Annual Results

RNS Number : 7278Q

SDCL Energy Efficiency Income Tst

30 June 2022

SDCL Energy Efficiency Income Trust plc

("SEEIT" or the "Company")

Announcement of Annual Results for the year ended 31 March 2022

SDCL Energy Efficiency Income Trust plc (LSE: SEIT) ("SEEIT" or the "Company") today announced its financial results for the year ended 31 March 2022.

Highlights

· Net Asset Value ("NAV") per share[1] of 108.4p as at 31 March 2022, up from 102.5p as at 31 March 2021 and a total return on a NAV basis¹ in the year of 11.2 %

· Profit Before Tax of £79.8 million for year to 31 March 2022, up from £32.4 million for the prior year to 31 March 2021

· Earnings per share of 10.0p for year to 31 March 2022 (March 2021: 7.0p)

· Aggregate dividends of 5.62p per share declared relating to the year ended 31 March 2022, in line with target

· Target dividend[2] of 6.00p per share for year to March 2023, a 7% increase from year to March 2022

· Portfolio Valuation¹ of £913 million at 31 March 2022, up from £553 million at 31 March 2021

· Investment at fair value on balance sheet of £928 million at 31 March 2022, up from £573 million 31 March 2021

· Market Capitalisation of £1,164 million at 31 March 2022, up from £758 million at 31 March 2021 and a total shareholder return¹ of 39.4 % since IPO to 24 June 2022

· Investment of approximately c. £305 million in 12 investments during the year and a further c. £43 million in cash after the year end

· Capital raised of £350 million during the financial year from three well-supported equity issues, with proceeds substantially deployed or committed to be deployed into investments from the Company's new investment pipeline

· Carbon Savings of 1,060,617 tCO2 (2021: 657,030[3] tCO2) from Company's portfolio, which also produced 2,455,305 MWh of electricity (2021: 1,750,071³ MWh)

Tony Roper, Chair of SEEIT, said: "The past year has been a watershed period for the energy efficiency sector. SEEIT is well positioned to take advantage of this by continuing its investment in solutions in this key sector. Despite facing significant challenges within the market, compounded by the tragic situation in Ukraine, SEEIT has produced another robust set of results, demonstrating the resilience of the business. The Investment Manager has continued to invest in and manage the portfolio effectively. SEEIT will continue seek opportunities to grow and diversify its portfolio and deliver cheaper, cleaner, and more reliable solutions to energy users."

Jonathan Maxwell, CEO of SDCL, the Investment Manager said: "SEEIT has continued to perform during a period of upheaval in capital markets, the energy sector and the wider economy. SEEIT is investing in one of the most important and fastest growing sectors of the infrastructure market, making investments that reduce carbon emissions and energy cost and that improve resilience and energy security. Against a background of high and rising energy prices during the past year and particularly following Russia's invasion of Ukraine, energy efficiency is more important than ever before. Energy efficiency has a key role to play in reducing demand for scarce energy resources, improving productivity, and achieving rapid decarbonisation at anything like the scale needed to achieve the '1.5C' or 'net zero' targets set at COP26".

For Further Information

Sustainable Development Capital LLP

Jonathan Maxwell

Eugene Kinghorn

Purvi Sapre

Tom Hovanessian

T: +44 (0) 20 7287 7700

Jefferies International Limited

Tom Yeadon

Gaudi Le Roux

Neil Winward

T: +44 (0) 20 7029 8000

TB Cardew

Ed Orlebar

Lucas Bramwell

T: +44 (0) 20 7930 0777

M: +44 (0) 7738 724 630

E: SEEIT@tbcardew.com

About SEEIT

SDCL Energy Efficiency Income Trust plc is a constituent of the FTSE 250 index. It was the first UK listed company to invest exclusively in the energy efficiency sector. Its projects are primarily located in the UK, Europe and North America and include, inter alia, a portfolio of cogeneration assets in Spain, a portfolio of commercial and industrial solar and storage projects in the United States, a regulated gas distribution network in Sweden and a district energy system providing essential and efficient utility services on one of the largest business parks in the United States.

The Company aims to deliver shareholders value through its investment in a diversified portfolio of energy efficiency projects which are driven by the opportunity to deliver lower cost, cleaner and more reliable energy solutions to end users of energy.

The Company is targeting an attractive total return for shareholders of 7-8 per cent. per annum (net of fees and expenses and by reference to the initial issue price of £1.00 per Ordinary Share), with a stable dividend income, capital preservation and the opportunity for capital growth. The Company is targeting a dividend of 6.00p per share in respect of the financial year to 31 March 2023. SEEIT's last published NAV was 108.4p per share as at 31 March 2022.

Past performance cannot be relied on as a guide to future performance.

Further information can be found on the Company's website at www.seeitplc.com .

Investment Manager

SEEIT's Investment Manager is Sustainable Development Capital LLP ("SDCL"), an investment firm established in 2007, with a proven track record of investment in energy efficiency and decentralised generation projects in the UK, Continental Europe, North America and Asia.

SDCL is headquartered in London and also operates worldwide from offices in New York, Dublin, Hong Kong and Singapore. SDCL is authorised and regulated in the UK by the Financial Conduct Authority.

Further information can be found at www.sdclgroup.com .

CHAIR'S STATEMENT

On behalf of the Board, I am pleased to present the annual report and financial statements (the "Annual Report") for the SDCL Energy Efficiency Income Trust Plc (''SEEIT'' or ''the Company'') for the year ended 31 March 2022.

The past year has set the scene for a watershed period for the energy efficiency sector and the Company is well positioned to invest in solutions that reduce carbon emissions, cut energy costs, and improve energy security.

At the beginning of the financial year, the COVID-19 pandemic was a dominant risk for the global economy. Though the pandemic remains ongoing, associated risks began to recede during the period in the Company's key markets and, in the year, it has not had a material impact on the financial performance of the investment portfolio.

Increasing focus on corporate social responsibility, environmental sustainability, climate change and decarbonisation, and specifically on limiting global warming to 1.5 ̊C, was galvanised by the 26^th annual Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26). Hosted by the United Kingdom in Glasgow, COP26 resulted in commitments to strengthen climate targets and phase down unabated coal power. For the first time, energy efficiency was included alongside the deployment of clean power generation in the "Calls Upon Parties" in the Glasgow Climate Pact. In addition to the official negotiations, side announcements and pledges were made to cut methane emissions, to end and reverse deforestation by 2030, and to make all new car sales zero emission by 2040 and by 2035 in leading markets.

In 2021 there has been global supply chain dislocation, spiking of energy prices and surging inflation for several months. Since February 2022 the ongoing and tragic situation in Ukraine has had further massive impacts on energy prices, supply-chains, and general inflation, making markets - particularly energy markets - even more volatile and uncertain. The Russian invasion of Ukraine has further highlighted the need for resilience in the global energy system, including through diversification of energy sources, large-scale, near-term clean energy solutions, energy cost mitigation and energy security.

There is now an increasingly widespread recognition of the role that energy efficiency can play, particularly in the short to medium term, in reducing the amount of energy that the world uses by cutting waste both on the supply and demand side. While the scale of the challenge to displace fossil fuels, which still represent some 80% of the world's energy system, with lower carbon and renewable energy is very large and will take time, energy efficiency measures can be taken in the meantime and can reduce the amount of overall energy needed. The global efforts to tackle the climate crisis and the latest climate data only further underpin the urgency and growth drivers in the energy efficiency sector. Many of our clients are committed to reaching net-zero emissions by 2050 or before and most of the world recognises the urgency of limiting global temperature rise to 1.5 ̊C.

Within the energy sector, efficiency may not be the whole answer, but it is probably at least half of it. Efficient and decentralised energy generation represents one of the largest and fastest growing investment categories of energy and infrastructure markets[4] and the Company, as the first UK listed investment company to invest exclusively in the energy efficiency sector, is a market leader and well placed to continue to expand its diversified portfolio of investments capable of delivering cheaper, cleaner, and more reliable solutions to energy users.

Further information on the Investment Manager's activities is included in the Investment Manager's Report in and the Investment Portfolio Summary.

Financial Performance

Profit before tax for the year ended 31 March 2022 was £79.8 million (2021: £32.4 million) and earnings per share were 10.0 p (2021: 7.0p). The Company's net asset value ("NAV")[5] at 31 March 2022 was £ 1,073.1 million (2021: £693.8 million) and NAV per share was 108.4p (2021: 102.5p).

The Company's investment portfolio ("Portfolio Valuation") was valued at £912.7 million at 31 March 2022, up from the Portfolio Valuation of £785.0 million at 30 September 2021 and £552.7 million at 31 March 2021, predominantly as a result of investments made during the year which, along with other movements in the Portfolio Valuation, are described in the Valuation of the Portfolio section.

The Company's Ongoing Charges ratio⁶ reduced to 1.00 % (2021: 1.13%), benefitting from spreading costs across a larger net assets base. Further detail on the Company's financial performance and the alternative performance measures of Portfolio Valuation and Ongoing Charges can be found in the Financial Review.

Investment cash inflow from the portfolio during the year ended 31 March 2022 was £64.7 million (2021: £42.1 million) on a Portfolio Basis⁶ (see the Financial Review for details), delivering 1.2x cash cover for interim dividends paid during the year.

Total return on a NAV per share basis[6] for the year was 11.2%, comprising a 5.9p increase in NAV from 102.5p at 31 March 2021 to 108.4p at 31 March 2022 and total dividends paid during the year totalling 5.6p. Total return on a NAV per share basis[7] since IPO is 8.1% p.a.

The Company's currency hedging strategy was successful in limiting the impact on the NAV arising from material movements in foreign exchange rates. Further details on the Company's hedging strategy can be found in the Financial Review.

While yields and discount rates in the infrastructure sector continue to tighten, improvements in the portfolio's value are also created from focused investment and active asset management activity which is discussed further in the Investment Manager's Report . Total return for the Company remains on track against target and the Company's NAV has remained resilient as the Investment Manager continues to effectively mitigate investment and portfolio level risk amidst a challenging market backdrop.

Dividends

In line with previous guidance, in June 2022 the Company announced its fourth interim dividend for the year ended 31 March 2022 of 1.405p per share, providing an aggregate dividend of 5.62p per share declared for the year ended 31 March 2022 which was fully covered by net cash income and earnings. The Company paid a total of £44.2 million in interim dividends during the financial year which included the last quarterly dividend for the year ended 31 March 2021 and three quarterly dividends for the year ended 31 March 2022.

Based on the projected investment cash flows from the current portfolio prepared by the Investment Manager and approved by the Board, the Company is announcing new dividend guidance of 6.00 p per share for the year to March 2023 (an increase of 7%) and as before, targeting a progressive dividend growth thereafter. See the Investment Manager's Report for further details.

The Company intends to continue to pay interim dividends on a quarterly basis through four broadly equal instalments (in pence per share).

Investment Activity

The Company holds a single investment, its subsidiary SEEIT Holdco Limited ("SEEIT Holdco" or "Holdco") through which SEEIT's portfolio of investments are held. During the financial year, SEEIT increased and diversified its portfolio, making over £300 million of new investments and commitments. In addition, the Company invested a further c. £37 million in the portfolio after the financial year end. Details of these new investments are provided in the Investment Manager's Report.

The Company's target geographies remain the UK, Europe and North America, plus other countries where the Company can invest on a risk-adjusted basis to secure returns that support its objectives.

The Company has carefully targeted key markets and technologies as it continues to build and diversify its portfolio, including district energy, green gas, solar and storage, geothermal, energy efficient motors and chillers, and EV charging infrastructure.

The Investment Manager entered into new, exclusive framework agreements during the year that demonstrate its ability to secure pipelines of further investment opportunities from existing investments and relationships. A significant proportion of the Company's investment activity during the year came from follow-on investment opportunities, which is expected to continue.

Our investment strategy of targeting high credit quality counterparties and providing services to key industries through contractual structures that limit exposure to demand or commodity price risk is proving to be successful.

The Board is pleased with the timely deployment of capital into new and follow-on investments during the year, which have been consistent with the Company's targeted technologies and geographic markets. This success demonstrates the Investment Manager's ability to source and secure attractive investments that meet the Company's investment strategy and objectives.

Funding

The Company published a new prospectus in September 2021 (the "September 2021 Prospectus") which was followed by the successful £250 million capital raise. This capital raise was the largest completed by the Company to date and was well-supported by investors with strong demand.

In March 2022, despite volatile market conditions due to the Russian invasion of Ukraine, the Company raised a further £100 million of capital (having targeted £75 million), and provided the Company the opportunity to maintain investment flexibility through prudent use of cash reserves.

The Company's share register has remained supportive and stable during the past financial year and the Board thanks its shareholders for their continued support in allowing SEEIT to pursue and achieve its objectives.

At the time of this report, the Group's gearing is approximately 34% of the Company's 31 March 2022 NAV, on the basis of a look through consolidated debt in the group, all of which is currently at investment level and in line with the Company's target structural gearing of 35%.

Portfolio Performance

The Company's investment portfolio performance remained broadly in line with projections during the financial year. Many of the operational assets within the portfolio provide key services to essential industries and continued to operate with minimal disruption, despite some challenges associated with the COVID-19 pandemic, disruptions to the energy market due to the Russian invasion of Ukraine and certain investments being affected by changes in offtake requirements such as Ironside which is affected by the idling of the blast furnace it provides energy services to. The Investment Manager remains focused on minimising the Company's exposure to risks associated with energy availability, input pricing, inflation, supply-chain disruptions, and additional macroeconomic factors that are creating volatility across the industry.

The Investment Manager places a significant emphasis on managing the investment portfolio through its asset management function, not only to protect the value of each investment but also to seek opportunities to create additional value for stakeholders. It plays an active role, both in oversight and in support of the management teams of its portfolio companies, with a focus both on risk management and value improvement.

The Investment Manager succeeded in securing additional value for certain portfolio investments, as well as identifying other accretive opportunities despite the headwinds described above. Further details on matters that specifically affected certain investments are described in the Investment Manager's Report.

Sustainable Future and ESG

SEEIT focuses exclusively on energy efficiency investments that contribute to a greener future. The Company is dedicated to accelerating the transition to a net-zero carbon economy and delivering long-term value for shareholders and society as a whole.

In November 2021, SEEIT published its second ESG report, wherein it reported on the Company's ESG considerations and carbon savings achieved in the investment portfolio in the previous year.

The Company recognises that in 2023 full disclosure on compliance with The Task Force on Climate Related Financial Disclosures ("TCFD") is required. The Company welcomes the adoption of the TCFD guidelines, and the Investment Manager is working towards implementing the full scope of the disclosure recommendations, which will allow the Company to highlight the intrinsic environmental benefits of its investment activities, while also providing valuable guidance on improving risk assessment and management approaches. This is part of the Company's broader strategy for reporting on climate-related issues and other ESG concerns, which includes TCFD.

See the ESG Management section for further details.

Board and Governance

The Directors' overarching duty is to promote the success of the Company for the benefit of investors, with due consideration of other stakeholders' interests. The Company seeks to maintain high standards of business conduct and corporate governance, ensuring, via the Investment Manager, that appropriate oversight, control, and policies are in place to ensure the Company treats its stakeholders fairly.

The Board seeks to guarantee the alignment of its purpose, values, and strategy with a culture of openness, debate, and integrity through ongoing dialogue and engagement with key stakeholders.

During the year, following the 2021 board evaluation, the Board commenced a recruitment process using a third party. This culminated in the Board a ppointing Sarika Patel as an independent Non-Executive Director and also as the chair of the Audit and Risk Committee, with effect from 1 January 2022. Sarika will support the other Directors' skills through her experience. The Board and the Investment Manager support equal opportunities in the recruitment and management of employees, regardless of age, race, gender, or personal beliefs and preferences.

Key Risks

The Board, its Audit and Risk Committee, and the Investment Manager monitor the risks that the Company and its investment portfolio face on an ongoing basis. Where relevant, mitigants against these risks are put in place in line with the Company's risk appetite and adjusted over time as necessary.

The majority of the risks identified, including the principal risks, affect only the Company's investment portfolio and therefore potentially impacts the Company, its performance and its ability to achieve its investment objective only indirectly.

The principal risks for the Company and its investment portfolio are described below:

· Credit risk of contracted counterparties

· Operational risks that may impact day-to-day operations

· Global macroeconomic factors

The principal risks to the Company have not changed materially from the prior year. The economic and political consequences of the Russian invasion of Ukraine have introduced an entirely new level of uncertainty to markets globally. The Investment Manager, through its asset management team, is monitoring these events with a view to mitigate their potential impacts on the Company where possible.

Pipeline and Outlook

SEEIT benefits from a substantial pipeline of new investment opportunities. SEEIT's target markets are also expected to continue to grow. Market drivers include increasing levels of focus on decarbonisation targets in the public and private sectors globally, the need for increased energy security and resilience, and relatively high and volatile energy prices. These factors continue to drive demand for on-site generation, efficient distribution, and demand side reduction solutions to the challenges faced by commercial, industrial and public sector clients.

The Investment Manager has remained very selective in making new investments, with a limited number of the new opportunities it sees making it to the stage of being reviewed by the Investment Committee. Looking ahead, organic growth of the existing SEEIT portfolio makes up, by value, around half of the near-term pipeline through follow-on opportunities, often at pre-agreed rates of return, while the Investment Manager continues to explore the most attractive secondary market investment opportunities for new investments.

