Release Date: December 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SDCL Energy Efficiency Income Trust PLC (LSE:SEIT, Financial) has a large and diversified portfolio valued at GBP1.5 billion, with operations in 10 countries, primarily in the United States.
- The company reported stable operations and performance, with net asset value per share slightly increasing to 90.6p from 90.5p in March.
- SEEIT's portfolio is generating total returns of about 9.4% to 11%, with a 13% dividend yield fully covered by cash flow.
- The company is actively managing its gearing levels, maintaining low levels of leverage compared to its peers, and has plans to reduce short-term debt.
- SEEIT is focused on shareholder value, with strategies in place to address the discount to net asset value and improve share price through potential share buybacks and capital recycling.
Negative Points
- SEEIT shares are trading at a significant 45% discount to net asset value, reflecting market distress and dislocation in price versus value.
- The investment trust market is currently distressed, impacting SEEIT's share price and market conditions.
- SEEIT faces macroeconomic headwinds, including higher interest rates and inflation, which could affect future performance.
- The company experienced negative FX movements, which impacted net asset value despite positive portfolio valuation movements.
- Operational challenges were noted in some assets, such as Red Rochester, which faced lower demand and higher maintenance costs, affecting EBITDA.
Q & A Highlights
Q: Is there potential to refinance the revolving credit facility (RCF) with longer-term debt?
A: Yes, there is an opportunity to refinance the RCF with longer-term debt. SEEIT's leverage currently combines short-term financing through its RCF and longer-term project-level debt. We are continuously exploring opportunities to align the duration of our liabilities with our assets, and we expect several opportunities to arise in the first half of 2025. - Jonathan Maxwell, CEO
Q: Why not provide accounts for each of your businesses to enhance disclosure?
A: We agree that enhanced disclosure of our larger investments is important, which is why we've focused on this over the last 12 to 18 months. The most crucial component of the company's NAV is the portfolio evaluation, and we have published a specific section on our approach to evaluations, assessing the impact of recent results on portfolio valuation over the medium to long term. - Eugene Kinghorn, CFO
Q: Do you expect to recover any value from the appeal against the omission of compensation for distribution costs at Oliva?
A: We are actively engaging with the government and industry associations on this matter. However, from a valuation perspective, we have taken a conservative approach and are not assuming any recovery. Any positive result would be an upside. - Ben Griffiths, Managing Director
Q: Can you comment on the possible impact of any end to IRA incentives on the business?
A: SEEIT's portfolio was largely constructed before the Inflation Reduction Act (IRA), based on commercial foundations. While the IRA provides potential advantages, our projects are consistent with the objectives of both political sides in the US. We believe the commercial merits of our projects remain robust, and any changes to the IRA are unlikely to have a substantial impact on our portfolio. - Jonathan Maxwell, CEO
Q: What is the confidence level in the timing of disposals or co-investments at Onyx and EVN, and why these assets?
A: We have confidence in Onyx due to the high demand for solar and storage solutions, making it an attractive platform for potential investors. Similarly, EVN's electric vehicle charging infrastructure is a growing market. We aim to bring in additional capital to further grow these businesses while maintaining their attractiveness to third-party investors. - Jonathan Maxwell, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
