Institutional Investing in Infrastructure: SDCL Energy Efficiency Income Trust to buy out Swedish gas distribution company

General/ 19 October 2020


SDCL Energy Efficiency Income Trust (SEEIT) has agreed to pay £100 million ($129 million) to acquire a 100 percent interest in Vartan Gas Stockholm AB (VGSAB), the owner of the established, operational and regulated gas distribution network for Stockholm, Sweden.

The VGSAB group owns and operates Stockholm’s regulated gas grid, 70 percent of which is sourced from locally produced biogas. The group supplies and distributes to more than 58,000 residential, commercial, industrial, transportation and real estate customers in Stockholm.

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 wastewater treatment plants — and at the point of use, through the displacement of natural gas in buildings and diesel in transport.

SEEIT intends to work toward increasing the proportion of green gas in the network to 100 percent, over time. The grid is an essential component of an integrated system, aligned with national and regional strategies to attain carbon neutrality by 2040.

The group’s revenues, 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 and opportunities to deliver new energy and infrastructure services to customers by developing the network and through vertical integration.

The acquisition will be funded from existing cash reserves and debt facilities, which include the capital raised in the recent equity fundraising and a £30 million ($38 million) short-term acquisition facility that has been added to SEEIT’s current £40 million ($51 million) revolving credit facility. VGSAB’s existing project debt finance facilities, which are equivalent to £26 million ($33 million), will remain in place.

“SEEIT is making an investment in an important infrastructure asset for the City of Stockholm,” said Jonathan Maxwell, CEO and founder of Sustainable Development Capital. “It provides an attractive opportunity for SEEIT to invest in an established energy network that helps with greenhouse gas emission reductions and for SEEIT to help make it greener.”

SEEIT is the first U.K. listed company of its kind to invest exclusively in the energy-efficiency sector. Since the IPO, SEEIT has now made nine investments and commitments in a diversified portfolio of distributed generation and energy-efficiency projects totaling £500 million ($645 million).The projects are primarily located in the United Kingdom, Europe and North America, and they include inter alia, a portfolio of cogeneration assets in Spain; a portfolio of recycled energy and cogeneration projects in the United States; and, most recently, investments and commitments in operational and construction assets in the United Kingdom and Singapore.