The current investment pipeline has a good balance of smaller and larger opportunities, often involving bilateral negotiations where the Investment Manager has a particular strength or relationship, which helps the Company avoid competitive processes where possible. The Investment Manager exercises robust pricing discipline when evaluating any opportunities within its target markets and geographies.

In conclusion, w e are pleased to report on another successful year for the Company. I would like to thank our shareholders again for their continued support. The Company is well positioned to deliver upon our stated investment objectives.

Tony Roper

Chair

INVESTMENT MANAGER'S REPORT

The Investment Manager

Sustainable Development Capital LLP ("SDCL", or the "Investment Manager") is a leading and specialist investor in energy efficiency infrastructure.

SDCL was established in 2007 and has a proven track record of financing, investing in and developing clean energy, energy efficiency and decentralised energy infrastructure projects in the UK, Europe, North America and Asia.

SDCL was launched to facilitate investment into environmental infrastructure markets and has always focussed on investing in projects that are good for the environment, good for people and commercially sustainable.

Market Review for Energy Efficiency

During the financial year, Europe and North America started to emerge from Covid-19 lockdowns. Economies rebounded with a combination of demand and stimulus-fuelled growth. Supply chain and resource constraints added to high inflationary trends. Energy prices escalated in the second half of 2021 in Europe against a background of, amongst other things, low wind yields and insufficient storage of gas, highlighting energy security vulnerabilities, notably in Europe. Gas markets responded globally, with substantial price volatility that continued throughout the financial year. No sooner had the United Nations climate change conference in Glasgow, COP26, aligned countries on the objective to work towards net zero and limiting global temperature rise to a 1.5 C above pre-industrial levels, the energy price and security crisis took on another geo-political dimension as Russia invaded Ukraine.

Alongside the terrible human tragedy associated with the loss of life, suffering and displacement resulting from the war in Ukraine, Europe has been confronted with a critically challenging question: how to replace the 40% of natural gas that it sources from Russia.[8] The answers are uncomfortable. 80%[9] of the world's energy is generated from natural gas, oil, and coal. Replacing Russian gas, and oil, with alternative sources of conventional and clean energy takes time and substantial investment.

Meanwhile, the world is wasting much of the energy it is producing. The World Economic Forum demonstrated that in 2019, the United States lost some 70% of its original energy through conversion, generation, transmission, and distribution losses before getting to the point of use. This is another uncomfortable truth, but one that we believe is crucial to address. However, there are encouraging signs that international governments have recognised the vital role that energy efficiency can play are encouraging. For example, the Glasgow Climate Pact signed at COP26 called for energy efficiency, for the first time, alongside clean power generation. The European Commission increased prioritisation of its "energy efficiency first principle" in a recast Energy Efficiency Directive and guidelines on its application.

The conditions of acute energy security needs, high energy costs, and the urgency to decarbonise all point towards energy efficiency, which is one of the largest, fastest, and cheapest sources of greenhouse gas emission reductions, economic productivity and resilience and energy security.

The IEA refers to energy efficiency as the "first fuel". SEEIT's portfolio is uniquely focussed on solutions that reduce generation, transmission and distribution losses through on-site generation, storage, and efficient distribution at local, municipal or district level. It is also investing in demand side measures such as lighting, heating, ventilation, air conditioning, building management systems and controls. Taken as a whole, investing in energy efficiency improves the energy system, so that when the new clean energy generation does eventually arrive at scale, it's not wasted.

Objectives and dividends

During the financial year, the Company achieved its financial objectives by generating sufficient net income from its investment portfolio to support its dividends and a positive NAV total return, consistent with its targets.

The Investment Manager prepared projections for the Directors and proposed 6.00 pence per share for the target dividend for the year ending 31 March 2023, an increase of approx. 7%. In making the proposal, the Investment Manager took into account a number of factors. These included the new investments made during the year, projected levels of cash generation from the investment portfolio, excess of earnings and cash flow over dividends paid in prior years and the current inflationary environment across the geographies in which the investment portfolio operates. The aim of the Company is to continue to deliver future capital growth and to target of covering the future progressive dividend with earnings and cash flow.

Growth

The Company's portfolio increased by over £300 million during the year, through 12 investments. The value of the Company's investment portfolio, including portfolio company leverage, surpassed £1 billion, compared to £100 million at IPO.

Diversification

Thanks to shareholder support for two new equity issues during the year that raised £350 million, the Investment Manager was able to achieve further scale and diversification for SEEIT by geography, technology, industry and counterparty, described further below.

Geographically, SEEIT added new investments to its portfolio in the United States, which now covers nearly every State. In Europe, SEEIT gained exposure to a new country, Portugal, through its acquisition of an operational green CHP system from, and establishment of a strategic partnership with, Sonae Group.

By technology, SEEIT expanded its portfolio of lighting and green CHP projects, so further diversifying its supply chain and end markets. In addition, it added exposure to new markets by funding the energy efficiency measures for the first certified net zero multi-family residential building in the United States and entered the United States biogas market, serving the Californian low carbon transport fuels market by financing the generation of green gas upstream, reducing the fugitive emissions from dairy farms. Post period, SEEIT added new investments in geothermal district energy, liquid cooling for datacentres and rare-earth free energy efficient motors.

Risk Management

The Investment Manager constantly monitors the portfolio for risks, seeking to identify and to actively mitigate them.

Credit risk mitigation is a key priority. The Investment Manager has sought to ensure that the majority of the portfolio's revenues are associated with investment grade clients (approx. 60% by investment value of the investment portfolio as at 31 March 2022) and, further, that the investments are providing essential energy services to essential infrastructure assets or facilities, such that they will continue to be needed even if there is a change of ownership. New investments during the year were made with the objective of maintaining a diversified portfolio of credit counterparties. During the year, and indeed since IPO, the Company has not suffered from any material losses from credit defaults in the underlying investment portfolio.

The investment portfolio companies benefit from over 300 full time employees at portfolio level, in addition to the team of over 45 at the Investment Manager.

Performance risk mitigation is an ongoing and active function of the Investment Manager, aimed at minimising the chances of operational disruption causing a loss in revenues to the Company from the underlying investments. This involves ensuring that appropriate operation and maintenance teams and contracts are in place for new investments, that availability of energy services is maintained at the levels required by clients and that warranties or guarantees as to performance from suppliers are enforced if required. The Investment Manager has also reviewed its insurance strategy across the portfolio to ensure suitability and value for money from the insurance programme and continued level of coverage across the projects.

The Company's revenues from underlying investments can be affected, in some cases, by changes in utilisation of assets by clients. This can occur where investments have 'capacity-based' revenues, which are derived principally from a contractual right of first despatch, whereby an off-taker agrees to pay for a volume of output to the extent that it has demand for it. This differs from revenues that are 'availability-based, regulated or pre-determined', which are derived principally from making an investment's asset available for use and that do not depend substantially on the demand for or use of the project. Most of the Company's investments have availability-based, regulated or pre-determined revenues (approx. 77% by investment value of the investment portfolio as at 31 March 2022) but in some cases they have capacity-based revenues (approx. 18% by investment value of the investment portfolio as at 31 March 2022) , such as Ironside and PCI in the Primary Energy portfolio.

During the financial year, expectations for future demand lowered at two of the five investments in the Primary Energy portfolio. One case was at Ironside with the announcement in February 2022 of the idling of Indiana Harbor number 4 blast furnace ("IH4"). The other case was at PCI in conjunction with a planned transition to lower carbon solutions over time. The Investment Manager is working closely with the Primary Energy management team and the client, Cleveland Cliffs, to re-configure the Ironside investments to serve other blast furnace needs at Indiana Harbor, and also to assist the client to identify solutions at PCI, which is a joint venture with Cleveland Cliffs. At the same time, the Investment Manager and the Primary Energy management team will be engaging with the client on the upcoming re-contracting at Cokenergy. The net incremental impact on the valuation as at 31 March 2022 from the operational challenges and opportunities at Primary Energy was however limited to less than £10 million.

The Company's revenues from underlying investments can also be affected by development and construction risks, including delays. Most of the Company's investments are in the operational phase but in some cases, such as Onyx's portfolio, they involve development stage projects. During the financial year, the impact of and expectations for delay to some project developments increased due to supply chain and other Covid-related factors. Nonetheless, the Onyx pipeline grew in volume and quality during the year. The Investment Manager worked closely with the Onyx management team and with its co-shareholder Blackstone to pro-actively grow the pipeline, as well as to strengthen and support the management team, systems and processes to ensure that risks can be managed so that Onyx can be in the best position to address a large and growing market opportunity.

The Company's revenues from the underlying investment portfolio are exposed to macro-economic factors, including foreign exchange rate fluctuations, and volatile inflation and interest rate environments.

Financial risk mitigation during the year included an effective foreign exchange hedging strategy which resulted in minimal impact on the Company's NAV from fluctuations in foreign exchange rates. In addition, the Investment Manager sought, where possible, opportunities to ensure that any exposure to energy or commodity prices are mitigated or passed through under contracts over the medium to long term. In certain areas of any potential residual risk exposure, for example on EU ETS costs in Spain, the Investment Manager implemented forward hedging to help manage the rising cost of certificates and the short-term impact on costs and cash flow.

Given the challenges faced across Europe with rising gas prices, the Investment Manager has also implemented a short-term gas hedging strategy across Vartan Gas and Oliva Spanish Cogeneration to manage the short-term impact of this on the free cash flow within these investments. The Investment Manager has also established an internal gas procurement division at Oliva Spanish Cogeneration, which it considers is valuable, to manage risks of fluctuating prices and supply interruption, and to optimise return through closer and more efficient alignment with the operations of the five natural gas fuelled investments within Oliva Spanish Cogeneration.

In addition to physical and financial risk management, the Investment Manager has also conducted a comprehensive review of cybersecurity across selected key investments during the year. No critical issues were flagged in the review and the Investment Manager has already commenced actioning recommendations that have come out of the exercise.

Value Protection and Creation

The Investment Manager seeks to generate added value for shareholders over the short, medium and long term.

Examples of short-term value creation include the making of investments on attractive terms. In the case of new investments, this involves discipline on purchase price and upside opportunities. In the case of operational assets, an example was the incremental investment in Primary Energy in September 2021 through the exercise of an option previously agreed on attractive terms. In the case of construction phase assets, an example was Biotown Ag, where discount rates can be expected to reduce as the investment moves from construction to operational phase and construction risk becomes sufficiently mitigated.

Over the medium term, value protection and creation can involve adding capacity to drive revenues, rationalising costs and/or otherwise improving margins. Successful examples on operational assets have included, in the case of Oliva Spanish Cogeneration, a combination of vertical integration by in-sourcing fuel supply and forward purchasing of EU ETS.

As regards assets under development or construction, the Investment Manager has actively supported platform companies such as the EV Network in structuring and securing key contracts, for example with bp pulse and ESB. The Investment Manager had active involvement in the negotiation of material contracts with offtakers, helping to accelerate roll-out of the fast-charging network and negotiating the right to convert a proportion of development capital to equity on pre-agreed terms with EV Network, the company managing the roll-out. The Investment Manager believes that the exercising of this right to convert will lead to additional value for the Company.

In the case of Onyx Renewables, the Investment Manager has worked closely with its partner and co-shareholder, Blackstone, to drive additional pipeline generation and to seek synergies across SEEIT's portfolio by making introductions to other SEEIT portfolio companies, with the objective of further enhancing Onyx's valuable position as one of the top ten commercial and industrial solar platforms in the United States.

Another example is RED , where the Investment Manager has been working to identify and invest in accretive projects that provide additional energy services to existing and new customers, as well as to identify new energy efficiency initiatives.

Over the longer term, the Investment Manager is focussed on business strategy and the opportunity for significant growth in certain investments. A good example is Vartan Gas, Stockholm's gas grid. The Investment Manager stated, at the point of acquisition, its environmental objective of increasing the biogas content from 70% to 100% over time. Currently, the biogas content is on track at approximately 80%. The Investment Manager believes that there is additional environmental and economic opportunity in leveraging the network to offer additional services, including electrical, as well as to service new transport markets beyond the existing bus networks. The Investment Manager is also exploring opportunities to expand downstream into on-site combined heat and power generation and, over the longer term, the role that its distribution assets might play in the distribution of hydrogen. These upsides will however take time, and in some cases years, to realise.

Organic Origination

A key feature of SEEIT's growth and competitive advantage has become the follow-on investment opportunities that arise from its existing portfolio, through investment in assets or commitments to platforms, or what the Investment Manager refers to as SEEIT's "organic" pipeline. Examples include the series of projects that SEEIT has invested in under the rights of first refusal or other arrangements that it has with Sparkfund in the US and the EV Network in the UK, and the development of future investment opportunities in onsite solar generation that the Onyx management team specialises in. These arrangements generate substantial volumes of deal flow, often at pre-agreed rates of return, which provides defensive characteristics in a competitive environment.

Acquisitions in the Market

The Investment Manager has continued to be selective in its approach to acquisitions in the market. It has continued to exercise pricing discipline and has preferred to make investments through a private or bilateral negotiation with a vendor, rather than through a competitive auction process competing on price alone.

During the year the Investment Manager secured significant new investments in Red Rochester and FES Lighting in the USA, Capshare in Portugal, and incremental stakes in Primary Energy and Oliva Spanish Cogeneration. These investments were all secured through private or bilateral negotiations and added to the investment portfolio to achieve further diversification and enhance the Company's ability to deliver on its stated objective.

The Investment Manager has seen similarly high levels of investor appetite and therefore competition for district energy assets in Europe and North America and has therefore preferred to adopt a strategic or buy-and-build strategy as opposed to pursuing existing platforms at high prices.

During and shortly after the period end, the Company made its first investments from the new allocation of up 3% of gross asset value to developers, operators or managers of energy efficiency projects, in accordance with the modification of the Company's Investment Policy in August 2021. These investments offer the Company exposure to potentially 'breakthrough', although commercially proven, technologies, together with the opportunity to invest in a scalable pipeline of projects. One of these investments involved a US$10 million investment in Turntide, a company that manufactures energy efficient motors that do not use rare earth minerals, together with a negotiated opportunity to invest up to US$100 million in project opportunities. Another of these investments involved an investment of £3 million in a company that offers an energy efficient cooling solution for data centres, Iceotope, together with a negotiated opportunity to invest up to another £100 million in project opportunities. Both investments were made alongside several other high quality institutional investors.

Active Asset Management of Investments

In addition to overseeing the portfolio and each investment, the Investment Manager carefully considers emerging geopolitical and macroeconomic developments that may impact the performance of the investments. In the current market -- made increasingly volatile due to extenuating circumstances such as the COVID-19 pandemic, supply chain disruptions, inflation, energy and carbon price volatility and most recently the Russian invasion of Ukraine - seeking to mitigate risks associated with external circumstances is essential.

The Investment Manager's team consists of investment professionals with experience in portfolio management, asset and risk management, managing construction and operation and maintenance (O&M) contracts and ESG Management. Further information can be found in the ESG Management section.

Focussing On Performance

The Investment Manager seeks opportunities to improve margins and returns, whether by increasing capacity, unlocking new sources of revenue, or addressing cost inefficiencies. For example, in the case of its Oliva Spanish Cogeneration portfolio in Spain, the Investment Manager put in place measures to improve the cost efficiency of fuel gas by bringing in house at investment level the gas procurement. Other examples included establishing priorities to expand revenue streams and increase biogas content in the Värtan Gas investment in Stockholm and actively developing pipeline opportunities with Onyx. The Investment Manager also seeks opportunities for collaboration between portfolio companies.

The portfolio is managed through a combination of:

· Over 45 employees at SDCL, plus over 300 full time employees at the project level, predominantly dedicated to "on the ground" operations of the Company's largest assets in the UK, Europe and North America; and

· Coordinated full time presence on-site, teams of professional advisers and active day-to-day involvement by the Investment Manager's management team, including a team of senior and experienced professionals focused solely on driving value through asset management and improvement.

The Investment Manager typically seeks to maintain influence and control over investments through board representation and to secure protection through financing and contractual arrangements. The Investment Manager seeks to retain the right to step in and replace subcontractors in the event of underperformance.

The Investment Manager is particularly focused on maintaining health and safety, reporting on and improving ESG factors, enhancing the value of its services, identifying and mitigating risks, and developing the skills of individuals involved in managing investments in the portfolio. The Investment Manager is in the process of undertaking a periodic review of its health and safety governance programme to ensure it is consistent across all investments and remains fit for purpose as part of the management of the overall investment portfolio.

Long-Term Contracted Cash Flows

The Company derives its return on its investments primarily through receipt of contracted cash flows through the operational life of the investments in the portfolio. These are often calculated upfront and can be based on a variety of factors, including but not limited to: heat and electricity availability, output of heat and electricity, opportunity for energy savings, or other energy related services. Cash flows may however have potential to be variable or fluctuating for certain investments, if they rely on a host counterparty's demand for energy or can be impacted by volatility in the energy market. Certain investments also assume that cash flows will continue beyond the current contractual period - further details are in the Valuation of Portfolio section.

