholders.”

Current stock price: 106.00p; down 4.5% on Tuesday

Year-to-date change: down 1.4%

London-listed SDCL Energy Efficiency Income Trust has launched a share placing with the aim of raising £80 million

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SDCL Energy Efficiency has launched an £80m placing – it hopes to issue 76.2m shares at 105.0p (a 5.4% discount to last night’s 111p close and a 4% premiumto NAV. The company has £100m of investments under exclusivity including an established operational European regulated energy network in a major Western European city, and a pipeline of follow-on investments from the Company’s existing portfolio. Plus a further £150m at advanced stages of due diligence including a portfolio of commercial and industrial on-site solar projects in the USA and further investment in combined heat and power projects for commercial, industrial and public sector buildings in the UK.

• Placing: SDCL Energy Efficiency Income is seeking to raise £80m through the issue of 76.2m new ordinary shares at 105.0p. The issue price represents a 5.4% discount to last night’s closing price of 111p and an 8.1% premium to the 31 March NAV, after adjusting for two interim dividends totalling 3.8p paid since March. The proceeds will be used to fund further acquisitions from the manager’s pipeline of investment opportunities, of which more than £100m of opportunities are under exclusivity and a further £150m is at advanced stages of due diligence. The manager expects 30 September asset valuations to be similar to those at 31 March, given the portfolio has performed in line with expectations since March. New shares form the placing will be entitled to receive the third quarter dividend which is expected to be declared in November.

• Background: SDCL Energy Efficiency Income last raised capital in June with a £110m placing that was upscaled from an initial target of £60m to meet investor demand. Since this point the company has committed £50m to electric vehicle charging infrastructure in the UK, in addition to acquiring a portfolio of CHP projects for an initial £5m and an energy efficiency project in Singapore for £2m. The fund has grown through a series of placings since it launched with IPO proceeds of £100m in December 2018. As a result, it now has a market cap of £473m. Energy efficiency and storage remains an in vogue sector with investors, particularly those with a sustainability focus. We note that Triple Point recently announced its intention to raise £200m for the IPO of a new investment company, Triple Point Energy Efficiency Infrastructure, which will invest in a diversified portfolio of energy efficiency assets in the UK that have a positive environmental impact and facilitate the transition to a low carbon economy.

SDCL Energy Efficiency Income Trust plc (SEEIT), managed by Sustainable Development Capital LLP, intends on raising £80 million through an issue of new ordinary shares at a price of 105.0 pence per ordinary shares.

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SDCL Energy Efficiency Income Trust is planning to raise £80m (€87.2m) by issuing new shares at 105p each.

The London-listed energy efficiency investor said the new capital will be used to fund further investments and new acquisitions.

The proposed fundraise is in line with the firm’s existing share issuance programme, the company said.

Tony Roper, chairman of SDCL Energy Efficiency Income Trust, said: “This proposed capital raise builds on the strong momentum SEEIT has achieved over the last two years. Energy efficiency is critically important in global efforts to address the climate emergency and has become an increasing focus for investors.

“The proceeds of this placing will allow SEEIT to continue to invest in this important and growing market whilst also delivering additional scale and diversification to shareholders.”

Jonathan Maxwell, CEO of SDCL’s investment manager Sustainable Development Capital, said: “The capital raised from this additional placing will be deployed to fund further investments and new acquisitions as we continue to grow SEEIT’s portfolio and deliver cheaper, cleaner and more reliable energy solutions.

”We currently have a wide pipeline of investment opportunities, several of which are either under exclusivity or at an advanced stage of negotiation and due diligence, that will diversify SEEIT’s portfolio in terms of technology, geography and counterparty and continue to deliver returns to shareholders in line with the company’s objectives.”

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