Liberum: SEEIT – Increased US Weighting Following $177M Acquisition

General/ 06 April 2021

Mkt Cap £765m | Prem/(disc) 13.9% | Div yield 4.9%


SDCL Energy Efficiency Income Trust has acquired a 100% equity interest in a commercial district energy system, RED-Rochester, for $177m. RED is one of North America’s largest district energy systems with 117 MW of steam turbine generators plus boilers, chillers and other equipment that provide exclusive utility services to commercial and industrial customers within the 1,200 acre Eastman Business Park, located in Rochester, New York.

RED offers 16 on-site services including electricity, steam, chilled water, wastewater, compressed air, nitrogen, lake water treatment, industrial water distribution and high purity water distribution. The park has a highly diversified group of businesses including manufacturing, chemicals, pharmaceutical and food and beverages.  RED has over 100 commercial and industrial customers, typically contracted on a 20-year fixed-term basis. Two-thirds of the value of the offtake contracts are from investment grade counterparties. Over 40 energy efficiency projects have been delivered since 2016 and the manager has identified further potential investments in this area.

The acquisition will be funded from cash and the revolving credit facility. There is also $83m of project debt within RED.

Liberum view

RED-Rochster has been acquired from an affiliate of Stonepeak Infrastructure Partners. Stonepeak acquired the asset in 2016 and invested approximately $80m in energy efficiency projects, including the conversion of RED’s coal-fired central plant to modern natural gas boilers.

Recent investments have shifted SEIT’s portfolio weighting in North America to over 50%. Today’s investments follows the recent $120m investment in a portfolio of on-site solar and energy storage projects in the US, together with a 50% interest in Onyx Renewable Partners.