Once operational, investments provide attractive levels of cash distributions and running yield, and are designed to achieve relatively high, contracted, and predictable cash flows. The quality of this running yield is enhanced through investments with strong delivery partners, where the risks involved in implementation, operation, and the associated revenues can be identified and mitigated.

Exploring co-investment opportunities

As set out in the Company's investment policy, the Company may co-invest alongside one or more co-investors, which could include investment companies, other financial investors, or strategic investors in the relevant sector.

The Investment Manager will consider co-investment opportunities where it believes such opportunities to be in the best interests of the Company, for instance, to manage the Company's exposure to an investments or counterparty and ensure compliance with investment policy restrictions.

Outlook

Overall, SEEIT's portfolio has grown to scale and benefits from a critical mass to support diversified income and growth opportunities from a combination of organic as well as new investment.

The market background and outlook provide tailwinds for energy efficiency, given that energy efficiency is more valuable than ever as a solution to economic, climate and energy security challenges.

SEEIT will continue to focus on operational investments and to a more limited extent, on investments in the development or construction phase that the Investment Manager considers can be commissioned within a short period of time following commitment and at low risk that project commissioning will overrun (both in terms of time and budget). The Investment Manager will seek opportunities to improve margins to achieve capital gain from operational projects, as well as to seek NAV growth through acquisitions at attractive prices or through development and construction stage projects that can be commissioned quickly to generate total return.

Against an outlook of heightened risks to energy prices, energy security and decarbonisation, energy efficiency has a crucial role to play, with the potential to offer large scale, proven, rapid and cost-effective solutions. The Investment Manager believes that SEEIT is well placed to continue to perform and grow.

ESG MANAGEMENT

Through its focus on energy efficiency solutions, SEEIT's investments provide positive environmental outcomes by reducing overall energy-related greenhouse gas emissions. However, in addition to environmental issues, the Company has evolved its ESG approach to integrate a broader range of material social and governance issues centred on key focus areas that maximise long term value creation for both investors and society.

SEEIT's Responsible Investment Policy, outlined above, sets out four focus areas that provide the Company an ESG lens with which to view its operations. The Responsible Investment Policy acts as the nexus of the Company's ESG considerations and is thus carried out in SEEIT's entire ESG management process.

The Company's ESG Management process sets out how material ESG risks and opportunities are identified, systematically analysed and assessed, monitored and managed throughout the investment lifecycle of projects, from initial screening and due diligence to acquisition and asset management.

The Investment Manager's focus on developing and investing in energy efficiency solutions signifies the Company's involvement in decarbonising energy production and thus facilitating net-zero. As part of that commitment, the Investment Manager strictly monitors, with the intention of abating, the Company's climate risks and related impacts. This includes key performance indicators which are used to measure, monitor, and manage ESG outcomes.

ESG Management

Responsible Investment Policy

The Company's commitment to facilitating net-zero is an integral aspect to its Responsible Investment Policy, the purpose of which is to set out the Company's approach to responsible investment and incorporate its considerations into its investment decision-making and monitoring processes. This policy applies to all of the Company's investments and is overseen on a day-to-day basis by the Investment Manager.

The Company's focus in looking at the material ESG issues in its investments covers four principal areas:

1. Aiding the transition to a net-zero carbon economy by maximising energy efficiency through its investment strategy and operations

2. Pro-actively minimising the environmental footprint of operations through managing negative impacts, such as waste, biodiversity loss, and emissions

3. Securing robust governance and business integrity, including assessing resilience to physical climate risk and engaging as an active participant on ESG with its delivery partners

4. Providing safe, diverse, and inclusive environments for all workers, contractors and members of the community who use or encounter its projects

The Company's Responsible Investment Principles govern the ESG management process to make sure that sustainability, and specifically the energy transition, are incorporated into the governance of our operations.

The Investment Manager is responsible for implementing SEEIT's ESG policy under instruction and supervision of the Board. The Investment Manager then oversees all aspects of ESG policy and implementation, including how ESG considerations, such as climate-related factors, are incorporated into processes for investment appraisal and asset management.

The investment appraisal process is conducted in two main stages with early identification of climate-related and other ESG issues during the first phase followed by detailed due diligence to resolve any identified concerns and confirm that climate-related targets will be met during project operation.

Climate-related performance targets for all portfolio projects are monitored and reported quarterly. This informs any interventions and is reflected in quarterly reporting to the Company's Board.

Mitigating our Climate Impacts

Calculating GHG Emissions

The Investment Manager is dedicated to mitigating the Company's climate impacts through its ESG management process, which gathers climate-related performance data quarterly. One of the most critical datasets gathered from investments are their relevant carbon emissions. The Investment Manager calculates carbon savings, renewable electricity and heat generated, and energy efficiency savings each reporting period based on power usage data recorded at the investment level. The Investment Manager also calculates Scope 1, 2 and 3 emissions based on the guidance from the Greenhouse Gas Protocol, which is the most comprehensive and globally standardised framework to measure and manage GHG emissions.

Due to the operational and organisational boundaries the Investment Manager set with regards to the Greenhouse Gas Protocol, the Company considers the Scope 1 and 2 emissions of its underlying investment portfolio to be its own Scope 1 and 2, instead of considering them as "Investments" under Scope 3. This allows the Investment Manager to take a critical look at the Scope 1,2 and 3 emissions of the Company's investments in order to create detailed and strategic plans for abating them.

Net-Zero Strategy

The Investment Manager is committed to aligning the Company's portfolio with the International Energy Agency's net-zero scenario, recognising the importance of decarbonising power generating assets to follow the sectoral decarbonisation pathway. The Investment Manager's ESG Team has reviewed the Science Based Target Initiative and created an internal timeline and working group to analyse decarbonisation scenarios for the Company's highest emitting assets. The ESG Team continues to monitor existing and potentially 'breakthrough' technologies and other innovative solutions to reduce climate impacts of the Company's projects.

The Investment Manager also considers the impact of future investments on net-zero and will continue to pursue projects that facilitate the global energy transition.

Climate Risk Management and Resilience of Strategy

SEEIT considers the resilience of its strategy in terms of the impact of climate-related risks on its portfolio and on the prospects for new acquisition or development opportunities in the future, on its pipeline.

In terms of the investment portfolio, the Investment Manager is considering how different climate-related scenarios would impact investments and related revenues and costs over time. This includes consideration of both transition risks and physical risks which are assessed during investment appraisal and on an on-going basis as part of asset management. The scenarios considered reflect general assumptions about short-, medium- and long-term climate-related impacts under a range of scenarios and are assessed in terms of project specific impacts.

This approach enables SEEIT to identify climate-related risks relevant to each project against which mitigation measures and plans are formulated. In line with evolving Task Force on Climate-Related Financial Disclosure (TCFD) guidelines, the Investment Manager's ESG team is now working to model the long-term climate risks associated with SEEIT's investments depending on specific IPCC scenarios and will suggest specific actions to mitigate the Company's risk exposure.

For new acquisition and development opportunities the Company considers the impact of climate-related scenarios in making decisions about the technologies and markets to focus on. Whilst this involves commitments to deploy resources to new regions and to develop new technology partnerships the Company can adapt its business development strategy in the medium to long term to take account of impacts suggested by climate-related scenario analysis as they evolve.

Task Force on Climate-Related Financial Disclosures ("TCFD") Guidelines

The Investment Manager and the Company supports the importance of adhering to TCFD to maintain consistent climate-related financial risk disclosures and indicate the opportunities for investments related to the energy transition. The TCFD regulations are not yet mandatory for the Company. Sustainability and climate are integral aspects of the Company's overall operations, as reflected in many of the disclosures outlined in this report and mapped out below for reference.

In the year ahead the Investment Manager will continue to progress relevant matters as the Company prepares to fully adopt TCFD.

INVESTMENT PORTFOLIO SUMMARY

Investment Update

During the financial year, SEEIT successfully increased the scale of its portfolio, investing over £300 million in new investments and commitments.

The Investment Manager has actively sought to make investments in a wider range of technological solutions for energy efficiency. For example, since 31 March 2021, SEEIT has made investments focused on supply and distribution and demand reduction involving:

- Geothermal district energy

- Biomass (forest waste) fuelled combined heat and power

- Green gas (agricultural waste) combined heat and power and gas grid injection

- Net zero carbon residential homes

- Industrial motors, controls and batteries

- Datacentre cooling

The Company started the year with approximately £126m of cash and no revolving credit facility ("RCF") debt drawn. The available cash and RCF was used to acquire the Red Rochester and SOGA investments for c. £140m, commit an initial c. £10m out of a total of £22m to Biotown, pay the fourth quarterly dividend in June 2021 and be available for general working capital purposes. In September 2021 the Company published a new prospectus with a twelve-month share issuance programme and completed a £250m capital raise shortly thereafter.

The proceeds were partially used to repay approximately £70m of debt under the RCF held by SEEIT Holdco, and £34m was used to acquire the remaining 35% stake in the Primary Energy portfolio in September 2021. The remainder was utilised, committed or allocated to new investments, including FES Lighting and Sustainable Living Innovations, and follow-on investments, including EV Network, Onyx and Spark US Energy Efficiency II.

A further £100m capital raise was concluded in March 2022 (see Financing Update below) and the proceeds supported the Company's c.£32 million investment in Capshare and allocations to follow-on investments and opportunities, including Turntide, Baseload and Iceotope.

Investment activity since 31 March 2021

Project	Investment/Commitment Date	Type	Location	Commitment
During the Financial Year Ended 31 March 2022
SOGA	April 2021	New	Singapore & Vietnam	c. £2m
RED	April 2021	New	USA	c. £139m
Tallaght Hospital	May 2021	New	Ireland	c. £6m[10]
Biotown	July 2021	New	USA	c. £22m[11]
Lycra	September 2021	New	Singapore	c. £3m [12]
Primary Energy	September 2021	Follow-on	USA	c. £34m
Sustainable Living Innovations	October 2021	New	USA	c. £4m
FES Lighting	November 2021	New	USA	c. £16m
Capshare	March 2022	New	Portugal	c. £32m
EV Network	Various in year	Follow-on	UK	c. £8m
Onyx	Various in year	Follow-on	USA	c. £21m
Spark US Energy Efficiency II	Various in year	Follow-on	USA	c. £11m
After the Financial Year Ended 31 March 2022
Baseload	May 2022	New	Sweden	c. £21m[13]
Turntide	May 2022	New	USA	c. £8m
Iceotope	June 2022	New	UK	c. £3m
Biotown	Various in the period	Follow on	USA	c.£1m
Onyx	Various in the period	Follow on	USA	c.£18m
Spark US Energy Efficiency II	Various in the period	Follow on	USA	c.£3m
Tallaght Hospital	Various in the period	Follow in	Ireland	c.£2m
EV Network	Various in the period	Follow on	UK	£6m
FES Lighting	Various in the period	Follow on	USA	c.£2m

Portfolio Analysis

The below table provides a summary of the Company's total portfolio as at 31 March 2022:

Country	Project	Phase	Customer	Industry	Technology	Overview
Ireland	Tallaght Hospital	Construction	Tallaght Hospital	Healthcare: Hospital	Combined Heat and Power (CHP), Heating, Ventilation, and Air Conditioning (HVAC), Building Management Systems (BMS) and other Energy Efficiency (EE) solutions	Energy efficient measures for one of Ireland's largest hospitals, resulting in more efficient generation of power onsite as well as overall reduction in consumption of power on-site
Portugal	Capshare	Operational	Sonae Arauco PT and Portuguese energy market	Industrial: Manufacturing	Biomass	Onsite efficient generation of renewable heat and electricity
Spain	Oliva Spanish Cogeneration (includes nine investments)	Operational	Spanish energy market and olive processing plants	Industrial: Food production	CHP, biomass and olive processing plants	Onsite efficient generation of heat and power to support the process of recycling waste from olive oil production for energy production as well as secondary olive oil products
Sweden	Värtan Gas (consisting of Gasnätet and Stockholm Gas)	Operational	54,000+ customers	Utility: Biogas and natural gas supply	Biogas and natural gas pipeline	Gas supply and distribution to buildings and transport across Stockholm, with high levels of system efficiency
United States	Onyx (includes five investments)	Operational, construction and development pipeline	70+ off takers across 200+ assets	Public and private sector	Solar and energy storage	Onsite solar and battery energy storage providing efficient renewable power for public and private sector customers
	Primary Energy (includes five investments)	Operational	Cleveland-Cliffs and US Steel	Industrial: Steel production	CHP, Steam turbines, and pulverized coal injection plant	Recycling of waste gases from steel processing as well as other fuel sources to produce onsite energy to the customer sites that is more efficient and cleaner than the grid
	Spark US Energy Efficiency I	Operational, construction and development pipeline	Various	Commercial: Various	Lighting and energy efficiency measures	Multi technology energy efficiency measures in buildings for small and medium-sized companies, resulting in decrease in consumption of energy onsite
	Spark US Energy Efficiency II	Operational, construction and development pipeline	Various	Commercial: Various	Lighting and energy efficiency measures	Multi technology energy efficiency measures in buildings for small and medium-sized companies, resulting in decrease in consumption of energy onsite
	RED Rochester	Operational	100+ companies	Industrial: various	Multiple energy and utility services	Onsite efficient power and heat generation and distribution, as well as energy, water and waste management for industrial and commercial companies located within a large commercial and industrial business park
	Biotown	Operational and expansion construction	NIPSCO, a public utility	Utility: Biogas and green gas supply	Biogas fired energy generation	Conversion of agricultural and food waste into biogas for energy generation and green gas supply
	Northeastern US CHP	Operational	Various (eight)	Commercial: Various	CHP	Onsite efficient generation of power and heat for the public and private sector customers
	SLI	Construction	Sustainable Living Innovations	Residential	Direct energy efficiency systems, solar and control systems	Direct energy efficiency systems, solar and control systems in the building, which collectively support the Net Zero Energy designation of 303 Battery Street building in Seattle
	FES Lighting	Operational, development pipeline	Various	Commercial: Various	Lighting	Energy efficiency though lighting retrofits for a range of mainly small and medium sized companies, resulting in decrease in energy consumption onsite
United Kingdom	Moy Park Biomass	Operational	Moy Park	Industrial: Food Production	Biomass boilers	Onsite and efficient generation of renewable heat
	Santander UK Lighting	Operational	Santander plc	Commercial: Banking	Lighting and energy efficiency measures	Energy efficient measures for buildings including more efficient lighting, resulting in decrease in consumption of energy across the customer's site
	Huntsman Energy Centre	Construction	Huntsman	Industrial: Polyurethane manufacture	Steam raising boilers	Recycling and reduction of waste gases from chemical manufacturing to produce onsite and efficient energy to the site
	Citi Riverdale CCHP	Operational	Citigroup	Data centres: Banking	Combined Cooling, Heat and Power (CCHP)	Onsite and efficient combined cooling and power for a data centre
	Moy Park Lighting	Operational	Moy Park	Industrial: Food Production	LED lighting	Efficient lighting, resulting in decrease in consumption of energy across the customer's estate
	GET Solutions	Operational	Holiday Inn and Crowne Plaza hotels	Travel: Hotels	CHP	Onsite and efficient generation of heat and power
	St Barts CCHP	Operational	St Bartholomew's Hospital	Healthcare: Hospital	Combined Cooling, Heat and Power (CCHP)	Onsite and efficient power, heating and cooling for England's oldest hospital
	Supermarket Solar UK	Operational, construction and development	Tesco plc	Commercial: Retail	Rooftop solar	Onsite solar projects providing efficient renewable power to the customer's sites
	EV Network	Construction	Charge point operators (e.g. BP Chargemaster, ESB Energy)	EV Infrastructure	Electric vehicle charging stations	Rapid and ultra-fast EV charging stations, providing enhanced system efficiency compared to petrol or diesel
	Kingspan Holywell Solutions	Operational	Kingspan	Industrial: Manufacturing	Lighting and energy efficiency measures	Energy efficient measures for building materials manufacturing site, resulting in decrease in consumption of energy on the customer site
	SmartEnergy	Operational	Various	Industrial: Various	CHP, HVAC, BMS and other EE solutions	Energy efficient measures for small and medium-sized businesses, resulting in a decrease in consumption of energy on customer sites

Singapore	SEEIPL (includes three projects)	Operational	Various	Industrial: Various	Chillers and compressors	Energy efficient chillers and compressors, resulting in decrease in consumption of energy on customer sites
	Lycra	Construction	The LYCRA Company	Industrial: Manufacturing	Chillers	Energy efficient chillers, resulting in decrease in consumption of energy on customer sites
	SOGA (located in Vietnam)	Operational	Various	Industrial: Manufacturing	Rooftop solar	Onsite solar projects providing efficient renewable power to the customer sites

COMPANY KEY PERFORMANCE INDICATORS

The Company sets out below its financial, operational and climate-related key performance indicators (KPIs) that it uses to track the performance of the Company over time against the objectives as described in the Strategic Report. The Board believes that the KPIs detailed below provide shareholders with sufficient information to assess how effectively the Company is meeting its objectives. The Board monitors these KPIs on an ongoing basis.

