SDCL Efficiency Income Trust (LSE:SEIT) — Interim results

0:01 Good morning, ladies and gentlemen. Welcome to the SDCL Energy Efficiency Income Trust PLC interim results investor presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated on the right hand corner of your screen. Just click q and a, scroll to the bottom, type your question, and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted to them, publish responses where it's appropriate to do so. These will be available via your investor meet company dashboard, and you'll be notified once they're ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Jonathan Maxwell, CEO of SDCL Energy Efficiency Income Trust PLC. Good morning, Jonathan. Good morning. Thank you very much for the invitation to present.

0:48 Great. Well, welcome everybody to the results presentation today, and I will take you through the discussion. Hopefully, keep it relatively brief, and then we can open up for questions afterwards. Just introducing myself, Jonathan Maxwell, founder and CEO of SDCL, the investment manager of SEIT, and also Eugene Kinghorn who's on the line. Eugene Kinghorn is the group CFO of SDCL and looks after the financial control of SEIT.. Just to dive in and to remind everybody, as usual, why we're here to talk about energy efficiency. The reason we're investing in energy efficiency is that we believe that energy efficiency is gonna be one of the most is... That is going to continue to be one of the most important sectors of the infrastructure investment market for the next decade.

1:47 The rationale is that energy, which is worth trillions of dollars and on which everybody and everything depends and which is at the heart of the problem as well as the solutions to climate change, energy is mostly wasted. Most of it is wasted. The world actually weighs some two thirds to three quarters of of its energy through inefficiencies either on the supply or the demand side. And SDCL and SEIT, this this investment company, invest in solutions to that problem. It's one of the biggest opportunities of investment in the energy sector for the next decade. Energy efficiency, we think, is not the whole solution to decarbonization of energy, but it's probably half of it or more.

2:43 Indeed, the International Energy Agency itself says that energy efficiency represents more than 40% of the emissions abatement needed by 2040. And the important thing there is that energy efficiency technologies exist today. They're readily available. They're widely tested, they're successful. So energy efficiency is and deserves increasingly to be at the center stage of our thinking around investment in decarbonization... Decarbonizing the energy sector. And the extremely interesting feature of energy efficiency that is creating the same or more economic output with less energy input, it's more profitable than business as usual. It cuts costs. It cuts emissions. It improves reliability and resilience of supply. It's an extremely important, ingredient to productivity for countries and indeed for profitability for companies.

3:43 It needs, we say, to take center stage alongside commitments to cut methane, deforestation, coal, petrol, and diesel cars as it did finally at this year's United Nations Climate Change Conference, COP twenty six, held in Glasgow, in the first couple of weeks of November this year. And we were delighted that the Glasgow Climate Pact called for energy efficiency at the same time as it called for clean power generation. Really important fundamental statement that clean power generation is a very important component decarbonizing our future, but so is energy efficiency at least as much. And and the issue with energy efficiency is although it's at least as important as clean power, it's probably attracted less than 10% of the capital. So So very, very interesting opportunity for investment, and we're delighted that SDCL's energy efficiency in...

4:37 Income trust is perfectly positioned, I think, for the for the next ten years. The International Energy Agency couldn't help myself but include this quote, says director, executive director, says that energy efficiency is the first fuel. It still represents the cleanest and in most cases, the cheapest way to meet our energy needs. And And indeed, that's what SEIT is all about, cheaper, cleaner, more reliable energy solutions. Now SEIT, the SDCL Energy Efficiency Income Trust, was the first, and it remains the largest London Stock Exchange listed energy efficiency focused investment company. And today, we're gonna be talking about the results for the last six months, and I think just taking a couple of opportunities look... To look back at the period since our IPO about three years ago.

5:25 Five key points. First, performance. So the net asset value per share in this period we're reporting on, which is six months to the end of September twenty twenty one, was up 2% or two p to a 104.5 p. That represents a total return in the period on an NAV total return basis of 4.77.1% per annum since IPO. Investors who are with us from the beginning might remember that we were looking for a 7% plus, seven to 8% target IRR from IPO, and we're well on track to deliver that at this stage of the year. I think we're well... Very well positioned to finish the year very well as well. Dividends, we've declared during the period 2.81 p of dividends, which is up from 2.75 p this time last year, crucially covered both by earnings and by cash.

6:18 I'm delighted that shareholder total return since IPO, just over 30%, 32% total shareholder return versus about 10% on the all share over the same period. The company has scaled up during this period. Gross asset value has increased to £950,000,000, up from £700,000,000 in in March March twenty twenty one, thanks largely to a £250,000,000 oversubscribed placing in September, the largest conducted by the company to date. That fundraising actually pushed the company over the £1,000,000,000 equity market capitalization by the end of this period, and it was subsequently admitted to the FTSE two fifty index. Investment activity during the period has been strong.

