Final Results

RNS Number : 3461Q

SDCL Energy Efficiency Income Tst

18 June 2020

 

18 June 2020

SDCL Energy Efficiency Income Trust plc

("SEEIT" or the "Company")

Announcement of Financial Results for The Year Ended 31 March 2020

SDCL Energy Efficiency Income Trust plc (LSE: SEIT) ("SEEIT" or the "Company") announces financial results for the year ended 31 March 2020.

Highlights

· Net Asset Value ("NAV") per share rose 2.6p to 101.0p as at 31 March 2020, up from 98.4p as at 31 March 2019

· Earnings per share of 5.2p   relating to the year ended 31 March 2020

· Dividend of 5.0p declared relating to the year ended 31 March 2020, in line with target; 10% increase target of 5.5p maintained for year to March 2021

· Portfolio Valuation 1   increased to £320 million at 31 March 2020, up from £61 million at 31 March 2019

· Investment of more than £250 million in four additional assets and portfolios during the year; cash of £71 million at 31 March 2020 2 available for investments, dividend and repayment of acquisition financing

· Expansion with total assets increasing from c. £100 million at IPO to c. £390 million at 31 March 2020, further improving the diversification of the Company's portfolio, including assets with strong income generating characteristics

· Awarded the London Stock Exchange Group's new Green Economy Mark in December 2019 which recognises listed companies that derive 50% or more of their revenues from environmental solutions

· Carbon Savings of 43,231 tCO2 from Company's portfolio, which also produced 71,256 MWh of electricity

Post Year End Highlights

· New Capital Raise planned: Intention to raise approximately £60m through Placing and Offer for Subscription at 104p per share

· Identified   extensive pipeline of investment opportunities with a value of over £400 million including three projects with a value of over £100 million which are at an advanced stage of negotiation

Notes

1 Value of the portfolio of investments, see the Valuation of the Portfolio section below

2 Stated on Portfolio Basis. Portfolio Basis is presented as an alternative performance measure, see the Financial Review section below

Tony Roper, Chairman of SEEIT, said: "We are pleased with the progress that we have made in the last year, having significantly grown and diversified the portfolio both by technology, sector and geography, and are grateful for the continued support from investors. Today we are announcing our intention to raise additional capital that will allow us to take full advantage of the exciting further opportunities available in the energy efficiency market."

Jonathan Maxwell, CEO of SDCL, the Investment Manager said: "The Company has delivered on its dividend targets and demonstrated resilience in capital value and robust returns through the early stages of the COVID-19 pandemic. SEEIT's portfolio has grown and diversified substantially. It continues to perform well and to deliver cheaper, cleaner and more reliable energy solutions to clients. We will look to continue to make investments in the best opportunities in our pipeline and that are aligned with the Company's objectives."

For Further Information

Sustainable Development Capital LLP Jonathan Maxwell Eugene Kinghorn Keith Driver	T: [phone]
Jefferies International Limited Tom Yeadon Gaudi Le Roux Neil Winward	T: [phone]
TB Cardew Ed Orlebar Joe McGregor	T: [phone] M: [phone] E: [e-mail]

There will be a call for analysts at 9.00am on 18 June 2020. For details please email [e-mail] . 

Chairman's statement

On behalf of the Board, I am pleased to present the report and accounts for the SDCL Energy Efficiency Income Trust (''SEEIT'' or ''The Company'') for the year ended 31 March 2020. As I write, the world is tackling the COVID-19 pandemic and our priority has been the health and safety of staff and colleagues of the Investment Manager, Sustainable Development Capital LLP (''SDCL'') and the workforce associated with the Company's portfolio.

This is the Company's first full annual reporting period, during which the Investment Manager has successfully invested capital to enlarge the portfolio, which is suitably diversified and has demonstrated resilience, particularly with the current challenges facing the world and global markets. The Company's portfolio currently consists of 26 energy efficiency investments located in the UK, Continental Europe and North America. The Company's investments now comprise a range of public sector entities as well as a spread of commercial and industrial counterparties.

Four new portfolio investments were made in the year - three operational and one under construction - involving more than £250m of capital. Each operational project is now cash generative and serves to support the Company's dividend targets. These investments were financed by three new equity issuances through the year.

The portfolio has delivered good levels of cash flows and returns in the year. Earnings per share were 5.2p in the year. Net asset value ("NAV") per share increased from 98.4p at 31 March 2019 to 101.0p at 31 March 2020 - see Note 10 for details on NAV per share.

With the COVID-19 pandemic, the Company and the Investment Manager acted quickly to ensure that the portfolio was actively monitored and managed, that appropriate contingency plans were in place across the portfolio, to ensure the health, safety and wellbeing of the workforce associated with its portfolio and to ensure an uninterrupted service for its energy services clients. Based on information to date, there are no COVID-19 project specific concerns that are material to the Company's current performance.

