PrivateEquityWire: SEEIT acquires Swedish regulated gas distribution network

General/ 19 October 2020

SDCL Energy Efficiency Income Trust (SEEIT), the first UK-listed investment company of its kind to invest exclusively in the energy efficiency sector, has agreed to acquire a 100 per cent interest in Värtan Gas Stockholm AB (VGSAB), the ultimate owner of the established, operational and regulated gas distribution network for Stockholm, Sweden, involving an equity investment of approximately GBP100 million.

VGSAB 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. SEEIT intends to work towards increasing the proportion of green gas in the network to 100 per cent 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, for example from serving new transport customers, as commercial and municipal vehicle fleets continue to switch to cleaner fuels, including biogas. In addition, there are opportunities to deliver new energy and infrastructure services to customers by developing the network and through vertical integration.

The investment is expected to meet and exceed SEEIT’s total returns targets and to further support its progressive dividend policy.

The acquisition will be funded from existing cash reserves and debt facilities, which include the capital raised in the recent equity fundraising and a GBP30 million short term acquisition facility that has been added to SEEIT’s current GBP40 million revolving credit facility. VGSAB’s existing project debt finance facilities, which are equivalent to cGBP26 million, will remain in place.

Completion of the acquisition is expected in the coming weeks, after satisfaction of certain customary conditions and consents.

Commenting on the acquisition, Jonathan Maxwell, CEO and Founder of Sustainable Development Capital, says: “SEEIT is making an investment in an important infrastructure asset for the City of Stockholm. 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. The operational investment offers the opportunity for an attractive level of income and for significant growth over the medium to long term. We are pleased to agree this investment immediately following our successful fund-raising.”