7:08 I mentioned that we've raised 250,000,000 recently, but we also raised, money during the, first half of the year, which we have deployed. So during the six months ended the 09/30/2021, we actually made about £250,000,000 of investments. During the period, five new investments, four follow on commitments, and after the period, 41,000,000 of two new investments and three follow on investments. Roughly, half of the investments that we've made have been follow on by number, and roughly half have have been been new new investments. This is a theme I'll come back to. We've described in the past the fact that this company coming on to the next stage point has a significant now competitive advantage.

7:56 It's got a consistent track record to delivering returns and investing capital, and we're investing capital in two ways. And first, actually, is off the back of an organic pipeline. This is what we mean by follow on investments. The company now has scale, and that scale delivers it cap... Competitive advantage and, of course, the opportunity to invest in new projects or acquisition that are gonna be EBIT and NAV enhancing. So, you know, consistent track record of investing and getting getting returns. And then the second point I think is important also is, you know, the expertise and leadership for the company and for SDCL in terms of sustainability. And I'm delighted that post period, we published our ESG report. So that was in November 2021 and available on the company's website, c@plc.com.

8:44 From a governance perspective, many thanks to shareholders for supporting a clarification of our policy and adjustment to the gearing, ratios within the company, were all approved at the AGM on the 08/10/2021. And I'm pleased to say that the board is recruiting a fifth director about about which more shortly.

9:12 Regarding evolution of the share price since IPO, we're pleased that the company has generally outperformed the main market. Obviously, the company came back more quickly than the rest of the market in the COVID correction, q one, q two twenty twenty, you know, since when it's continued to be relatively stable and and outperform. I'm very pleased to say that we've generated, you know, significant returns, but also managed to to raise capital in the blue boxes and deploy it in the black inscriptions expeditiously. So to the point I made before, we raised a 160,000,000 in a placing in February and invested it before we came back to the market in September and raised 250,000,000.

10:02 And we're... We are half to two thirds the way through investing that too. So company is well on track. Quick update on the portfolio before handing across to Eugene on finance. So during the period, we made new investments. So the... This is a a sample of five of the investments that we made since March 2021.

10:28 We categorized our portfolio really into three main areas. So first is cleaner and more efficient supply. That is, you know, cutting out this extraordinary generation transmission and distribution losses, which means that the world wastes about two thirds of the energy before it gets to the point of use. And we replace that sort of centralized inefficient, often grid connected supply of energy with on-site generation. What we call cleaner and more efficient supply of energy on-site or near site generation. So that's one of the key areas for our investments. The second key area for our investments is in demand... In in reducing, demand, what we call point of use or demand reduction, reducing the amount of energy that buildings, industry, and transport need. Buildings, industry, and transport on the demand side represents 70% of all the world's energy use. So cutting demand, cutting cost, decarbonizing, and that's absolutely key on the demand side.

11:27 And then the distribution side in the middle, we call green energy distribution. So this is basically taking green energy from where it's produced to green energy where it's needed typically in and around the transport sector. So each of these new investments that we've made during the period were classified either as cleaner and more efficient supply, green energy distribution, or indeed point of use, supply distribution, and demand. And in some cases, a couple of these projects actually tick more than one box. Example, Biotown up at the top there. So this is converting agricultural and food food waste that would otherwise be polluting and disposed of into useful productions, and we're using the the the the the the agricultural food waste to create biogas, and that biogas is then used to generate energy on-site, but also to inject into the into the gas grid to provide green gas supply and in return for long term contracted offtake agreements. So, again, everything SEIT is looking for is long term contracted cash flows.

12:31 Tyler Hospital is one of the largest hospitals in Ireland. We were delighted to be in the position to finance retrofit of that hospital with energy efficient equipment. So we're delivering on-site energy generation that's more efficient as well as investing in solutions that reduce demand for energy across the hospital. So thrilled to be entering the Irish health care market with that deal. For SEIT, it's an area that we as SDCL have been involved with for a long time. Just to demonstrate more that to the diversification of our portfolio, we've also now delighted to have made an investment in the sustainable living innovations project. So that's the energy efficiency systems and on-site generation that is gonna make the the... Well, the greenest apartment building in Seattle, but perhaps more importantly, the first net... Certified net zero energy multifamily apartment building in the world of its kind. Really excited to be able to support that kind of initiative SEIT.

13:36 So we've talked about agricultural and food waste to long term contracted revenues associated with energy. We've talked about hospitals and long term contractor to to run the energy solutions for a hospital. We talked about apartment buildings. So diversification takes us out into the industrial sector now. Primary energy was an investment that we made eighteen months ago originally, and, we were pleased, to... The time to have acquired 50%. We stepped up our stake to 65%. And then I'm delighted to say post the, fundraising in September, we increased our stake from 65 to a 100%. SEIT is now a 100% owner of Primary Energy. That is a series of projects, which for the large part, recycled waste gases come off of... Coming off of steel mills, blast furnaces.