Financial KPIs

KPI	Definition	31 March 2022	31 March 2021	Commentary
Net Asset Value ("NAV") per share (pence)	NAV divided by number of shares outstanding as at 31 March	108.4p	102.5p	NAV has increased compared with the prior year due to earnings per share of 10.0 pence exceeding the dividend paid of 5.6 pence - see the Financial Review.
Share price (pence)	Closing share price as at 31 March	117.5p	112.0p	The share price has generally continued to grow steadily during the year despite market volatility
Dividends per share (pence)	Aggregate dividends declared per share in respect of the financial year	5.62p	5.5p	The dividend increased year on year due to predictability of cash generation from portfolio plus new investments made previously. The Company met its stated dividend targets for the years ended 31 March 2021 and 31 March 2022.
Dividend cash cover (x)	Operational cash flow divided by dividends paid to shareholders during the year	1.19x	1.17x	The target was for net operational cash inflow to fully dividends paid. The Company met its target for the years ended 31 March 2021 and 31 March 2022.
Total Return on NAV basis in the year (%)	NAV growth and dividends paid per share in the year	11.2%	8.0%	NAV growth in the year (described above) resulted in strong financial performance for the year. In both years the Company exceeded its target of 7-8% p.a. (based on IPO price).
Ongoing charges ratio (%)	Annualised ongoing charges (i.e. excluding investment costs and other irregular costs) divided by the average published undiluted NAV in the period, calculated in accordance with AIC guidelines	1.00%	1.13%	Reduced year on year by benefitting from the growth in NAV and therefore spreading costs across a larger base. See the Financial Review.

Operational KPI

KPI	Definition	31 March 2022	31 March 2021	Commentary
Weighted average investment life (years)	Weighted average number of years to be remaining in investment contracts	14.8	13.4	Increased due to new investments made during the year
Largest five investments as a % of NAV (%)	Total value of five largest investments divided by the sum of all investments held in the portfolio together with any cash, calculated at year end	49 %	44%	Target is to maintain good portfolio diversification, achieved in both financial years.

Climate-Related KPIs

Climate-related reporting

The Company seeks to measure, monitor and report climate-related KPIs that are consistent with all relevant international standards, both statutory and voluntary, for assessing the sustainability of the Company's activities. As well as TCFD, these include the Streamlined Energy and Carbon Reporting ("SECR") and the requirements under SFDR and EU Taxonomy Regulations.

The Company' aim is that its investments should contribute to substantial climate change mitigation and that its performance against the measured KPIs should be used to demonstrate if this aim has been achieved.

KPI	Definition	31 March 2022	31 March 2021	Commentary
Total Carbon Emissions (Scope 1, 2 and 3)	SEEIT follows the Greenhouse Gas Protocol definition of Scopes: - Scope 1 emissions are direct emissions from owned or controlled sources. - Scope 2 emissions are indirect emissions from the generation of purchased energy. - Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.	1,026,004 tCO2 (Of which 21,994 tCO2 was in the UK)	541,161 tCO2 (Of which 18,477 tCO2 was in the UK)	Increase driven by addition of new investments in the year
Total Carbon Emissions (Scope 1 and 2)	Total Scope 1 and 2 Carbon Emissions	745,041 tCO2 (Of which 6,162 tCO2 was in the UK)	368,041 tCO2 (Of which 2,257 tCO2 was in the UK)	Increase driven by addition of new investments in the year
Energy consumption used to calculate above emissions (MWh)	Underlying global energy use in MWh	3,748,007 (of which 131,722 was in the UK)	2,291,542 (of which 100,102 was in the UK)	Increase driven by addition of new investments in the year
Carbon Footprint	Total Scope 1 and 2 Carbon Emissions / Total portfolio value (tCO2e/£M)	817	685	The increase is mainly due to the addition of RED to the portfolio, which is a large user of natural gas
Exposure to Carbon-Related Assets	Percentage of portfolio assets by asset value tied to the energy and utilities sector (excluding renewable)	74 %	83%	Decrease in exposure to carbon related assets reflects an overall move towards lower-carbon assets over the last year.

The calculation approach in each case follows several key principles, to maintain a consistent approach. The principles are:

1. Where possible to capture fundamental data regarding project performance. Examples of this data include energy generated (kWh) and fuel consumed (kWh);

2. Use publicly available emissions factors from government sources specific to the project location;

3. Where a project was commissioned, or purchased, by SEEIT mid-way through the reporting period, only the portion of the period after commissioning or purchase date should be recognised; and

4. Where SEEIT owns less than 100% of a project, the total project savings should be reduced pro-rata with the ownership percentage.

Strategic Report: Portfolio Review

FINANCIAL REVIEW

Financial information

In accordance with IFRS 10 the Company carries its investment in SEEIT Holdco at fair value as it meets the conditions of being an Investment Entity (see Note 2 for details). The fair value of SEEIT Holdco includes the fair value of the underlying investments which is described in further detail in the Valuation of the Portfolio section.

In order to provide shareholders with more transparency into the Company's capacity for investment, ability to make distributions, operating costs and gearing levels, results have been reported in the pro forma tables below on a non-statutory "Portfolio Basis" to include the impact if SEEIT Holdco were to be consolidated on a line-by-line basis. The Directors consider the non-statutory Portfolio Basis to be a helpful basis for users of the financial statements to understand the performance and position of the Company. This is because key balances such as cash and debt balances carried in SEEIT Holdco and all expenses incurred in SEEIT Holdco, including debt financing costs, are shown in full rather than being netted off. The "Portfolio Basis" is presented as an alternative performance measure.

The pro forma tables that follow show the Company's result for the year ended 31 March 2022 compared to the pro forma balance sheet at 31 March 2021 and the pro forma Income statement and Cash Flow for the year to 31 March 2022.

The impact of including SEEIT Holdco is shown in the Holdco reallocation column in the Income Statement and Balance Sheet which reconciles back to the statutory financial statements ("IFRS") and constitute a reallocation between line items rather than affecting NAV and Earnings. In the Cash Flow statement the Holdco column simply represents the net difference between the Portfolio Basis and IFRS for movements that may occur only in SEEIT Holdco or only the Company.

NAV per share and Earnings per share are the same under the Portfolio Basis and the IFRS basis.

Summary Financial Statements

Portfolio Basis Summary Income Statement

Year to 31 March 2022				Year to 31 March 2021
£ millions	Portfolio Basis	Holdco reallocation	IFRS (Company)	Portfolio Basis	Holdco reallocation	IFRS (Company)
Total income	92.5	(3.8)	88.8	41.1	(3.3)	37.8
Expenses and Finance Costs	(12.7)	3.8	(9.0)	(8.7)	3.3	(5. 4 )
Profit before Tax	79.8	-	79.8	32.4	-	32.4
Earnings	79.8	-	79.8	32.4	-	32.4
Earnings per share (pence)	10.0	-	10.0	7.0	-	7.0

On the Portfolio Basis, Total Income of £92.5 million (2021: £41.1 million) represents the return from the portfolio recognised as income comprising dividends, interest and valuation movements. Further detail on the valuation movements is given in the Valuation of the Portfolio section.

On an IFRS basis, Total income of £88.8 million (2021: £37.8 million) comprises income received by the Company and valuation movements in its investment (see Note 5). Both Total Income and Expenses and Finance Costs are lower than on the Portfolio Basis, as costs incurred by the Holdco are included by netting off within Total Income under IFRS, not under Expenses and Finance Costs. The costs incurred by the Holdco not included on an IFRS basis include transaction abort costs, foreign exchange movements related to hedging and financing expenses related to the RCF.

The increase in Total income compared to the prior year is mainly as a result of the increase in the size of the portfolio and thereby generating a higher amount of revenue from interest and dividends, in addition to the movements in fair value as described in the Valuation of the Portfolio section. The increase in Expenses and Finance costs is also mainly due to the growth of the size of the portfolio with total fees accruing to the Investment Manager of £7.2 million for the year (2021: £4.0 million).

Neither the Investment Manager nor any of its affiliates receives other fees from the Company's portfolio of investments.

Profit before tax of £79.8 million (2021: £32.4 million) included net foreign exchange losses of £7.3 million (2021: £4.6 million loss) incurred by Holdco comprising a £22.0 million gain on revaluing of non-GBP investments for the year ended 31 March 2022 offset by loss on hedging of £29.3 million. The foreign exchange gains and losses are reflected in the investment value of Holdco.

In the year, the Company and Holdco incurred £0.3 million (2021: £1.1 million) of abort costs on unsuccessful bids and bids that were in progress (mainly legal, technical and tax due diligence) at the end of the financial year.

On both the Portfolio Basis and IFRS basis, Earnings were £79.8 million (2021: £32.4 million) and Earnings per share were 10.0p (2021: 7.0p).

Portfolio Basis Balance Sheet

As at 31 March 2022				As at 31 March 2021
£ millions	Portfolio Basis	Holdco reallocation	IFRS (Company)	Portfolio Basis	Holdco reallocation	IFRS (Company)
Investments at fair value	912.7	15.5	928.2	552 .7	19 .9	572.6
Working capital	(10.6)	9.4	(1.2)	14 .9	( 15.8 )	(0.8)
Debt	-	-	-	-	-	-
Cash	170.9	(24.9)	146.1	126.2	(4.1)	122.1
Net assets attributable to Ordinary Shares	1,073.1	-	1,073.1	693.8	-	693.8
NAV per share	108.4	-	108.4	102.5	-	102.5

On a Portfolio Basis, Investments at fair value are £912.7 million (2021: £552.7 million), representing the Portfolio Valuation. The increase of £360.1 million is predominantly due to new investments during the year (£304.9) although further detail on the movement in Investments at fair value is given in the Valuation of the Portfolio section.

On a Portfolio Basis, cash at 31 March 2022 was £170.9 (2021: £126.2 million); mainly reflecting cash from equity capital raised and cash received from investments, net of cash used for investments. The Company is expecting to utilise the cash balance in paying the fourth quarterly interim dividend on 30 June 2022, and approximately £37m million was utilised since the year end to complete further investments (please refer to the Investment Portfolio Summary). On an IFRS basis, cash at 31 March 2022 was £146.1 million (March 2021: £122.1 million) which reconciles to the Portfolio Basis through the cash held by Holdco at this date.

An analysis of net cash movement is shown in the cash flow analysis below.

On an IFRS basis, Investments at fair value were £928.2 million (2021: £572.6 million), reflecting the Portfolio Valuation adjusted for cash, working capital and debt held by Holdco. A reconciliation between the Portfolio Valuation at 31 March 2022 and Investment at fair value shown in the financial statements is given in Note 11 to the financial statements, the principal differences are as per the table below.

	March 2022	March 2021
	£ millions	£ millions
Portfolio Valuation	912.7	552.7
Holdco cash	24.9	4.1
Holdco debt	-	-
Holdco net working capital	(9.4)	15.8
Investment at fair value (see Note 11)	928.2	572.6

NAV per share at 31 March 2022 was 108.4p (2021: 102.5p). NAV per share has increased by 5.9p since last year, reflecting the earnings in the year of 10.0p, interim dividends paid during the year of 5.6p and accretive share issues in the year of 1.5p.

Analysis of growth in NAV

		NAV per share (pence)
NAV per share at 1 April 2021		102.5
Change in discount rate	3.3
Change in macroeconomic assumptions	1.3
Foreign exchange loss	(0.7)
Portfolio performance	6.1
Earnings per share to 31 March 2022		10.0
Interim dividends paid 1		(5.6)
		106.9
NAV accretive share issues 2		1.5
NAV per share at 31 March 2022		108.4

[1] Consisting of a fourth interim dividend of 1.375p per share paid in June 2021 for the year ending 31 March 2021 and three interim dividends of 1.405p per share each paid for the year ended 31 March 2022

2 Arising from issuing of shares in the Company in September 2021 and March 2022 at a price higher than the prevailing NAV per share.

Portfolio Basis Cash Flow Statement

For the year ended 31 March 2022				For the year ended 31 March 2021
£ millions	Portfolio Basis	Holdco	IFRS (Company)	Portfolio Basis	Holdco	IFRS (Company)
Cash from investments	64.7	(11.7)	53.0	42.1	(6.1)	36.0
Operating and finance costs outflow	(11.8)	2.9	(8.9)	(6.4)	1.7	(4.7)
Net cash inflow before capital movements	52.9	(8.8)	44.1	35.7	(4.4)	31.3
Cost of new investments including investment costs	(304.9)	(14.9)	(319.8)	(255.2)	(61.4)	(316.6)
Share capital raised net of costs	343.9	-	343.9	368.0	-	368.0
Movement in borrowings	(1.7)	1.7	-	(64.7)	64.7	-
Movement in capitalised debt costs and FX hedging	(1.3)	1.3	-	2.1	(0.4)	1.6
Dividend paid	(44.2)	-	(44.2)	(30.4)	-	(30.4)
Movement in the year	44.7	(20.7)	24.0	55.4	(1.6)	53.9
Cash at start of the year	126.2	(4.1)	122.1	70.8	(2.4)	68.1
Cash at end of the year	170.9	(24.9)	146.1	126.2	(4.1)	122.1

Cash inflows from the portfolio on a Portfolio Basis were £64.7 million (2021: £42.1 million), in line with expectations. The increase in cash received compared with the previous period reflects the increase in the size of the portfolio.

The cost of new investments by the SEEIT group on a Portfolio Basis of £304.9 million (2021: £255.2 million) includes investment acquisition costs as described in the Valuation Movements below.

On an IFRS basis, costs of new investments of £319.8 million (2021: £316.7 million) reflects funding extended by the Company to Holdco in the year to make portfolio investments and for repayment of the RCF that Holdco utilised to make new investments.

Net cash flow before capital movements in the year on a Portfolio Basis was £52.8 million (2021: £35.7 million) and covers dividends paid of £44.2 million in the year (2021: £30.4 million) by 1.2 times.

Share capital raised (net of costs) totalled £343.9 million (2021: £368.0 million) reflecting the net proceeds of shares issued during the year through three separate capital raisings under the share issuance programme.

Hedging for the group is undertaken by Holdco and therefore the Company should have no cash flows for this on an IFRS basis. Holdco enters into forward sales to hedge foreign exchange rate exposure in line with the Company's hedging policy set out below (see 'Foreign Exchange Hedging'). On a Portfolio Basis, there was a net cash inflow of £5.4 million on foreign exchange hedging in the year.

Ongoing charges

Ongoing charges, in accordance with AIC guidance, are defined as annualised ongoing charges (i.e. excluding investment costs and other non-recurring items) divided by the average published undiluted NAV in the year. On this basis the Ongoing charges ratio is 1.00% (2021: 1.13%) for the full year. The Ongoing charges percentage has been calculated on the Portfolio Basis to take into consideration the expenses of the Company and Holdco.

As expected, the Ongoing Charges ratio has reduced year on year, benefitting from the growth in the net assets, meaning the known ongoing costs of the Company are spread across a larger base, and benefitting from the reduction in management fees percentage above £750 million.

Group Drawings and Gearing Levels

The Investment Manager periodically considers refinancing options aligned to the pipeline of potential transactions and in the interest of efficient capital management and foreign exchange hedging. This enables the Company to make new investments via SEEIT Holdco. During the year, SEEIT Holdco increased the RCF to £145 million and ING, HSBC and Intesa Sanpaolo joined Investec as lenders. The facility includes an uncommitted accordion of £55 million and has also been extended to June 2024. As at 31 March 2022 the RCF was undrawn.

Foreign Exchange Hedging

The Company applies foreign exchange hedging through currency hedges entered into by Holdco. The objective of the Company's hedging strategy is to protect the NAV from material movements in foreign exchange rates, and to provide stability and predictability of near to medium term Sterling cash flows.

This is achieved on an income basis by hedging forecast investment income from non-Sterling investments for up to 24 months through foreign exchange forward sales. On a capital basis, this is achieved by hedging a significant portion of the portfolio value through rolling foreign exchange forward sales. The Investment Manager also seeks to utilise corporate debt facilities in the local currency to reduce foreign exchange rate exposure.

As part of the Company's hedging strategy the Investment Manager will regularly review non-Sterling exposure in the portfolio and adjust the levels of hedging accordingly and in doing so will also take into account the cost benefit of hedging activity. The hedging strategy also dictates that at times the Company needs to retain additional cash to meet the liquidity requirements imposed by hedging counterparties during periods of volatility affecting the Company adversely.

Net foreign exchange losses in the year ended 31 March 2022 was £7.3 million, representing c. 0.7% of NAV.

Going concern

The Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis of accounting in preparing the financial statements. Further details of the processes carried by the Company in determining that the going concern basis continues to be appropriate can be found in the Report of the Directors.

VALUATION OF THE PORTFOLIO

Introduction

The Investment Manager is responsible for carrying out the fair market valuation of the SEEIT group's portfolio of investments (the "Portfolio Valuation") which is presented to the Directors for their consideration and approval. A valuation is carried out on a six-monthly basis, as at 31 March and 30 September each year. The Portfolio Valuation is the key component in determining the Company's NAV.

The Company has a single investment in a directly and wholly owned holding company, SEEIT Holdco. It recognises this investment at fair value. To derive the fair value of SEEIT Holdco, the Company determines the fair value of investments held directly or indirectly by SEEIT Holdco and adjusted for any other assets and liabilities. The valuation methodology applied by SEEIT Holdco to determine the fair value of its investments is described below.

