SDCL Energy Efficiency Income Trust, a UK-listed investment company that invests exclusively in the energy efficiency sector, has agreed to acquire a 100% 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 £100 million.
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. SEEIT intends to work towards increasing the proportion of green gas in the network to 100% 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 £30 million short term acquisition facility that has been added to SEEIT’s current £40 million revolving credit facility. VGSAB’s existing project debt finance facilities, which are equivalent to c.£26 million, will remain in place.
Completion of the acquisition is expected in the coming weeks, after satisfaction of certain customary conditions and consents.