14:29 Those waste gases would otherwise be polluting. Instead, they're actually being recycled and put back through turbines to create power and steam for the steel mills. A fantastic example of emissions reduction, clean energy supply, and, you know, cleaner and more affordable energy for the end customer, which means that one of the reasons we were able to recontract one of the five projects there in the the middle of last year. And then finally, from a diversification perspective, I'm delighted a couple of weeks ago to have been able to invest in the FES lighting project at the bottom here. So that's lighting as a service mostly for small, medium sized companies, some large companies across The US. Eugene, I think we picked up thousand contracts as part of that portfolio acquisition. And not only did we invest in the underlying projects, but we've also been able to acquire 50% of the company that developed them, which gives SEIT, I think, a fantastic opportunity to roll out exciting as a service, with its partners in The United States. So, more diversification, more income, more support for our capital base, and more opportunity for growth in the future through these investments.

15:42 We've actually listed out here all of the investments that we've made from thirties... Sorry, to the September 30 and then subsequently to date. You can expect to see more news from us again shortly, but it's been an active period since the year end. 14 investments, as I said, about half of which will follow on by number, about half of which were new investments. In terms of key portfolio updates, I made the point that we've, you know, very pleased now to be a 100% owner of Primary Energy. I think it gives us a a great opportunity actually to expand our efforts with existing off takers and indeed potentially to leverage the platform to find other opportunities in and around Indiana where this is based as well as potentially outside in other states in The US. I'm extremely excited to be earning a 100% of the five projects in primary energy. Red Red Red Rochester is the large district energy system that we invested in at the first half of this year, and that's up in, Upstate New York. That's the old, Eastman Kodak, business park. We own the energy and utilities, 16 utility services, serving over a 100 customers across that estate providing cheaper, cleaner, more reliable on-site energy solutions.

17:08 Extremely pleased to finish the hundred day onboarding plan post investment and now looking at actively pursuing value add opportunities by expanding services across the business park and the outside and the surrounding areas. Oliver Spanish cogeneration from an asset performance perspective has been, operating well. We have taken active asset management steps that have now translated into returns for the fund and profits, and that, you know, includes, for example, bringing in our fuel procurement in house, which is added value. We We will see, and we said this when we first announced the deal, you know, we all see short term fluctuations in revenues, albeit, that they are designed to be, mitigated, over the longer term through the, market incentives that we have in place in Spain so that over the medium to long term, we'll expect to see stable and predictable cash flows coming out of this investment.

18:05 One of the one of the fluctuations that we've seen has been on EU ETS or carbon prices, which are part and parcel of the overall market incentive regime in Spain. So we've taken some short term provisions against short term volatility in that market, but we're very happy and optimistic about the outcome and our opportunity set in that portfolio of nine projects in Spain. One x renewables is the large portfolio, so 200 separate projects when we made the acquisition, more coming through. This is solar and storage throughout The United States. We own operating assets, projects under construction, and the near term development pipeline. And indeed, SEIT also has 50% of the underlying development platform in partnership with Blackstone, which is the largest commercial and industrial real estate owner in The United States. So really excited about the current future for Onyx as well. We have seen some short term impact from COVID nineteen impacting decision making with offtakers, slowing down some elements of construction and development.

19:12 On the other hand, we're seeing the pipeline develop extremely well, so I'm happy with the performance. Vartan Gas actually Stockholm's gas grid, which is today about 80% biogas, taking, for example, waste gases off the wastewater treatment plants and distributing them to customers, residential, commercial, and indeed transport customers across Stockholm. This is the Stockholm gas grid.

19:41 Our our asset management team is actively working on improvements to our margins. So we're, again, pleased with the cash generation of the of the business and the portfolio, but instead... But actually taking active steps to reduce customer churn, grow revenues by cross selling across the estate, potentially going upstream to increase our biogas productions, and generally increasing where we can our margins and then making sure our costs are streamlined. Huntsman Energy Center commissioning continues. Minor technical delays, some equipment that needed to be reordered. We're gonna be in full operations in 2022. We have, have, having said that, reviewed our contracts with counterparties during 2021 and made sure that they're appropriately adjusted to mitigate the financial impact of the construction delay.

20:34 Key risks and mitigants. This is a, I think, a topic for anybody investing with SEIT that you'll be fairly familiar with. I'll tell you the risks that we worry about, but I'll also tell you the risks that we worry about so much that we try and eliminate them before they get into our portfolio. So maybe I'll start there. I think it's fair to say that the energy market has been volatile, generally, over the course of the last few months. Energy markets have been gyrating, but SEIT's portfolio has been quite well positioned against that context. In fact, very well positioned. SEIT's portfolio seeks to have long term predetermined or contracted returns or revenues from its projects investments. We seek to to significantly mitigate, if not eliminate, exposure to day to day movements in the power... In the energy markets.