For non-market traded investments (being all the investments in the current portfolio), the valuation is predominantly based on a discounted cash flow methodology and adjusted in accordance with the IPEV (International Private Equity and Venture Capital) valuation guidelines where appropriate to comply with IFRS 13 and IFRS 9, given the special nature of infrastructure investments. Certain investments may be held at cost if in the early part of a construction phase, however this will still be supported by a discounted cash flow analysis or similar method to determine fair value. For the 31 March 2022 valuation, this is the case for investments in Tallaght Hospital, EV Network and Lycra . For the investment in the development pipeline of Onyx, fair value is derived from assuming a price that can be achieved per MW. Where an investment is traded in an open market, a market quote would be used although currently this is not applicable to the investment portfolio.

The Investment Manager exercises its judgment in assessing the expected future cash flows from each investment based on the project's expected life and the financial models produced for each project company and adjusts the cash flows where necessary to take into account key external macro-economic assumptions and specific operating assumptions.

The fair value for each investment is then derived from the application of an appropriate market discount rate (on an unlevered basis) to reflect the perceived risk to the investment's future cash flows and the relevant year-end foreign currency exchange rate to give the present value of those cash flows. Where relevant, project level debt balances are then netted off to arrive at the valuation for each asset. The discount rate takes into account risks associated with the financing of an investment such as investment risks (e.g. liquidity, currency risks, market appetite), any risks to the investment's earnings (e.g. predictability and covenant of the income) and a thorough assessment of counterparty credit risk, all of which may be differentiated by the phase of the investment.

The Investment Manager uses its judgement in arriving at the appropriate discount rate. This is based on its knowledge of the market, taking into account intelligence gained from its bidding activities, discussions with financial advisers in the appropriate market, and publicly available information on relevant transactions.

All the operational investments included in the valuation have an underlying contract for energy services. The valuation is based on the future expected cash flows derived from these contracts. For the March 2022 valuation the assumed future cash flows match the maturity of the underlying contract or regulatory life of the asset except in the case of four of the assets in Primary Energy and the assets in Oliva Spanish Cogeneration where it is assumed that future contract extensions are achieved and hence the expected cash flows are currently projected to extend beyond the maturity date of the existing contract with the counterparty.

For the valuation as at 31 March 2022, the Directors commissioned a report from a third-party valuation expert to provide their assessment of the appropriate discount rate range for each investment (excluding small investments with an aggregate value of less than 1% of the Portfolio Valuation) in order to further benchmark the valuation prepared by the Investment Manager.

The valuation methodology is materially unchanged from the Company's IPO and has been applied consistently in each subsequent valuation.

Portfolio Valuation

The Portfolio Valuation as at 31 March 2022 was £912.7m, an increase of £360.0 compared to the Portfolio Valuation of £552.7m as at 31 March 2021 and an increase of £127.7m compared to the Portfolio Valuation of £785.0m at 30 September 2021 - the increase is mainly a result of the new investments during the year, with additional movements described below.

Valuation Movements

A breakdown of the movement in the Portfolio Valuation in the period is set out in the table below.

Valuation Movements During the Year To 31 March 2022 (£'m)
Portfolio Valuation - 31 March 2021		552.7
New Investments	300.5
Cash from Investments	(64.7)
		235.9
Rebased Portfolio Valuation		788.6	% on Rebased
Changes in Macroeconomic Assumptions	12.7		1.6%
Changes in Foreign Exchange	22.0		2.8%
Changes in Discount Rates	33.1		4.2%
Balance of Portfolio Return	56.5		7.2%
		126.2
Portfolio Valuation - 31 March 2022		912.7

The Portfolio Valuation at 31 March 2022 was £912.7 million, an increase of 65% from the Portfolio Valuation £552.7 million at 31 March 2021. Allowing for investments of £300.5 million as outlined in the Investment Portfolio Summary and cash receipts from investments of £64.7 million, the rebased Portfolio Valuation is £788.6 million. An overall increase of £124.2 million was achieved above the rebased valuation - after adjusting for changes in macro-economic assumptions, foreign exchange movements and changes in discount rates, this resulted in a portfolio return in the year of £56.5 million, equating to a 7.2% return in the year.

Return from the Portfolio

Each movement between the rebased valuation of £788.6 million and the 31 March 2022 valuation of £912.7 million is considered in turn below:

(i) Changes in macroeconomic assumptions of £12.7 million:

Inflation assumptions: Previously certain jurisdictions had both near-term and long-term inflation assumptions and the remaining jurisdictions had only long-term assumptions. To achieve consistency and reflect the impact of the current high inflation macro environment more accurately, the approach in all jurisdictions is to apply a 3-year near-term bridge to the relevant long-term inflation assumption. This has resulted in an uplift in the valuation due to high near-term inflation compared to the assumptions applied for the March 2021 valuation or at the time of investments during the year.

Tax rate assumptions: There were no changes to corporation tax rate assumptions during the year.

Further details on the macroeconomic assumptions applied to the 31 March 2022 valuation and comparison to previous periods can be found in Note 4.

(ii) Changes in foreign exchange rates of £22.0 million:

The gain of £22.0 million on the investment portfolio in the year reflects the movements of GBP against US Dollar, Euro and Swedish Krona in the year or since new investments were made. This however only reflects the movement in underlying investment values and is shown before the offsetting effect of foreign exchange hedging that is applied at the level of SEEIT Holdco outside of the Portfolio Valuation which resulted in a loss of £29.3 million. Therefore overall foreign exchange movements did not have a significant impact on NAV in the period with a net loss from foreign exchange hedging and movement in the assets of £7.3 million.

(iii) Changes in valuation discount rates of £33.1 million:

The discount rate used for valuing each investment represents an assessment of the rate of return at which infrastructure investments with similar risk profiles would trade on the open market.

During the year there were selected reductions of discount rates that in aggregate resulted in an increase in the valuation of £33.1 million.

The Investment Manager observed downwards pressure on discount rates generally in the market for energy efficiency investments, notably in the second half of the financial year. This has resulted in a reduction applied to discount rates for several investments in the portfolio in several countries and across several technologies, and is the main reason for the reduction of the weighted average discount rate since September 2021. Over the course of the financial year these reductions broadly offset new investments that were acquired at discount rates above the prevailing weighted average.

In addition, investments moving from construction phase to operational phase has contributed marginally to the overall reduction in weighted average discount rate.

The weighted average discount rate for the portfolio as at 31 March 2022 was 7.0% on an unlevered basis (March 2021: 7.0% and September 2021: 7.2%) and c. 8.0% on a levered basis.

The Directors noted that the discount rates used by the Investment Manager were within the ranges advised by the third-party valuation expert.

(iv) Balance of portfolio return of £56.5 million:

This refers to the balance of valuation movements in the year (excluding (i) to (iii) above) and which provided an uplift of £56.5 million. The balance of portfolio return reflects the net present value of the cash flows unwinding over the period at the average prevailing portfolio discount rate and various additional valuation adjustments described below. The portfolio delivered a return of 7.2% in the financial year.

The portfolio valuation, and by implication the return achieved, includes several key estimates and judgements in addition to key changes assumed in the portfolio valuation. These are described below and while some had a positive impact on the portfolio valuation, others may have an adverse impact on the portfolio valuation - overall these estimates and judgements have had a net positive impact on the valuation:

· The adverse impact of the idling of Blast Furnace 4 at Primary Energy which affects the Ironside investment, and lower than expected energy demand at PCI, although partially offset by an uplift in valuation from increased revenues assumed to be derived from recontracting of key contracts in Primary Energy and the use of an interim agreement, resulting in an overall broadly offsetting impact

· The remaining 35% stake in the Primary Energy portfolio of five assets was acquired in September 2021 at a price that was pre-determined in December 2020 when SEEIT increased its stake from 50% to 65%. The carrying value of the existing stake was higher than the consideration paid in September 2021 and therefore the Portfolio Valuation benefited from an uplift of more than £10 million to bring the newly acquired 35% stake in line with the valuation of the 65% stake.

· Uplift in valuation of c. £13 million for Oliva Spanish Cogeneration, mostly from the reversal of previous provisions for EU ETS cost assumptions by assuming prudent compensation using proposed legislative changes

· Adverse impact from a delay in the construction portfolio within Onyx and the following development pipeline, although broadly offset in part from an increase in the assumed megawatts to be delivered in the development portfolio

· Uplift in the valuation of c. £10 million due to a net increase in forecast customer load assumptions at Red Rochester resulting in additional revenues from those previously assumed.

Additional information on critical estimates and judgements are in Note 3.

As in the previous year, the Investment Manager has reviewed the impact of the COVID-19 pandemic on the portfolio during the year, and the overall impact on the financial performance and cash flow projections has again not had a material impact on the Portfolio Valuation and NAV.

The pandemic caused some operational and financial disruption to certain assets, of which the two key impacts are listed below:

· It has caused slower than anticipated decision making from potential counterparties in the US, resulting in slower than previously assumed deployment of onsite solar generation projects in the Onyx investment

· Lower than expected revenue from delivering gas to restaurant customers in Stockholm in the Vartan Gas investment, which has also been assumed to continue in the near term and therefore continue to adversely affect near-term cash flows and valuation.

Key sensitivities

For each of the sensitivities, it is assumed that potential changes occur independently of each other with no effect on any other base case assumption, and that the number of investments in the portfolio remains static throughout the modelled life. For the purpose of the sensitivities described below, the potential changes are applied as at 31 March 2022 and remain constant thereafter apart from inflation which is applied with compounding effect.

Please refer to Note 4 in the Notes to the Financial Statements for further detail on the key sensitivities in this section and Note 3 for further detail on critical estimates and judgements and their sensitivities.

Discount Rate Sensitivity

The weighted average discount rate that is applied to each portfolio company's forecast cash flow, is the single most important judgement and variable for the purposes of valuing the portfolio.

A 0.5% increase in the discount rates would result in a NAV per share decrease of 4.1p based on the Portfolio Valuation as at 31 March 2022. A 0.5% decrease in the discount rates would result in a NAV per share increase of 4.5p based on the Portfolio Valuation as at 31 March 2022.

Corporation Tax Rate Sensitivity

This sensitivity considers a 5% p.a. movement in corporation tax rates in each country where an investment is held - for the valuation as at 31 March 2022 this included UK, Spain, Sweden, Singapore and USA. The profits of each portfolio company are subject to corporation tax in the country where the project is located.

A 5% p.a. increase in corporation tax rates would result in a NAV per share reduction of 3.3p based on the Portfolio Valuation as at 31 March 2022. A 5% p.a. decrease in corporation tax rates would result in a NAV per share increase of 3.2p based on the Portfolio Valuation as at 31 March 2022.

The sensitivity is shown on the basis that corporation tax rates remain as the sensitised level for the remainder of any period in which cash flow is assumed for that project and that no mitigations that may be available are applied. Key mitigants available include portfolio structuring changes including gearing, and the option available to the Company to use interest streaming of dividends to shareholders in the future, whereby a portion of the dividend distribution is designated as interest, allowing net taxable interest income to be reduced.

The sensitivity mainly shows the unmitigated impact of changes in US, Swedish and Spanish tax rates. The exposure to UK corporation tax at project level has negligible sensitivity to the sensitised movements in UK corporation tax rates, including the impact of the expected future tax rises announced by the UK government, because of UK entities within the group being able to offset aggregate profits and losses.

Inflation rate sensitivity

This sensitivity considers a 0.5% p.a. movement in near-term and long-term inflation in the underlying investment cash flows which is considered a reasonable range on the long-term inflation assumptions as well as the range of assumptions introduced for the initial three years prior to reverting to the long-term assumption.

A 0.5% p.a. increase in inflation rates would result in a NAV per share increase of 1.2p based on the Portfolio Valuation as at 31 March 2022. A 0.5% p.a. decrease in inflation rates would result in a NAV per share reduction of 1.1p based on the Portfolio Valuation as at 31 March 2022.

The Company's exposure to inflation via its investment portfolio is currently largely to the USA and Europe with c.55% and c. 22% of NAV respectively although the level of exposure to inflation in underlying investments in each geography varies. The investment portfolio as at 31 March 2022 has a positive correlation to inflation with approximately half of the current portfolio by value having revenues that are partly or wholly inflation linked.

The Company's portfolio includes investments that benefit from fixed or escalating revenues that are not directly linked to inflation. This includes the assets in Primary Energy where periodic recontracting is assumed in the valuation. It is assumed that the renewed revenue contracts entered into in future years reset the revenues at such a level that it materially offsets increases to project level costs such as O&M that is materially inflation-linked. Within the portfolio of Oliva Spanish Cogeneration assets there is some natural offsetting or protection between revenues and costs for inflation increases and decreases. The assumption in the Vartan Gas investment is that the regular renewals of customer contracts (typically annually) include inflationary increases to the tariffs charged, however it is also assumed that this would not result in the charges being above the regulatory cap and therefore the full inflationary increase is not passed on to the customer each time. In the current portfolio there are several investments with no or negligible exposure to inflation, notably the investments in the UK and the senior debt loan investments in Spark US Energy Efficiency I and II, FES Lighting and Biotown.

The Investment Manager aims to construct and maintain a portfolio that generates year-on-year revenue growth on a progressive basis. The Investment Manager does not aim to construct and maintain a portfolio of investments purely with direct inflation-linked returns, however it targets any potential portfolio downside inflation impact to be broadly offset through revenue growth over the medium to long-term.

Foreign Exchange Rate Sensitivity

This sensitivity considers a 10% movement in relevant non-GBP currencies, which in the case of the Portfolio Valuation at 31 March 2022 is US Dollar, Singapore Dollar, Swedish Krona and Euro, from the foreign exchange rates used at 31 March 2022 - the sensitivity is shown below pre and post mitigation from hedging.

This sensitivity is presented after considering the effect of hedging implemented by the Company. Using historical levels of hedging and the Company's hedging strategy as described in the Financial Review as a guide, at an assumed level of 90% hedging, a 10% increase (strengthening of GBP) in foreign exchange rates would result in a NAV per share reduction of 0.8p and 10% decrease (weakening of GBP) in foreign exchange rates would result in a NAV per share increase of 0.8p.

Without any hedging, a 10% increase (strengthening of GBP) in foreign exchange rates would result in a NAV per share reduction of 7.7p based on the Portfolio Valuation as at 31 March 2022. A 10% decrease (weakening of GBP) in foreign exchange rates would result in a NAV per share increase of 8.4p based on the Portfolio Valuation as at 31 March 2022.

Directors' Responsibility Statement

The 2022 Annual Report which will be published in July 2021 contains a responsibility statement in compliance with DTR 4.1.12. This states that on 30 June 2022, the date of the approval of the Annual Report, the Directors confirm that to the best of their knowledge:

· the Company financial statements, which have been prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the company; and

· the Strategic Report: Portfolio Review includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

- STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2022

	Note	For the year ended 31 March 2022 £'000	For the year ended 31 March 2021 £'000
Investment income	5	88,763	37,834
Total operating income		88,763	37,834
Fund expenses	6	(9,005)	(5,429)
Profit for the year before tax		79,758	32,405
Tax on profit on ordinary activities	7	-	-
Profit for the year		79,758	32,405
Total comprehensive income for the year		79,758	32,405
Attributable to: Equity holders of the Company		79,758	32,405
Earnings Per Ordinary Share (pence)	8	10.0	7.0

The accompanying Notes are an integral part of these financial statements.

All items in the above Statement derive from continuing operations.

STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2022

	Note	31 March 2022 £'000	31 March 2021 £'000
Non-current assets
Investment at fair value through profit or loss	11	928,229	572,574
		928,229	572,574
Current assets
Trade and other receivables		363	401
Cash and cash equivalents		146,064	122,059
		146,427	122,460
Current liabilities
Trade and other payables		(1,538)	(1,229)
Net current assets		144,889	121,231
Net assets		1,073,118	693,805

Capital and reserves
Share capital	12	9,903	6,771
Share premium	12	925,067	584,437
Other distributable reserves	12	39,342	58,165
Retained earnings		98,806	44,432
Total equity		1,073,118	693,805
Net assets per share (pence)	10	108.4	102.5

The accompanying Notes are an integral part of these financial statements.

The financial statements for the year ended 31 March 2022 of SDCL Energy Efficiency Income Trust plc, were approved and authorised for issue by the Board of Directors on 30 June 2022.