21:26 So we've had relatively little impact from what's otherwise been pretty wild movements in the energy markets, and therefore, very stable effect on our portfolio and ultimately feeding through to stability on our valuations. So that's one sort of key area. Another key area that we try to mitigate is exposure to demand or volume risk. Most of our projects are pre... Contracted on, you know, predetermined terms where we get paid to make assets available for use. Some of our projects have some linkage to demand, but where we've got take or pay arrangements. If we haven't got take or pay arrangements, we're typically producing much less energy that the comp... Than the company needs, what we call sort of capacity style contracting.

22:14 So as a result, our portfolio has been stable compared to other... You know, what would otherwise be a fairly volatile period. In fact, fairly volatile couple of years from a global energy and demand perspective, we've been stable throughout. Our assets have continued to operate. The three key risks that we concern ourselves very much with are credit and counterparty risk, operational risk, and you know, other global macroeconomic factors. Starting with credit counterparty risk, most of our investments are investment grade counterparty or related to investment grade counterparties. Where we don't have investment grade counterparties per se, We have a huge amount of work we do on the role that the assets that we're providing energy to play in their economies to make sure that, you know, if there is any downturn in the economy, the energy is still going to be needed. And indeed, even if the existing owner of a building even if the existing owner of a building has a credit event, we're comfortable that we're gonna be providing energy to a valuable building that's gonna be owned by somebody else going forward. So credit and counterparty risk is a really important area for us, significant area of focus. I'm also pleased to say with Eugene picking it up, maybe referencing this later that we've had no significant credit defaults across any of our portfolio assets over the last... Well, since IPO.

23:35 Operational risk is another key area of focus. I think the best way to describe mitigation of operational risk is focusing on investing in projects with technologies that are commercially proven, where we've got appropriate guarantees, warranties, and availability performance and efficiency, where we've got tier one suppliers providing operation and maintenance services to us. And, also, I think a key factor for SEIT is that we've actually got approximately 300 full time employees at portfolio company level with a huge focus at our level as fund manager on asset management, looking after these assets and making sure they're performing. Again, we've had very strong operational performance across our entire portfolio. Finally, on global macro factors, we've been taking very careful comprehensive tax and structuring advice to make sure that we're efficient across the group.

24:27 Eugene will give a a sense of sensitivity to tax, but we've been able to manage well to date. We've tilted the portfolio slightly into the inflationary tailwinds. So as we've seen inflation levels pick up, we have invested with... To take a little bit more exposure to the inflation trends than we had before. Foreign exchange is a key area for us. A very large part of our portfolio, more than 50% in The United States, about 30, 35% in Europe. We've had a very successful fore... Forex hedging strategy from the beginning with no material losses or gains from our FX overall on the... On on our NAV, and I'll let Eugene talk about that a bit later.

25:16 Just moving on to the, next slide and then hand over on finance. We give a sense of the diversification of the portfolio by a number of factors. On the top there by project, on the bottom by technology. So we're very pleased. We've got a sort of range of technologies, everything from CHPs, solar and storage, industrial process efficiencies, lighting as as per reference previously. But we also diversify by country and life cycle stage. And just over half of the portfolio by values in The United States today, very good chunk in Continental Europe, Sweden, Spain, Ireland, in particular, and also, in The UK, about 7%. Although we expect number of 7% to grow given particularly our focus on electric electric vehicle charging infrastructure here in The UK as well as other interesting opportunities we're working on right now.

26:10 That cash position of 18% was as at the September 30. That cash position is no longer 18%. Eugene will come on to that later. It's probably around a £100,000,000 or closer to 10%. Life cycle stage, 70% of the portfolio by value, including the cash is operational. So if you strip out the cash, the vast majority of the investments are operational, though we do have assets under construction and development as well within the the budget limits.

26:43 Eugene, if you don't mind, can I hand over to you to talk about projected cash flows and indeed the financial performance of the company? Thank you, Jonathan, and a very good morning to all of you. On slide 14, the slide we're looking at right now is... And as we have done previously, we show you an illustration of the projected cash flows. This is based on initial 950,000,000 portfolio, and we've used the same assumptions the September 21 valuation for this slide. And this slide demonstrates this visibility that we have, and Jonathan has referenced this earlier, this long term contractual characteristics of the cash flows. And this gives us a strong and predictable cash yield. So we show you the key assumptions, but what I want to draw your attention to really is bottom right where we've got the average earnings cover more than 1.1 times and average cash cover of more than one and a half times over this period that we illustrate.