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED 31 MARCH 2022

	Note	Share Capital £'000	Share Premium £'000	Other distributable reserves £'000	Retained earnings £'000	Total Equity £'000
Balance at 1 April 2021		6,771	584,437	58,165	44,432	693,805
Shares issued	12	3,132	346,868	-	-	350,000
Share issue costs	12	-	(6,238)	-	-	(6,238)
Dividends paid	9	-	-	(18,823)	(25,384)	(44,207)
Profit and total comprehensive income for the year		-	-	-	79,758	79,758
Balance at 31 March 2022		9,903	925,067	39,342	98,806	1,073,118

	Note	Share Capital £'000	Share Premium £'000	Other distributable reserves £'000	Retained earnings £'000	Total Equity £'000
Balance at 1 April 2020		3,204	219,721	88,578	12,027	323,530
Shares issued		3,567	371,433	-	-	375,000
Share issue costs		-	(6,717)	-	-	(6,717)
Dividends paid	9	-	-	(30,413)	-	(30,413)
Profit and total comprehensive income for the year		-	-	-	32,405	32,405
Balance at 31 March 2021		6,771	584,437	58,165	44,432	693,805

The accompanying Notes are an integral part of these financial statements.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2022

	Note	For the year ended 31 March 2022 £'000	For the year ended 31 March 2021 £'000
Cash flows from operating activities
Operating profit for the year		79,758	32,405
Adjustments for:
Gain on investment at fair value through profit or loss		(47,792)	(15,021)
Loan interest income	5	(7,299)	(2,684)
Operating cash flows before movements in working capital		24,667	14,700
Changes in working capital
Decrease in trade and other receivables		37	1,440
Increase in trade and other payables		309	645
Net cash generated from operating activities		25,013	16,785
Cash flows from investing activities
Additional investment in Holdco	11	(319,863)	(316,479)
Loan principal repayment received		12,000	13,021
Loan interest income received		7,300	2,684
Net cash used in investing activities		(300,563)	(300,774)
Cash flows from financing activities
Proceeds from the issue of shares Payment of share issue costs Dividends paid	12 9	350,000 (6,238) (44,207)	375,000 (6,718) (30,413)
Net cash generated from financing activities		299,555	337,869
Net movement in cash and cash equivalents during the year		24,005	53,880
Cash and cash equivalents at the beginning of the Year	2	122,059	68,179
Cash and cash equivalents at the end of the year	2	146,064	122,059

The accompanying Notes are an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2022

1. General Information

The Company is incorporated in the United Kingdom under number 11620959 pursuant to the Companies Act 2006 and is domiciled in the England, United Kingdom. The Company's registered office and principal place of business is 6^th Floor, 125 London Wall, London, EC2Y 5AS. The Company was incorporated on 12 October 2018 and is a Public Company limited by shares and the ultimate controlling party of the group.

The Company's ordinary shares were first admitted to the premium segment of the UK Listing Authority's Official List and to trading on the Main Market of the London Stock Exchange under the ticker SEIT on 11 December 2018.

The Company's objective is to generate an attractive total return for investors comprising stable dividend income and capital preservation, with the opportunity for capital growth through the acquiring and realising of a diverse portfolio of energy efficiency infrastructure projects.

The Company currently makes its investments through its principal holding company and single subsidiary, SEEIT Holdco Limited ("Holdco"), and intermediate holding companies which are directly owned by the Holdco. The Company controls the investment policy of each of the Holdco and its intermediate holding companies in order to ensure that each will act in a manner consistent with the investment policy of the Company.

The Company has appointed Sustainable Development Capital LLP as its Investment Manager (the "Investment Manager") pursuant to the Investment Management Agreement dated 22 November 2018. The Investment Manager is registered in England and Wales under number OC330266 pursuant to the Companies Act 2006. The Investment Manager is regulated by the FCA, number 471124.

The financial statements are presented in Pounds Sterling because that is the currency of the primary economic environment in which the Company operates.

2. Significant Accounting Policies

a) Basis of accounting

On 31 December 2020, IFRS as adopted by the European Union at that date brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. The Company transitioned to UK-adopted International Accounting Standards in its Company financial statements on 1 April 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the year reported as a result of the change in framework.

The financial information set out above does not constitute the Company's statutory financial statements for the years ended 31 March 2022 or 2021 but is derived from those financial statements. Statutory financial statements for 2021 have been delivered to the registrar of companies, and those for 2022 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis.

The principal accounting policies adopted are set out below and consistently applied, subject to changes in accordance with any amendments in IFRS.

(i) New Accounting Standards, amendments to existing Accounting Standards and/or interpretations of existing Accounting Standards (separately or together, "New Accounting Requirement") adopted during the current year

There are no standards, amendments to standards or interpretations that are effective for annual periods beginning on 1 April 2021 that have a material effect on the financial statements of the Company nor the value of investments. This includes the following standards which the Company adopted during the year:

· Amendments to IFRS 16 Leases: Covid-19 - Related rent concessions beyond 30 June 2021

· Amendments to IFRS 7, IFRS 4 and IFRS 16 Interest rate benchmark reform-- phase 2

a) IFRS 10 - basis of consolidation and Investment entities exemption

The Company applies IFRS 10 Consolidated Financial Statements. As in the previous year, the Directors have concluded that in accordance with IFRS 10, the Company continues to meet the definition of an investment entity having re-evaluated the criteria (see below) that need to be met. The financial statements therefore comprise the results of the Company only and no subsidiaries are consolidated on a line by line basis.

The Company invests its investable cash into SEEIT Holdco Limited (the "Holdco") when a targeted investment has been approved by the Investment Manager's Investment Committee. The sole objective of the Holdco is to enter into several energy efficiency projects, via individual corporate entities. The Holdco issues equity and loans to finance the projects. Holdco also incurs overheads and borrowings on behalf of the group. As a result, the Directors have provided an alternative presentation of the Company's results in the Strategic Report which includes a consolidation of Holdco.

Under IFRS 10 investment entities are required to hold subsidiaries at fair value through the Statement of Comprehensive Income rather than consolidate them. There are three key conditions to be met by the Company for it to meet the definition of an investment entity. For each reporting period, the Directors assess whether the Company continues to meet these conditions:

(ii) The Company has obtained funds for the purpose of providing investors with investment management services;

(iii) The business purpose of the Company, which was communicated directly to investors, is investing solely for risk-adjusted returns (including having an exit strategy for investments); and The performance of substantially all investments is measured and evaluated on a fair value basis.

The Company is an investment company, providing investors exposure to a diversified portfolio of energy efficiency infrastructure projects that are managed for investment purposes.

During the year ended 31 March 2022, the Company, via Holdco, made significant new investments, notably in the USA, and as a result the size of the Company significantly increased. These investments are described in Note 11. These investments were made in line with the stated objective of the Company to generate returns from capital appreciation and investment income in accordance with the strategy that has been set by the Directors. The Directors assessed each new investment carefully in order to determine whether the Company as a whole still meets the definition of an investment entity.

As part of the assessments the Directors had regard for the nature of the underlying business and operations and the exit strategy of each new investment and how that compared to the already existing portfolio. The Company's exit of investments may be at the time each investment reaches its current assumed end of economic life. At this point it could be possible for the Company to remain invested subject to contractual negotiations, economic viability and investment policy of the Company at the time. The Company is investing in a sector for which there is an active secondary market and therefore the Company may also exit investments at an earlier stage for profit or for portfolio rationalisation purposes.

The assessments concluded that the new investments shared similar characteristics to the existing investments, are in line with the business purpose of the Company and that each has an appropriate exit strategy. In particular, the Directors noted that:

· the underlying businesses and the structure of the new investments are in keeping with the existing portfolio through the provision of energy efficiency services to clients, or host counterparties, predominantly through long-term contracted agreements

· The underlying businesses are set up as Special Purpose Vehicles (SPV's) and although each SPV can have an indefinite life, the equipment associated with providing such services have finite lives, are capable of being upgraded or sold and the contracts can be renewed

· As part of the exit strategy for each new investment, the structure of that investment is such that it could be readily made available for sale (further information on exit strategy for new investments can be found in the Investment Manager's Report)

· Each new investment is measured at fair value.

After assessing whether the Company meets the definition of an investment entity set out in IFRS 10 the Directors concluded that as a whole:

(iv) the Company has multiple investors with shares issued publicly on London Stock Exchange and obtains funds from a diverse group of shareholders who would otherwise not have access individually to investing in energy efficiency projects;

(ii) the Company's purpose is to invest funds for both investment income and capital appreciation. The Holdco and its SPVs have indefinite lives however the underlying assets have minimal residual value because they do not have unlimited lives, are not to be held indefinitely and have appropriate exit strategies in place; and

(v) the Company measures and evaluates the performance of all of its investments on a fair value basis which is the most relevant for investors in the Company. The Directors use fair value information as a primary measurement to evaluate the performance of all of the investments and in decision making.

The Directors are of the opinion that the Company meets all the typical characteristics of an investment entity and therefore meets the definition set out in IFRS 10. The Directors believe the treatment outlined above provides the most relevant information to investors.

b) Going concern

COVID-19

During the year to 31 March 2022 and up to the date of this report, the outbreak of the COVID-19 pandemic has slowed down somewhat compared to a year ago. However, the pandemic still has a negative impact on the global economy and therefore the uncertainties and additional risks for the Company raised in prior periods remain under review. The Directors of the Company and the Investment Manager continue to follow government guidelines in relation to the COVID-19 pandemic in all the jurisdictions where its investments operate to ensure best practices are followed. There has not been a material impact to the Company, to its investment in Holdco and to its indirect subsidiaries to carry out its operations and receive the expected return from its investments, therefore the Directors are confident that there should not be a material financial impact on the performance of the Company in the future if subsequent lockdowns or similar restrictions are introduced. The Directors do not believe there is a significant risk to the Company from COVID-19 pandemic but, along with the Investment Manager, continue to monitor the portfolio for material impact from the COVID-19 pandemic

Investment diversification and cash

The Company, through its investment in Holdco, benefits from a portfolio of investments that have a range of long-term contracts with a diversified set of counterparties across multiple sectors and jurisdictions. A key risk facing the Company is that counterparties to the investments may not be able to make their contractual payments. The Company has prepared, and the Directors have reviewed a cash flow forecast covering the minimum period of twelve months from the date of approval of this report, taking into consideration potential changes in investment and trading performance and applying a 10% reduction in revenues to test the resilience of cash flows in the near term. The forecast demonstrates an expectation to continue to generate positive cash flows for the foreseeable future that as a minimum will meet liabilities as they fall due. The Directors reviewed a severe downside scenario where the Company would not receive any further income from its investment for the next 12 months from signing of the financial statements and taking into account all committed payments for running the Company, the Company would have sufficient cash reserves to continue as a going concern. As at 31 March 2022, the Company's net current assets were £144.9m, including cash balances of £146.1 million. Further amounts of cash are held by the Company's direct and indirect subsidiaries, which are sufficient to meet current obligations as they fall due. The major cash outflows of the Company are the payment of dividends and payments relating to the acquisition of new assets, both of which are discretionary.

Credit Facility

The Company's single subsidiary, Holdco, has a RCF that has adequate headroom in its covenants that have been tested for historic and forward interest cover and group loan to value limits. As at 31 March 2022, the facility was undrawn and £145m is available to meet future working capital and pipeline requirements. The Company is a guarantor to the RCF (see Note 17) but has no other guarantees or commitments.

Ukraine conflict

In light of the events in Ukraine in the first quarter of 2022, the Board and the Investment Manager have been monitoring its continual development and performed an assessment of the current exposure to Ukraine, Russia and Belarus (the "Region") and the potential impact to the Company's and the portfolio companies' operations.

The Company is a UK registered public company. Currently neither the Company nor the Investment Manager conducts business and operations in the Region; therefore the Company is not subject to any direct impact by this event.

With regards to the Company's investments, none of the portfolio companies have business operations or client / supplier relationships in the Region. Through this assessment, the Board and the Investment Manager duly considered any restriction imposed by the relevant sanctions, and its impact on the portfolio companies. The effects on the global economy are still emerging and the full impact on the portfolio remains uncertain at this point and continues to be closely monitored by the Board and Investment Manager. The Board and Investment Manager continues to actively monitor the Partnership's investment and operating activities.

Inflation

The global impact of the Russian invasion of Ukraine on the oil and gas prices is a significant contributor to rises globally in at present. The Company has carried out assessment of the impact of the global rise in inflation on its portfolio and have concluded that overall there is a positive correlation to inflation and there is no adverse impact.

The Directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of approval of the financial statements. The Directors have reviewed the Company's financial projections and cash flow forecasts, including the potential impact from COVID-19 and believe, based upon those projections and forecasts and various risk mitigation measures in place, that it is appropriate to prepare the financial statements on a going concern basis.

c) Segmental reporting

The Chief Operating Decision Maker ("CODM") being the Board of Directors, is of the opinion that the Company is engaged in a single segment of business, being investment in energy efficiency projects to generate investment returns whilst preserving capital. The financial information used by the CODM to manage the Company presents the business as a single segment.

d) Foreign Currency Translation

Foreign currency and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates, the Company's functional currency. The financial statements are presented in Pounds Sterling which is the Company's functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into Pounds Sterling using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income.

e) Income

Dividend income and investment income from financial assets at fair value through profit or loss is recognised in the Statement of Comprehensive Income within investment income when the Company's right to receive payments is established.

Fair value gains on financial assets at fair value through profit or loss are recognised in the Statement of Comprehensive Income at each valuation point.

Finance income comprises interest earned on cash held on deposit. Finance income is recognised on an accruals basis. Loan interest income is accounted for on an accruals basis using the effective interest method.

f) Dividends payable

Dividends to the Company's shareholders are recognised when they become legally payable. In the case of interim dividends, this is when they are paid. In the case of final dividends, this is when they are approved by the shareholders at the AGM.

g) Fund expenses

All expenses including investment management fees, transaction costs, non-executive directors' fees are accounted for on an accruals basis. Share issue expenses of the Company directly attributable to the issue and listing of shares are charged to the share premium account.

h) Acquisition costs

Acquisition costs are expensed to the Income Statement as they are incurred.

i) Taxation

The Company is liable to UK corporation tax on its income. Current tax is the expected tax payable on the taxable income for the period, using tax rates that have been enacted or substantively enacted at the date of the Statement of Financial Position. Fair value movements and dividends received by the Company are exempt from UK corporation tax.

j) Cash and cash equivalents

Cash and cash equivalents include deposits held at call with banks and other short-term deposits with original maturities of three months or less. The majority of cash is held at the Money market fund managed by JP Morgan. It is highly liquid investment and readily convertible to a known amount of cash. There is no expected credit loss as the bank institutions have credit ratings of at least BBB+ and all cash is held at call from the banks.

k) Financial instruments

Financial assets and financial liabilities are recognised in the Company's Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the instrument expire or the asset is transferred and the transfer qualifies for derecognition in accordance with IFRS 9 Financial instruments.

Investments are recognised when the Company has control of the asset. Control is assessed considering the purpose and design of the investments including any options to acquire the investments where these options are substantive. The options are assessed for factors including the exercise price and the incentives for exercise.

The Company classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value through profit or loss; and

• those to be measured at amortised cost.

At initial recognition, the Company measures investments in energy efficiency projects at its transaction price net of transaction costs that are directly attributable to the acquisition of the financial asset. The Company subsequently measures all investments at fair value and changes in the fair value are recognised as gains/(losses) on investments at fair value through profit or loss within investment income.

l) Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that not quoted in an active market. Those includes Prepayments, VAT Receivable and other receivables which are intercompany balances due from subsidiary. Receivables are initially recognised at fair value. They are subsequently measured at amortised cost, less any expected credit loss.

The Company has assessed IFRS 9's expected credit loss model and does not consider any impact on these financial statements.

m) Trade and other payables

Trade and other payables include accruals and other payables and initially are recognised at fair value, and subsequently re-measured at amortised cost using the effective interest method.

n) Share Capital and share premium

The Company's ordinary shares are not redeemable and are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction in equity and are charged from the share premium account. The costs incurred in relation to the IPO and subsequent fundraisings of the Company were charged from the share premium account.

3. Critical accounting estimates and judgements

The preparation of financial statements in accordance with IFRS requires the Directors to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the year. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in the period and future periods if the revision affects both current and future periods.

Judgements

Investment entity

As disclosed in Note 2, the Directors have concluded that the Company continues to meet the definition of an investment entity as defined in IFRS 10. This conclusion involved a degree of judgement and assessment as to whether the Company met the criteria outlined in the accounting standards.

Estimates

Investment valuations

The key area where estimates may be significant to the financial statements is the valuation of the Company's single subsidiary, SEEIT Holdco, which in turns holds investments in a portfolio of investments that are held at fair value (the "Portfolio Valuation").

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Board of Directors has appointed the Investment Manager to produce the Portfolio Valuation at 31 March 2022, which includes estimates of future cash flows that have the potential to have a material effect on the measurement of fair value.

The key estimates made include:

Discount rate

The weighted average unlevered discount rate (post tax) applied in the 31 March 2022 valuation was 7.0% (2021: 7.0%). The discount rate is considered one of the most unobservable inputs through which an increase or decrease would have a material impact on the fair value of investment at fair value through profit or loss. An appropriate discount rate is applied to each underlying asset. The range of discount rates applied and its sensitivity to movements in discount rates is shown in note 4.

Macroeconomic assumptions

Further estimates have been made on the key macroeconomic assumptions that are likely to have a material effect on the measurement of fair value being inflation, corporation tax and foreign exchange which are further described in Note 4.

Investment specific cash flow assumptions

For the investments in Primary Energy, estimates have been made to determine the demand for generation by the offtakers and the cash flows that can be generated through renewal of contract terms with the counterparty after the expiry of the existing contract terms. The most material estimate is in relation to Cokenergy. If the actual increase in contractual terms assumed for the Cokenergy investment is 50% less than estimated, the Portfolio Valuation at 31 March 2022 could be reduced by approx. £14 million, assuming no other mitigants are available.