27:39 And this latter part is the cash flow and the the strong cash cover also gives us the opportunity to reinvest the surplus cash, and that can enhance the capital value over time. So this projection shows the expectation that the dividends to shareholders can grow progressively alongside a growth in NAV over time as well. If I can move you on to the financial results. So I'll go to slide 16. And And here, I'd like to draw your attention to the following, which is the 2.81p per share of dividends declared so far in this financial year, and that'd be on track for our full year target of 5.62 per share. The earnings is 3.3p for the period... The six month period to September 21, and that provided good cover for our dividends declared.

28:30 The cash cover, 1.2, and that is in line with our internal expectations. Profit before tax was 23,000,000, up 34% compared to 17 in the prior period. The increase in profit is driven by a larger portfolio in absolute terms, also the resilient performance of the portfolio, which we will describe shortly as part of the valuation section. In pence per share, the earnings was lower, but this is a function of when in each relevant period we undertook capital raises as both both this period, as you well know, and in the comparative period, we had quite significant changes in the underlying issued capital of the company.

29:17 You heard earlier that the NAV has increased 2% or, in fact, also two p to $1.00 4.5p, up from $1.00 2.5 at March. And in pound terms, the NAV has increased 36% from 694 to 943,000,000.

29:35 So in summary, the NAV is up, Profit is up. Dividends are on track, and good earnings and cash cover was achieved for the dividend, which we're really, really pleased with. If I can now move you on to the valuation section. So the the bridge or the chart is on slide 17. Much of what I'll describe is in the narrative on slide 18. So as previously, the portfolio evaluation at September 21 was prepared by the investment manager. We've used the same valuation methodology that we've always used since IPO. And as always, it was approved by the board, and it was reviewed by PLC. So at September, the valuation... The portfolio valuation was 785,000,000.

30:22 A total increase of 42% on the portfolio valuation of 553 at March. And after adjusting for the acquisitions that we described earlier, which equated to 208,000,000 in the period and the cash received from investments of 27,000,000. The rebased portfolio valuation, which you can see on the chart in the previous slide, is 734, and it's from this rebased valuation that we measure the portfolio return in the period. So the portfolio generated a return of 32,000,000, which in percentage terms is 4.4% in the six month period. So is this made up of? It's made up of the expected return in the period, sometimes referred to as the unwind of the discount rate, and then a few net upsides on the valuation.

31:16 Now these upsides included... Jonathan referred earlier to the the additional 35% stake that we required, the remaining stake in primary entry. And as a result of that transaction, we were able to take an uplift in the valuation of over £10,000,000. Also Also included is an additional 2,000,000 upside on the assumed revenues from what we call renewable energy certificates or if you want the acronym, REX. It will stay in the primary energy assets. And as part of our asset management activities, we worked with the management team in the... All of the Spanish cogeneration assets to internalize or bring in house the gas procurement activities.

32:03 And we're pleased to see a £2,000,000 upside on our valuation as a result of the savings that that in house gas procurement can achieve in the medium or near term, in fact. We spoke earlier or Jonathan spoke about the EU ETS cost, and these have continued to rise in the near term. So partly a a provision against this increase and the short short term term volatility that we've experienced in the commodity pricing. This is all near term, but on the near term side, we've included a provision of £4,000,000 in the valuation. So overall, exceeding our target return for for the period through the 32,000,000 return

32:49 on the portfolio. We briefly mentioned COVID earlier. And in this instance, in this six month period, as it was in the previous period, no material impact from from COVID on the financial performance of the company. In this case, materiality, if I apply the audit materiality of 1%, so, you know, less than 1% impact as a result of COVID, significantly less, in fact. The portfolio blended weighted average discount rate on a... This is on an unlevered basis, increased marginally to 7.2, up from 7% at March. Two movements, a little bit down... Downwards movement, five bips came from discount rates to two assets, one that became operational in the period, and the other one in gas, in fact, where we completed a refinancing on significantly improved terms compared to that which we had in the project when we acquired it about a year ago.

33:53 We also saw a 25 bps upward movement on the discount rate, and these came from the new investments that were made in the period at rates that were higher than the prevailing rate at the time. However, we have noted a tightening or you can call it reduction in discount rates towards the end of the period and certainly significantly also after the period end. And I think based on today's observations, I would say we would expect if this trend continues or or sustains the levels that we're observing at the moment, then we would expect to apply further discount rate reductions when we prepare the March 22 portfolio evaluation.

34:41 Jonathan mentioned the hedging strategy. So, yes, that has remained effective for us and in line with our expectation to minimize the net asset value from large fluctuations in the FX market. The the two aggregate numbers are... May seem large, but they're not really particularly large, but 17,000,000 uplift on the valuation side and a 16.9 losses on the on the hedging side, and that's very much by design, that resulted in a naught point 1,000,000 effect from FX movements during the six months period. We do show you sensitivities. They're in the appendix, but just to to bring them to your attention on on slide 27, we show you the discount rates, corporation tax, inflation, and FX as we always do.