Although the investment in Onyx has been adversely affected by delays in the development and construction of new assets, an increased estimate has been made for the amount of Megawatts that can be deployed from the development pipeline which are valued on an EV multiple per MW. If only 50% of the increased estimate is achieved, the Portfolio Valuation at 31 March 2022 would be reduced by approx. £8 million.

At the start of 2021 the Investment Manager worked with the management team of Oliva Spanish Cogeneration to establish an inhouse gas procurement company to target savings against the spot price for procuring natural gas for the five investments in Oliva Spanish Cogeneration that use natural gas as a fuel supply. Key estimates are made in the future cash flows of the savings that can be achieved, however, if the margin of estimated savings is 5% less, then the Portfolio Valuation at 31 March 2022 would be reduced by approx. £13.8 million.

In the investment in Vartan Gas, the future cashflows includes an assumption that the management team will target a decline in customer numbers at a year on year rate that is lower than the historic average decline. If the rate from the last 12 months is assumed for the following two years, the adverse impact on the Portfolio Valuation at 31 March 2022 would be £1.7m.

4. Financial Instruments

Valuation methodology

As detailed in Note 1 and Note 11, the Company has a single investment directly wholly owned holding company (Holdco). It recognises this investment at fair value. To derive the fair value of Holdco, the Company determines the fair value of investment held directly or indirectly by Holdco and adjusts for any other assets and liabilities. See Note 11 for a reconciliation of this fair value. The valuation methodology applied by Holdco to determine the fair value of its investments is described below.

The Directors have satisfied themselves as to the methodology used and the discount rates and key assumptions applied in producing the valuations. All investments are at fair value through profit or loss.

For non-market traded investments (being all the investments in the current portfolio), the valuation is based on a discounted cash flow methodology and adjusted in accordance with the IPEV (International Private Equity and Venture Capital) valuation guidelines where appropriate to comply with IFRS 13 and IFRS 9, given the special nature of infrastructure investments. Where an investment is traded in an open market, a market quote is used.

The Investment Manager exercises its judgement in assessing the expected future cash flows from each investment based on the project's expected life and the financial models produced for each project company and adjusts the cash flows where necessary to take into account key external macroeconomic assumptions and specific operating assumptions.

The fair value for each investment is then derived from the application of an appropriate market discount rate for that investment to reflect the perceived risk to the investment's future cash flows and the relevant period end foreign currency exchange rate to give the present value of those cash flows. The discount rate takes into account risks associated with the financing of an investment such as investment risks (e.g. liquidity, currency risks, market appetite), any risks to the investment's earnings (e.g. predictability and covenant of the income) and a thorough assessment of counterparty credit risk, all of which may be differentiated by the phase of the investment. Specific risks related to each asset that can be attributed to climate change and to the COVID-19 pandemic are assessed and where required, adjustments are made to expected future cash flows or reflected in the asset specific discount rate that is applied.

Fair value measurement by level

IFRS 13 requires disclosure of fair value measurement by level. Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety which are described as follows:

• Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments.

Investment at fair value through profit or loss

Level 1

£'000

Level 2

£'000

Level 3

£'000

31 March 2022

928,229

31 March 2021

572,574

The Company's indirect investments have been classified as level 3 as the investments are not traded and contain unobservable inputs. As the fair value of the Company's equity and loan investments in the Holdco is ultimately determined by the underlying fair values of the SPV investments or debt schedules, the Company's sensitivity analysis of reasonably possible alternative input assumptions is the same across all its investments. The reconciliation of Level 3 fair value is disclosed in Note 11.

Valuation Assumptions

		31 March 2022	30 September 2021	31 March 2021
Inflation rates	UK (RPI)	7.9% declining to 3.5% by 2024, 2.75% p.a. long-term	2.75% p.a.	2.75% p.a.
	UK (CPI)	6.0% declining to 2.3% by 2024, 2.00% p.a. long-term	2.00% p.a.	2.00% p.a.
	Spain (CPI)	5.8% declining to 1.7% by 2024, 2.00% p.a. long-term	1.3% to 1.4% until 2023, 2.00% p.a. long-term	1.0% to 1.4% until 2023, 2.0% long-term
	Sweden (CPI)	3.4% declining to 2.0% by 2024, 2.00% p.a. long-term	1.7% to 1.8% until 2023, 2.00% p.a. long-term	1.4% to 1.7% until 2023, 2.0% long-term
	Singapore (CPI)	3.2% declining to 2.0% by 2024, 2.00% p.a. long-term	2.00% p.a.	2.00% p.a.
	Ireland (CPI)	4.8% declining to 2.0% by 2024, 2.00% p.a. long-term	n/a	n/a
	USA (CPI)	6.3% declining to 2.0% by 2024, 2.00% p.a. long-term	2.00% p.a.	2.00% p.a.
Tax rates	UK	19% to 2023, 25% thereafter	19% to 2023, 25% thereafter	19% to 2023, 25% thereafter
	Spain	25%	25%	25%
	Sweden	21.4%	20.6%	21.4%
	Singapore	17%	17%	17%
	Ireland	17%	17%	n/a
	USA	21% Federal & 3-9% State rates	21% Federal & 3-9% State rates	21% Federal & 3-9% State rates
Foreign exchange rates	EUR/GBP	0.84	0.86	0.85
	SEK/GBP	0.08	0.08	0.08
	SGD/GBP	0.56	0.55	0.54
	USD/GBP	0.76	0.74	0.73

Discount rates

The discount rates used for valuing each investment are described in the Valuation Methodology section above.

The discount rates used for valuing the investments in the portfolio are as follows:

	31 March 2022	31 March 2021
Weighted Average discount rate (on unlevered basis)	7.0%	7.0%
Discount rates	4.0% to 10.0%	4.5% to 10.0%

Sensitivities

The sensitivities below show the effect on Net asset value of assuming a different range for each key input assumption, in each case applying a range that is considered to be a reasonable and plausible outcome for the market in which the Company has invested.

Discount rates

A change to the weighted average discount rate by plus or minus 0.5% has the following effect on the NAV.

Discount rate

NAV/share impact

-0.5%

change

Net asset value

+0.5% change

NAV/share impact

31 March 2022

4.5p

£44,079k

£1,073,118k

(£40,648k)

(4.1p)

31 March 2021

4.4p

£29,854k

£693,805k

(£27,553k)

(4.1p)

Inflation rates

The Portfolio Valuation assumes long-term inflation as indicated above in the UK, USA and Spain. A change in the inflation rate by plus or minus 0.5% has the following effect on the NAV, with all other variables held constant.

Inflation rate

NAV/share impact

-0.5%

change

Net asset value

+0.5% change

NAV/share impact

31 March 2022

(1.1p)

(£10,540k)

£1,073,118k

£11,936k

1.2p

31 March 2021

(0.7p)

(£5,069k)

£693,805k

£5,560k

0.8p

Corporation tax rates

The Portfolio Valuation assumes tax rates based on the relevant jurisdiction. A change in the corporation tax rate by plus or minus 5% has the following effect on the NAV, with all other variables held constant.

Corporation tax rate

NAV/share impact

-5%

change

Net asset value

+5% change

NAV/share impact

31 March 2022

3.2p

£31,706k

£1,073,118k

(£33,005k)

(3.3p)

31 March 2021

3.0p

£20,025k

£693,805k

(£20,003k)

(3.0p)

Foreign exchange rates

The Portfolio Valuation assumes foreign exchange rates based on the relevant foreign exchange rates against GBP at the reporting date. A change in the foreign exchange rate by plus or minus 10% (GBP against Euro, Swedish Krona, Singapore Dollar and US Dollar) has the following effect on the NAV, with all other variables held constant. The effect is shown after the effect of current level of hedging which reduces the impact of foreign exchange movements on the Company's NAV.

Foreign exchange rate

NAV/share impact

-10%

Change

Net asset value

+10% change

NAV/share impact

31 March 2022

0.8p

£8,329k

£1,073,118k

(£7,649k)

(0.8p)

31 March 2021

0.8p

£5,342k

£693,805k

(£4,621k)

(0.7p)

5. Investment Income

	Year ended 31 March 2022 £'000	Year ended 31 March 2021 £'000
Dividend income	33,656	20,100
Gain on investment at fair value through profit or loss (Note 11)	47,792	15,021
Interest income	7,315	2,713
Investment income	88,763	37,834

Interest income is mainly in respect of coupon bearing loan notes issued to the Company by Holdco (Note 15) but includes bank interest of £16k for the year ended 31 March 2022 (2021: £29k). The loan notes accrue interest at 6%, are unsecured and repayable in full on 18 April 2039. Loan Interest income is recognised on the Statement of Comprehensive Income on an accruals basis. The gain on investment is unrealised.

6. Fund Expenses

	Year ended 31 March 2022 £'000	Year ended 31 March 2021 £'000
Investment management fees (Note 15)	7,211	4,042
Non-executive directors' fees (Note 16)	275	156
Other expenses	1,076	913
Fees to the Company's independent auditors:
- for the audit of the statutory financial statements	398	263
- for audit-related assurance services	45	55
Fund Expenses	9,005	5,429

As at 31 March 2022, the Company had no employees (31 March 2021: nil) apart from Directors in office. The Company confirms that it has no key management personnel, apart from the Directors of the Company. There is no other compensation apart from those disclosed. Other expenses include professional fees, administration fees, irrecoverable VAT and other fees in relation to the running of the Company.

7. Tax

The tax for the year shown in the Statement of Comprehensive Income is as follows .

	Year ended 31 March 2022 £'000	Year ended 31 March 2021 £'000
Profit for the year before taxation	79,758	32,405
Profit for the year multiplied by the standard rate of corporation tax of 19% (2021: 19%)	15,154	6,157
Fair value movements (not subject to taxation)	(9,080)	(2,854)
Dividends received (not subject to taxation)	(6,395)	(3,819)
Surrendering of tax losses to unconsolidated subsidiaries	321	516
Total tax charge	-	-

The corporation tax rate will increase from 19% to 25% with effect from 1 April 2023. No deferred tax were recognised in the periods.

8. Earnings per Ordinary Share

	Year ended 31 March 2022	Year ended 31 March 2021
Profit and comprehensive income for the year (£'000)	79,758	32,405
Weighted average number of ordinary shares ('000)	795,954	463,389
Earnings per ordinary share (pence)	10.0	7.0

There is no dilutive element during the financial year and subsequent to the financial year.

9. Dividends

	Year ended 31 March 2022 £'000	Year ended 31 March 2021 £'000
Amounts recognised as distributions to equity holders during the year:
Second Interim dividend for the year ended 31 March 2020 of 2.5p per share	-	8,010
First quarterly interim dividend for the year ended 31 March 2021 of 1.375p per share	-	5,859
Second quarterly interim dividend for the year ended 31 March 2021 of 1.375p per share	-	7,234
Third quarterly interim dividend for the year ended 31 March 2021 of 1.375p per share	-	9,310
Fourth quarterly interim dividend for the year ended 31 March 2021 of 1.375p per share	9,310	-
First quarterly interim dividend for the year ended 31 March 2022 of 1.405p per share	9,513	-
Second quarterly interim dividend for the year ended 31 March 2022 of 1.405p per share	12,692	-
Third quarterly interim dividend for the year ended 31 March 2022 of 1.405p per share	12,692	-

All dividends have been paid out of distributable reserves. Further information on distributable reserves can be found in Note 12.

On 16 June 2022, the Company declared a fourth interim dividend for the year ended 31 March 2022 of 1.405p per share which is expected to result in a cash payment of approximately £13.9 million on 30 June 2022.

10. Net assets per share

		31 March 2022	31 March 2021
Shareholders' equity (£'000)	1,073,118			693,805
Number of ordinary shares ('000)	990,288			677,087
Net assets per ordinary share (pence)	108.4			102.5

11. Investment at fair value through profit or loss

The Company recognises the investment in Holdco, its single directly owned holding company, at fair value. Holdco's fair value includes the fair value of each of the individual project companies and holding companies in which the Holdco holds a direct or an indirect investment, along with the working capital of Holdco.

	Year ended 31 March 2022 £'000	Year ended 31 March 2021 £'000
Brought forward investment at fair value through profit or loss	572,574	254,095
Loan investments in year	96,801	42,000
Equity investments in year	223,062	274,479
Loan Principal repaid in year	(12,000)	(13,021)
Movement in fair value	47,792	15,021
Closing investment at fair value through profit or loss	928,229	572,574

Movement in fair value is recognised through Investment Income in the Statement of Comprehensive Income (see Note 5).

Of the closing investment at fair value through profit and loss balance, £149,980k (March 2021: £65,179k) relates to loan investment (also see Note 5) and £778,249k (March 2021: £507,395k) relates to equity investment.

A reconciliation between the Portfolio Valuation (as described in Valuation of the Portfolio section), being the valuation of the Investment Portfolio held by Holdco, and the Investment at fair value through profit or loss per the Statement of Financial Position is provided below. The principal differences are the balances in Holdco for cash and working capital.

	31 March 2022 £'000		31 March 2021 £'000
Portfolio Valuation (see the Financial Review for details)		912,714		552,672
Holdco cash		24,880		4,141
Holdco debt		-		-
Holdco net working capital		(9,365)		15,761
Investment at fair value per Statement of Financial Position		928,229		572,574

Investments by the Company

During the year ended 31 March 2022, the Company invested £319.9 million into Holdco for new portfolio investments and repayment of debt. Holdco used £67.8 million of this funding to repay its Revolving Credit Facility ("RCF") in September 2021 and £30.6 million in March 2022.

Portfolio Investments, via Holdco

During the year ended 31 March 2022, Holdco invested c. £300.2 million in new portfolio investments.

The Company announced the following investment activity in the year:

· In April 2021, the Company acquired a 100% equity interest in a commercial district energy system, RED-Rochester, LLC for a cash consideration of c. £139 million.

· In April 2021, the Company invested in a 4.5MWp portfolio of operational commercial and industrial rooftop solar systems and a 20 MWp pipeline of late development stage and ready to build assets at multiple sites in Vietnam (via a Singapore developer) for a cash consideration of c. £2.4 million.

· Following on from the initial investment in Onyx in the year ended 31 March 2021, the Company invested additional amounts of c. £6 million in April 2021, c. £2 million in September 2021, c. £13 million in November 2021 and c. £2 million in March 2022 to fund further construction.

· Following on from the initial investment in Spark US Energy Efficiency II in the year ended 31 March 2021, the Company invested via Holdco an additional c. £4.5 million July 2021, c. £6 million in November 2021 and c. £2 million in March 2022.

· Following on from the initial investment in Oliva in the year ended 31 March 2021, the Company invested additional amounts of c. £10 million in December 2021 and c. £3 million in March 2022 to fund further construction.

· In July 2021, the Company announced it had agreed to invest approximately c. £22 million in a large-scale green gas-to-grid project in Indiana, US. The initial investment was c. £11 million with incremental amounts expected to be deployed over time to fund expansion activity. The Company invested a further c. £2 million in November 2021 and c. £0.3 million in March 2022.

· In August 2021, the Company invested c. £1 million into Holdco to facilitate the retrofit project of energy efficient measures in Tallaght Hospital, one of Ireland's largest hospitals.

· In September 2021, the Company invested £34 million to acquire the remaining 35% equity interest in Primary Energy.

· In September 2021, the Company announced it had agreed to invest c. £3 million to develop, implement, finance and own the replacement of a chiller system at Lycra Singapore's facility.

· In September 2021, the Company invested £8 million to facilitate the drawdown of capital to EV Network for the purchase of the first tranche of rapid and ultra-fast EV charging stations.

· In October 2021, the Company invested c. £4 million to provide funding for the new-build, highly energy efficient multi-family residential buildings designed and constructed by Sustainable Living Innovations ("SLI") in the United States.

· In November 2021, the Company invested c. £16 million in Future Energy Solutions Holdings LLP, a portfolio of 1,800+ LED lighting projects across 1,700+ sites and 1,000+ counterparties in the USA.

· In March 2022, the Company invested c. £31 million to acquire an 80% interest in Sociedade de Iniciativa e Aproveitamentos Florestais - Energia, S.A. ("SIAF"), a high-efficiency and operational biomass plant. The Company funded the intermediatory company on 31 March 2022 with the deal completing in April 2022.

The Company made further portfolio investments after 31 March 2022 of c. £43 million - see Note 18 for details:

12. Share capital and share premium

Ordinary Shares of £0.01	Year ended 31 March 2022 '000	Year ended 31 March 2021 '000
Authorised and issued at the beginning of the year	677,087	320,374
Shares Issued - during the year	313,201	356,713
Authorised and issued at the end of year	990,288	677,087

	Share capital £'000	Share Premium '000
Total as at 1 April 2021	6,771	584,436
Issue of Ordinary shares	3,132	346,868
Costs of issue of Ordinary shares	-	(6,238)
Total as at 31 March 2022	9,903	925,067

In September 2021, the Company issued 226,244,343 new ordinary shares at a price of 110.5p per share raising gross proceeds of £250m.

In March 2022, the Company issued 86,956,522 new ordinary shares at a price of 115p per share raising gross proceeds of £100m.

The Company currently has one class of ordinary share in issue. All the holders of the £ 0.01 ordinary shares, which total 990,288k (2021: 677,087k) and are fully paid (2021: fully paid), are entitled to receive dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company.