35:33 And just following on from the inflation point that Jonathan raised earlier. So, the new acquisitions in the period resulted in an increase to the correlation to inflation. We don't aim to construct to maintain a portfolio of investments that are fully direct inflation linked returns from these investments. However, to... We felt it was the right time to introduce some balance into the portfolio. So the the new investments brought with them inherent inflation linkage and to to now approximately half the portfolio has inflation linkage in its revenues.

36:20 So to summarize then on the portfolio evaluation, we are pleased with the perform... Really pleased with the performance of the portfolio. The outcome of the valuation, which had good performance, performance, continued resilience to to COVID, and therefore remain excited over what will happen in the next six months and how the investments will continue to deliver the returns that we... We're targeting. So just moving you on to finally conclude on the summary financials. On slide nineteen and twenty, we've actually talked about much of this already. So I won't repeat all the things such as the profit and the net assets. However, do want to bring your attention to the ongoing charges, which you're all familiar with.

37:09 And we've seen further reductions in the ongoing charges through the ability to to spread our ongoing cost over a larger capital base. And we're now at point 99% on the ongoing charges down from previous period and down from March as well. On slide 20... Forgive me. On slide 20, just to to point out that there was no debt at the end of September, and that's because we used the... A part of the the capital raising proceeds to repay the debt.

37:44 But also during the period, we increased the revolving credit facility from 40,000,000 to a 145,000,000, and it also has a further 55,000,000 uncommitted accordion. Managed to expand the banking group from one to four banks. And this RCF will allow us to... Gives the company the operational flexibility to commit to further investment opportunities as they arise. We've previously mentioned the debt at portfolio level as well. So, again, on slide 26, if you're looking for further information on the levels of debt across the portfolio and also our compliance with the gearing restrictions. So, Jonathan, just to finish,

38:26 from a financial perspective, really pleased with the set of financial results. It demonstrates that the company is achieving its objectives and hitting key financial targets. So with that, I hand back to you. Thank you, Eugene. Thank you very much. So, yes, just to summarize from a financial perspective, net net asset, we've grown the net asset value during the period. We are on track with our interim dividends covered by cash and by earnings. We've raised 250,000,000 during the period, in fact, right at the end of it. But I think just as importantly, we've actually invested 250,000,000 since March in 14 deals. So we've been active, and we're gonna continue to find opportunities in, you know, what we're calling our organic pipeline that is follow on opportunities from our existing portfolio as well as, obviously, opportunities acquire assets that are EBIT and NAV enhancing in the in in the market.

39:31 I think really important point, you know, we're continuing to apply our asset management initiatives across all of our investments. We've got a very well diversified portfolio across The US, Europe, and The UK. Our asset management team is very active.

39:49 Some of the opportunities, as you've seen during this period, generate... Have generated profits during this period. Some of those activities where we're looking to expand capacity, increase revenues, you know, manage costs, and improve overall levels of profitability. Some of those opportunities you can expect to see realized during this financial year. I think some of those opportunities you can expect to see, you know, in subsequent periods. These are infrastructure investments that are, you know, the subject of long term asset management. But I'm very pleased to see... To to to see, you know, quantifiable,

40:29 you know, improvements being made across the estate today. So in summary, the the company is very well positioned. It's positioned because, you know, we're sitting here in a, global environment where there's more focus on decarbonization. There is as much, if not more, focus on cost management. And managing costs and managing carbon are absolutely key to what SEIT is doing, providing solutions to energy problems and indeed making more efficient, cleaner, more reliable energy solutions available and maintaining them properly for customers. We're able to do that and and grow the company both through making additional investments in our existing portfolio as well as by making new opportunities available to the company for it to execute on.

41:18 Income target for the year of 5.62 p. We feel comfortable we're on track to achieve that during this year to March 2022. And just, you know, looking forward, into the future, you know, I think we continue to see opportunities. As I said, you know, we're hugely focused on protecting and growing the value of our existing portfolio. But to the extent that we can find opportunities for the company, you know, to make value accretive investments and add further to the scale, the diversification, marketability, and liquidity for shareholders, we will will continue to do so. And just to put a sort of measure on that, currently working on project opportunities worth approximately 500,000,000, just over, compared to roughly 100,000,000 of cash. So, you know, the company can be afford to be, you know, selective,

42:11 and we'll find the best opportunities for the company and continue to continue to look to drive performance on. So think just on that note, perhaps I could thank you very much indeed for listening to our presentation and open for questions. Fantastic. Jonathan and Eugene, thank you very much indeed for the presentation. Ladies and gentlemen, do please continue to submit your questions using the q and a tab situated on the right hand corner of your screen. But just while the team take a few moments to review those investor questions we've had through already, I'd like to remind you that recording of the presentation along with a copy of the slides and the published q and a can be accessed via your invest... Investor dashboard on the Investor Meet company platform. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected to the opportunity to provide for... Your feedback in order that the team can better understand your views and expectations.

42:59 Jonathan, you, Jim. We've had a number of questions that popped up during the meeting itself. If I may just ask you just to click on that q and a tab, and where appropriate to do so, if you could just read out the question and give you a response, that'd be wonderful. Great. Well, look. Thank you very much indeed, and we've had... We certainly had some questions and I'll try and sort of answer them rapid fire in each case, though, giving Eugene, if you don't mind the opportunity to, you know, to comment. And I would just take them in order of the way that they have presented themselves. First question, what would trigger an exit or a part exit of an investment? Two questions. And then second, how competitive are you finding valuation and new targets? So in terms of an exit or a part exit, I think, you know, the the basic investment policy and and and objective of the company is to seek to make good investments for the long term that will cover our dividends and provide long term value, capital protection, and opportunities for growth.

43:57 It's not... We're not in a... SEIT is not by by definition a short term investor. Having said that, the answer to your question is what would trigger an exit or a part exit of an investment is if we felt that there was more value that could be generated for shareholders by selling the investment than they would by keeping it. Currently, we're not in a position, you know, where we don't... In other words, we feel that we can generate as much, if not more value, for our shareholders by holding on to, for the long term, our investments, managing them appropriately, expanding revenues, managing costs. So, but there are no sacred cows, and, you know, we would certainly look at triggering an exit if we thought there was exceptional value, and we could not afford to hold the investment. Eugene, are there any other points you wanted to make on that?

44:47 How competitive are we in finding valuation in new targets? Do have a significant advantage, which is that given the fact that we've made a significant portfolio of investments already, a lot of the investments that have been made, we have also sort of rights to make follow on investments often at predetermined rates of return. Return. So that provides a very fundamental defense, against yield compression in the market and indeed some real fantastic optionality for the company to continue to follow on. So that is one area which maintains our competitiveness. The second area, frankly, is that, you know, we are trying to avoid hotter areas of competing markets where... You know? And and indeed, participation in auctions where we don't have an angle. Instead, finding opportunities to do bilateral or privately negotiated deals or... Yeah. And or participating in an auction if we have a real angle, and it may be if we can get ahead of the auction.

45:42 And I think all of the major investments that we've been made from memory over the course of the last six to nine months, Eugene, taken that character. They're either follow on investments or they're acquisitions that we've been made... We've made in the market, but normally on a privately negotiated bilateral basis and, you know, getting assets before they go to auction.

46:03 Eugene, any comments you wanted to make? None for me. Question...

46:11 Actually, this this will be interesting for you, Eugene, but the fund fund... The question is the fund now has some stakes in project developers. What's the approach to generating value for these? So so first of all, the the the the main rationale for us to invest in developers comes alongside the opportunity for us to follow on with project level investment opportunities. So probably the notable ones today would include positions like Onyx or FES lighting. Onyx is for solar and storage assets. In The United States, FES lighting is for lighting projects. There is obviously a secondary benefit to earning stakes in the developers. In the each case, 50% to see it today, which is, you know, these stakes in due course can be accretive to the value. And, Eugene, maybe just over to you. You know, our valuation methodology is predominantly discounted cash flow basis for our project level investments. But, of course, we will be looking to fair market value, any sort of development businesses that we acquire on the way.

47:14 Yeah. And definitely an area that we... We're very interested in at the moment. And from a evaluation perspective, one of the reasons why we wanted to have that flexibility of of investing or have the potential to invest in developers is that there can be significant upside or... In value, and we don't wanna be left behind, and we don't want the shareholders to be left behind if if there is value associated with what we do anyway, which is the strong predictable cash flows from the projects. So far, I would have to say that, having said that, so far, the invest... The stakes that we have in project developers have typically come part and parcel of a project level acquisition. So, fundamentally, can have been valued as part of an overall discounted cash flow valuation.

48:00 Although, I do think that they... It's an opportunity. You're correct to point out that there's upside associated with that. We also took commission from investors on... In in our August AGM to place up to 3% of our capital into into developers, operators, or managers of energy efficiency projects. So not necessarily projects on day one, although we have not actually, to date, used, I think, any of that budget so far. The the the... Sorry, Eugenie. Were you gonna say something? Yeah. I was gonna say I'm happy to take the next one Yeah. Also also from Solomon. So the question is, do we expect SEIT to present information on portfolio company discount rates, other valuation metrics, and performance against budget?

48:48 Inherently, we report the performance versus budget because every time we do evaluation, we look at historic performance and how that impacts the the future. And if there is a material reason to adjust evaluation, we we will call that out. We we show you the weighted average and also the range of portfolio discount rates. Don't necessarily have plans to sort of present each and every portfolio discount rate at at the moment. But, Solomon, perhaps if you want to get in touch, we'd love to to talk that one through with you and understand what is valuable to you as an investor, including with... You refer to other valuation metrics. Again, we'd love to to understand if you... On the SEIT website, there's an email address to to contact us, so please do get in touch.