Other distributable reserves were created through the cancellation of the Share Premium account on 12 March 2019. This amount is capable of being applied in any manner in which the Company's profits available for distribution, as determined in accordance with the Companies Act 2006, are able to be applied.

Other distributable reserves and Retained Earnings are detailed in the Statement of Changes in Shareholders' Equity.

13. Financial risk management

Financial risk management objectives

The objective of the Company's financial risk is to manage and control risk exposure of the underlying investment portfolio held by Holdco. The Board is responsible for overseeing the management of financial risks, however the review and management of financial risks is delegated to the Investment Manager. The Investment Manager monitors and manages the financial risks relating to the operations of the Company through internal procedures and policies designed to identify, monitor and manage the financial risks to which the Company is exposed.

These risks include market risk (including price risk, currency risk and interest rate risk), credit risk and liquidity risk.

Price risk

The value of the investments directly and indirectly held by the Company is affected by the discount rate applied to the expected future cash flows and as such may vary with movements in interest rates, inflation, power prices, market prices host demand for energy services and competition for these assets.

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company receives loan interest, loan principal and dividends from its single investment, Holdco, in sterling. However, the Company is indirectly exposed to currency risk through its Holdco as its investments include non-sterling investments are held in Euro, US Dollar, Singapore Dollar and Swedish Krona.

The Company monitors its foreign exchange rate exposures using its near-term and long-term cash flow forecasts. Its policy is to use foreign exchange hedging to provide protection to the level of sterling distributions that the Company aims to pay over the medium-term, where considered appropriate. This may involve the use of forward exchange.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company, via Holdco, invests indirectly in loans in project companies, usually with fixed interest rate coupons. Where floating rate debt is owned, the primary risk is that the portfolio's cash flow will be subject to variation depending on changes to base interest rates. The portfolio's cash flows are continually monitored and re-forecasted to analyse the cash flow returns from investments.

The Company's policy is to ensure that interest rates are sufficiently hedged, when entering into material medium/long-term borrowings, to protect the Company and portfolio companies' net interest margins from significant fluctuations in interest rates. This may include engaging in interest rate swaps or other rate derivative contracts at the subsidiary level under direction of the Company.

The Company's financial assets and financial liabilities are at a pre-determined interest rate, as a result the Company is subject to limited exposure to risk due to fluctuations in the prevailing levels of market interest rates.

The Investment Manager has carried out an assessment on the accounting implications of the IBOR reform directly affecting the Company. There is no direct impact from the reform as the Company and its UK subsidiaries do not have exposure to LIBOR. There is currently no exposure at project level in all locations other than the US where analysis is ongoing. However the reform is not expected to have a material impact on these projects or SEEIT as a whole.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company through a reduction in future expected cash receipts.

The key counterparties are the project companies in which the Company makes indirect investments via Holdco. The projects companies' near-term cash flows forecasts are used to monitor the timing of cash receipts from project counterparties and are reviewed regularly to demonstrate the projects' ability to pay interest and dividends when they fall due.

The Company does not have any significant credit risk exposure to any single counterparty in relation to trade and other receivables. On-going credit evaluation is performed on the financial condition of accounts receivable.

As at 31 March 2022, there were no receivables considered impaired. At an investment level, the credit risk relating to significant counterparties is reviewed on a regular basis and potential adjustments to the discount rate are considered to recognise changes to these risks where applicable.

The Company maintains its cash and cash equivalents across various banks to diversify credit risk. These are subject to the Company's credit monitoring policies including the monitoring of the credit ratings issued by recognized credit rating agencies. The Company's cash and deposits are held with counterparties that meet strict investment rating criteria per the Company's treasury policy.

The Company is at risk of credit loss on its loans, receivables, cash and deposits. Underlying investments are held by Holdco at fair value using discounted cash flows. Receivables are primarily intercompany and taxation. While cash and cash equivalents are subject to the impairment requirements of IFRS 9, there was no identified credit loss.

The Company's maximum exposure to credit risk over financial assets is the carrying value of those assets in the Statement of Financial Position.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Board of Directors has established an appropriate liquidity risk management framework for the management of the Company's short-, medium- and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves by monitoring forecast and actual cash flows and by matching the maturity profiles of assets and liabilities.

The Company also ensures that Holdco has sufficient banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Unconsolidated project companies are subject to contractual agreements that may impose temporary restrictions on their ability to distribute cash. Such restrictions are not deemed significant in the context of the overall liquidity.

The table below shows the maturity of the Company's non-derivative financial assets and liabilities. The amounts disclosed are contractual, undiscounted cash flows and may differ from the actual cash flows received or paid in the future as a result of early repayments. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

As at 31 March 2022	Up to 3 months £'000	Between 3 and 12 months £'000	Between 1 and 5 years £'000	Total £'000
Assets
Cash and cash equivalents	146,064	-	-	146,064
Trade and other receivables	-	-	-	-
Liabilities
Trade and other payables	(1,538)	-	-	(1,538)
Total	144,526	-	-	144,526

As at 31 March 2021	Up to 3 months £'000	Between 3 and 12 months £'000	Between 1 and 5 years £'000	Total £'000
Assets
Cash and cash equivalents	122,059	-	-	122,059
Trade and other receivables	1	-	-	1
Liabilities
Trade and other payables	(1,229)	-	-	(1,229)
Total	120,831	-	-	120,831

Capital management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders. In accordance with the Company's investment policy, the Company's principal use of cash (including the proceeds of the IPO) has been to fund investments via Holdco as well as ongoing operational expenses.

The Board, with the assistance of the Investment Manager, monitors and reviews the broad structure of the Company's capital on an ongoing basis. The capital structure of the Company consists entirely of equity (comprising issued capital, distributable reserves and retained earnings).

The Company is not subject to any externally imposed capital requirements.

14. Related undertakings

The following table shows the Company's single direct subsidiary (SEEIT Holdco Limited) and indirect subsidiaries and related undertakings of the Company. As the Company applies IFRS 10 and Investment Entities (Amendments to IFRS 10) (see Note 2), these entities have not been consolidated in the preparation of these financial statements.

Investment	Country of incorporation & Place of Business	Shareholding at 31 March 2022
SEEIT Holdco Limited	United Kingdom	100%
EECo Kingscourt Limited	United Kingdom	100%
SEEIT Europe Limited	United Kingdom	100%
EECo Data Centres No. 1 Limited	United Kingdom	100%
SEEIT US Limited	United Kingdom	100%
EECo Biomass No 1 Limited	United Kingdom	60%
EECo Evergreen Limited	United Kingdom	100%
EECo Wilton No. 1 Limited	United Kingdom	100%
SmartEnergy Finance Two Limited	United Kingdom	49%
Combined Heat and Power Investments Limited	United Kingdom	100%
Energy Efficient Global UK Project Limited	United Kingdom	100%
EECo Smithfield Limited	United Kingdom	100%
SDCL Solar Edge Limited	United Kingdom	100%
SEEIT UK 1 Limited	United Kingdom	100%
SEEIT Asia Limited	United Kingdom	100%
SEEIT Europe 2 Limited	United Kingdom	100%
SEEIT US Two Limited	United Kingdom	100%
Zood Infrastructure Limited	United Kingdom	100%
Walworth Invest S.L.	Spain	100%
EE CO Ireland Hospitals TUH Ltd	Ireland	100%
SDCL TG Cogen LLC	USA	71%
SEEIT BTB LLC	USA	100%
SEEIT Net Zero LLC	USA	100%
SEEIT PE 1 LLC	USA	100%
SEEIT PE 2 LLC	USA	100%
PERC Midco LLC	USA	100%
SEEIT Capital LLC	USA	100%
SEEIT Capital II LLC	USA	100%
SEEIT Hemisphere Holdco, LLC	USA	100%
SEEIT Red Holdco, LLC	USA	100%
SEEIT US Lighting Holdings LLC	USA	100%
FE Energy Efficiency INV PTE. Limited	Singapore	100%
SEEIPL 1 PTE. Limited	Singapore	100%
SEEIPL 3 PTE. Limited	Singapore	100%
SEEIPL 4 PTE. Limited	Singapore	100%
Shire Oak Green Asia Portfolio 2 Pte	Singapore	100%
SEEIT EUROPE 2 SWEDEN HOLDING AB	Sweden	100%

All subsidiaries that have a place of business in the United Kingdom are registered in the United Kingdom and their principal place of business and registered office is 5^th Floor, 1 Vine Street, London, W1J 0AH.

SDCL TG Cogen LLC, SEEIT Capital LLC, SEEIT Capital II LLC, PERC Midco LLC, SEEIT Hemisphere I LLC, SEEIT Red Holdco LLC, SEEIT US Lighting Holdings LLC, SEEIT BTB LLC and SEEIT Net Zero LLC are registered in Delaware, USA and their registered office is 1209 Orange Street, Wilmington, Delaware, USA with their principal place of business is 1120 Avenue of the Americas, New York, New York 10036, USA.

Walworth Invest S.L. is registered in Spain and its principal place of business and registered office is Calle Príncipe de Vergara 112, Planta Cuarta, 28002 Madrid, Spain.

EE CO Ireland Hospitals TUH Ltd is registered in Ireland and its principal place of business and registered office is 55 Merrion Square South, Dublin, DO2 YD65.

FE Energy Efficiency PTE. Limited, SEEIPL 1 PTE. Limited, SEEIPL 3 PTE. Limited, SEEIPL 4 PTE. Limited and Shire Oak Green Asia Portfolio 2 PTE Ltd is registered in Singapore and their principal place of business and registered office is 6 Eu Tong Sen Street # 11-09, The Central, Singapore 059817.

SEEIT EUROPE 2 SWEDEN HOLDING AB is registered in Sweden and its principal place of business and registered office is RÅSUNDAVÄGEN 12, 16967 Solna, Stockholm County, Sweden.

15. Related parties

The Company and Sustainable Development Capital LLP (the "Investment Manager") have entered into the Investment Management Agreement pursuant to which the Investment Manager has been given responsibility, subject to the overall supervision of the Board, for active discretionary investment management of the Company's portfolio in accordance with the Company's investment objective and policy.

As the entity appointed to be responsible for risk management and portfolio management, the Investment Manager is the Company's AIFM. The Investment Manager has full discretion under the Investment Management Agreement to make investments in accordance with the Company's investment policy from time to time. This discretion is, however, subject to: (i) the Board's ability to give instructions to the Investment Manager from time to time; and (ii) the requirement of the Board to approve certain investments where the Investment Manager has a conflict of interest in accordance with the terms of the Investment Management Agreement. The Investment Manager also has responsibility for financial administration and investor relations, advising the Company and its group in relation to the strategic management of the portfolio, advising the Company in relation to any significant acquisitions or investments and monitoring the Company's funding requirements.

Under the terms of the Investment Management Agreement, the Investment Manager will be entitled to a fee calculated at the rate of:

· 0.9%, per annum of the adjusted NAV in respect of the Net Asset Value of up to, and including, £750 million; and

· 0.8%, per annum of the adjusted NAV in respect of the Net Asset Value in excess of £750 million.

The management fee is calculated using an adjusted NAV which is the latest published NAV at the relevant time, less uncommitted cash and adjusted on a daily basis for new acquisitions, new cash committed to investments, disposals and changes in amounts of debt drawn.

The management fee accrues monthly and is invoiced monthly in arrears. During the year ended 31 March 2022, management fees of £7,211k (2021: £4,042k) were incurred of which £708k (2021: £919k) was payable at the year-end.

During the year ended 31 March 2022, £319.9m (2021: £316.5m) of funding was provided by the Company to the Holdco for investment acquisitions and the repayment of the RCF utilised by Holdco.

During the year ended 31 March 2022, coupon bearing loan notes of £96.8 million (2021: £42.0 million) were issued which accrue interest at 6%. During the year ended 31 March 2022, Holdco had repaid coupon bearing loan notes of £12.0 million (2021: £13.0 million). In the year to 31 March 2022, £7,299k interest had accrued on the loan notes (2021: £2,684k) of which nothing is outstanding at the year-end (2021: £1,300k).

All of the above transactions were undertaken on an arm's length basis and there have been no changes in material related party transactions since the last annual report.

16. Key management personnel transactions

The Directors of the Company, who are considered to be key management, received fees for their services. Their fees were £275k (disclosed as Non-executive directors' fees in Note 6) in the year (2021: £156k) which included £254k for Director salaries (2021: £148k), £18k for national insurance contributions (2021: £8k) and £3k for the reimbursement of expenses (2021: £nil).

17. Guarantees and other commitments

The Company is the guarantor of the RCF between Holdco and Investec Bank plc.

Across two phases in June 2021 and August 2021, the Company renewed and increased the RCF that it holds through its wholly owned subsidiary, SEEIT Holdco, from £40 million to £145 million. The RCF, which is SONIA linked and has a margin of 2.65%, expires in June 2024 with options to extend for a further two years and includes an accordion function for a further £55 million increase on an uncommitted basis.

18. Events after the reporting period

The Directors have evaluated subsequent events from the date of the financial statements through to the date the financial statements were available to be issued.

Between April and June 2022, the Company made the following investments, via SEEIT Holdco:

· A further c. £3 million in Spark US Energy Efficiency II.

· A further c. £1 million in Biotown.

· A further c. £18 million in Onyx.

· A further c. £2 million in Tallaght Hospital.

· A financing round of c. £8m in Turntide Technologies, Inc. a provider of smart motor systems across several jurisdictions, headquartered in the US with operations in Canada, Europe and India.

· A c.£21 million debt investment commitment to Baseload Capital, a portfolio of small scale geothermal projects which utilise existing heat sources which has not yet been drawn.

· A further c. £6 million in EV Network.

· A further c. £2 million in FES Lighting.

· A c. £3 million in Iceotope, a company that provides energy efficient cooling systems for data centres.

GLOSSARY OF FINANCIAL ALTERNATIVE PERFORMANCE MEASURES ("APM")

The Company uses APM's to provide shareholders and stakeholders with information it deems relevant to understand and assess the Company's historic performance and its ability to deliver on the stated investment objective.

Measure	Calculation	Why the Company uses the APM
Net Asset Value ("NAV")	Net assets attributable to Ordinary Shares by deducting gross liabilities from gross assets.	It provides a metric that allows for useful comparison to similar companies and that allows for useful year on year comparisons of the Company. See the Financial Review.
NAV per share	NAV divided by total number of shares in issue at the balance sheet date	This provides shareholders with a metric that allows for tracking the Company's performance year on year. See the Financial Review.
Total NAV Return on per share basis	Interim dividends paid in pence per share and movement in NAV per share over the course of the relevant period (e.g. in financial year or since IPO). Dividends are not assumed to be re-invested.	This provides shareholders with a metric that allows for tracking the Company's performance year on year
Total Return on share price basis	Interim dividends paid and share price uplift per share over the course of the relevant period	This provides shareholders with a metric that allows for tracking the Company's performance year on year
Portfolio Basis	Portfolio Basis includes the impact if Holdco (the Company's only direct subsidiary) were to be consolidated on a line-by-line basis	See the Investment Policy and Approach for detailed description and reconciliation
Ongoing Charges Ratio	In accordance with AIC guidance, defined as annualised ongoing charges (i.e. excluding investment costs and other non-recurring items) divided by the average published undiluted NAV in the year	Used as a metric in the investment company industry to compare cost-effectiveness. See the Financial Review.
Portfolio Valuation	The fair value of all investments in aggregate that are held directly or indirectly by Holdco	It provides relevant information of the value of the underlying investments held indirectly by the Company from which it is ultimately expected to derive its future revenues. See the Valuation of the Portfolio section.
Cash on Portfolio Basis	Cash at bank of the Company and Holdco	To provide relevant information to shareholders of the Company's ability for new investments, working capital and payment of dividends. See the Financial Review.

[1] In this annual results announcement, there are a number of references to financial Alternative Performance Measures. For further details on these, please see the Glossary of financial Alternative Performance Measures ("APM")

[2] The target dividend stated above by the Company is based on a projection by the Investment Manager and should not be treated as a profit forecast for the Company

[3] Per SEEIT's ESG Report, November 2021

[4] Source : IEA ; https://www.iea.org/reports/energy-efficiency-2021/executive-summary

[5] In this Annual Report, there are a number of references to financial Alternative Performance Measures. For further details on these, please see the Glossary of financial Alternative Performance Measures ("APM")

[6] In this Annual Report, there are a number of references to financial Alternative Performance Measures. For further details on these, please see the Glossary of financial Alternative Performance Measures ("APM")

[7] In this Annual Report, there are a number of references to financial Alternative Performance Measures. For further details on these, please see the Glossary of financial Alternative Performance Measures ("APM")

[8] Source: IEA ; https://www.iea.org/news/how-europe-can-cut-natural-gas-imports-from-russia-significantly-within-a-year

[9] Source: EESI ; https://www.eesi.org/topics/fossil-fuels/description

[10] A total commitment of £6 million of which £1.4 million had been deployed by 31 March 2022

[11] A total commitment of £22 million of which £14 million had been deployed by 31 March 2022

[12] A total commitment of £3m which £0.3m had been deployed by 31 March 2022

[13] A total commitment of £21m not yet drawn

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SDCL Energy Efficiency Income Trust (SEIT)

Tuesday, 3rd December 2024

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