49:40 Thank you, Eugene. There's a question that's come in, which I think is a clarification fundamentally. It says, can we comment on how the external asset managers compensated or incentivized? So my my comments during the course of today, including the one that's right up on the screen in the middle of it, continued performance together with active asset management initiatives. Those active asset management initiatives we're referring to. So we have at at SDCL. We have an asset... Dedicated asset management function, and that's compensated as part and parcel of the overall management fee, which is paid to SDCL. That's in the prospectus and then the reporting accounts. Is the tightening in discount rates you've noticed this last question we've got on the screen? Maybe go up to verbal ones. But is the tightening in discount rates you've noticed in recent transactions still to be reflected in the valuation?

50:29 And I think there's another part to that, which is about impact on future returns. So, I mean, Eugene, I think it would be fair to say that there has been no material adjustment in our weighted average discount rate across the portfolio as a result of witnessed or observed discount rate compression in the market at this point, at this valuation point on the September 30. So I think the answer to the question, Eugene, I think is, no.

50:58 You know, we we have not passed that through into our valuation at this reporting period, But we have flagged that it's something we're going to be monitoring carefully for the second half of the year. And if we do see the trend continue in terms of discount rate movements, then, of course, that's something that we'll need to take into account for the year end valuation. That's correct. We saw that, you so in the lead up to to the September 30 valuation, but wanted to see how consistent that will be in the market. And, you know, as I said earlier... And and thank you, Miguel, for allowing me to clarify this. Yes. It wasn't taken into account. We noticed it, wanted to see the trend. The the trend has continued, but we will clearly monitor this between now and when we prepare the March renovation. There was another question as to whether or not it impacts our returns.

51:49 I think just one observation is that our weighted average discount rate actually went up during the period rather than down. We often get this question. Sorry. We always get the question about whether or not competition is going to drive down our sort of returns generations, capabilities. What happened in the last periods is that it drove up. So our our, you know, project investments,

52:12 new ones added to our existing ones actually increased the discount rate from 77.2% because we were investing north of the the weighted weighted average cost of capital of the company. I think in future, there are two answers to the question. One of which, as I said, you know, some of our investments, particularly when we've got follow on investment rights, carry predetermined returns. So we've got rights to invest on predetermined rates, which defend against falling discount rates. Secondarily, you know, we we are actively pursuing opportunities where we've got an angle, where we can add value, where we can see our secure opportunities either off market or on a private and negotiated or bilateral basis. Yes. We did present a funnel at our year end, which showed actually quite the level of attrition that we have in our pipeline, in our funnel.

53:01 I think at the year end, Eugene, I think we showed just over 4,000,000,000 of opportunities that went up through, you know, a significant consideration gate here at the management team, and only 15, 15% of those made their way through to an investment decision. So, of the 85% of the significantly advanced deal flow that we progressed in the last full financial year, of the 85 of the deals that we didn't do, the single biggest reason for not progressing, you know, would have been around returns, sometimes around credit, sometimes around performance, sometimes around market or demand based risks. But in those circumstances, we've been able to be highly selective still add, you know, very significantly to the new investment book for the business.

53:49 That's fantastic. Jonathan, Eugene, I think you've covered off all those questions from investors that we've had through. And, of course, if any further questions do come through, the team will have the ability to review those questions, and we can publish responses where appropriate to do so on the company platform. Jonathan, just before we go and get some feedback for you from the attendees, if may just ask you just for a few final closing comments, please?

54:09 Well, you know, thank you very much. I'm just going back going back to what I said at the beginning. You know, I think are really pleased that energy efficiency is starting to become its own category. I'd say this from a global perspective. I think governments are realizing and recognizing the role that it has to play. That's why it was included in the Glasgow Climate Pact. We're seeing companies commit to net zero carbon, you know, at various different dates over the next decade and governments over the next two to three decades. So I think the trend towards decarbonization and the sort of increasing focus on energy efficiency, I think, bodes very well for the the growth of this market. As the market grows, SEIT has a greater level of investment universe to invest in. I think it's got great competitive advantage.

54:54 We feel very comfortable with the portfolio we have today and that we can add value further to it over time. And and we feel that there are other opportunities for the company to continue investing at attractive rates. So I also wanted to say many thanks for our shareholders who supported us during the course of the year in

55:11 2021. It's a big year for us. Delighted to vent to the two fifty, two fifty index, and our shareholders can certainly count on us to be working incredibly hard on their behalf into the years to come. That's fantastic. Jonathan, Eugene, thank you again for updating investors today. Could I please ask investors not to close this session? It should be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete and is greatly valued by the company. On behalf of the management team of SDCL Energy Efficiency Income Trust PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you, and good morning. Thank you all.