The portfolio is now diversified by asset and source of revenue and, as a whole, is materially insulated against short term energy market volatility as offtake agreements are typically structured and contracted on pre-determined terms through availability or capacity contracts. The Company maintains a healthy liquidity position.

Investment activity

In addition to the Seed Portfolio acquired shortly after the IPO, the Company has now completed five additional investments, consistent with the Company's targeted technologies and geographies, and with the pipeline previously described.

The first investment in the year, Supermarket Solar UK, was announced in June 2019. The investment comprises a delivery framework to install, own and operate solar rooftop projects across Tesco plc's (''Tesco'') estate in the UK. The initial commitment to invest is £5 million, with potential for an additional £10 million. This investment was one of three identified in the IPO Prospectus.

In September 2019 the Company announced a second acquisition, Spark US Energy Efficiency, a $22 million investment, structured as secured senior and subordinated loans, into a portfolio of 264 loans, leases and subscription agreements relating to energy efficiency projects installed across a wide range of industries across the USA. SEEIT acquired the portfolio from Sparkfund, a US energy efficiency development company.

In November 2019, the Company made its first investment in Continental Europe, Oliva Spanish Cogeneration, the largest portfolio acquisition to date at approximately €150 million. The investment comprises five combined heat and power ("CHP") plants, two olive processing plants and two biomass plants, which provide, in aggregate, 125 Megawatts (''MW'') of clean and efficient energy generation capacity.

The Company's final investment in the year, in February 2020, was the acquisition of a 50% interest in Primary Energy, a portfolio of recycled energy and cogeneration projects located in Indiana, USA which provides, in aggregate, 298 MW of clean and efficient generation capacity. The acquisition involved an equity cash consideration of approximately $110 million.

The Board is pleased with the judicious deployment of capital through these new investments during the year which are consistent with the Company's targeted technologies and geographic markets and demonstrate the Investment Manager's ability to source and secure attractive investments that meet the Company's investment strategy and objectives.

The Investment Manager continues to pursue a pipeline of further investment opportunities. Given the ongoing challenges caused by the COVID-19 pandemic, the Company continues to focus on high quality opportunities with strong credit characteristics, providing essential energy services to robust counterparties. Opportunities may present themselves for the Company to invest on advantageous terms given, inter alia, dislocations in financial markets.

Financial performance

The Company's financial performance for the year has been good and in line with expectations. The NAV per share was 101.0p at 31 March 2020, up from 98.4p at 31 March 2019. The Portfolio Valuation was valued at £319.8 million as at 31 March 2020, up from £81.3 million at 30 September 2019 and £60.9 million at 31 March 2019, predominantly as a result of the acquisitions made during the year.

Profit before tax for the year ended 31 March 2020 was £11.6 million (2019: £0.4 million). Earnings per share were 5.2p (2019: 0.4p). The Company's Ongoing Charges ratio reduced to 1.17% (2019: 1.38%), reflecting the economies of scale achieved during the year and in line with the Company's objective to provide value for shareholders. Further detail on the Company's financial performance, the Portfolio Valuation and the Ongoing Charges can be found in the Financial Review section below.

Cash inflow from investments during the year ended 31 March 2020 was £17.1 million, delivering over 1.5x cash cover for dividends paid during the year. Further details can be found in the Financial Review section below.

Total return for the year of 6.2%, comprising an increase in NAV from 98.4p at 31 March 2019 to 101.0p and dividends paid totalling 3.5p, is consistent with the long term investment objectives of the Company, given inter alia the upfront costs of investments and the ramp-up of the portfolio.

SEEIT Holdco, the Company's direct subsidiary, secured a revolving acquisition debt facility of £25 million together with an acquisition financing facility of £40 million in April 2019. Both the revolving and acquisition facility were utilised to fund the acquisition of the Oliva Spanish Cogeneration portfolio and at the date of this report 95% of the facilities have been utilised. As at 31 March 2020, the Company's borrowings (including borrowings at both Company level and portfolio level) represented 46% of NAV, within the acquisition gearing limits of 50% of NAV.

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

Distributions

In line with previous guidance, on 22 May 2020, the Company announced its second interim dividend for the year ended 31 March 2020 of 2.5p per share, providing an aggregate dividend of 5.0p per share for the year ended 31 March 2020.

The Board remains confident in the forecast future portfolio cashflows, enabling us to reiterate the previously published dividend guidance of 5.5p per share for the year to March 2021 and progressive dividend growth thereafter. As previously announced, going forward, the Company intends to pay interim dividends on a quarterly basis instead of six-monthly, with the first quarterly dividend expected to be paid in September 2020 in respect of the quarter ending 30 June 2020.

Funding  

During the year, the Company has increased its market capitalisation by issuing a further 220,374,508 shares in three separate placings, two under the 12-month placing programme that was put in place at the time of the IPO and one as a tap issuance.

In April 2019, a placing of new Ordinary Shares raised gross proceeds of £72 million. The capital raised was used, in part, to fund the Supermarket Solar UK and Spark US Energy Efficiency acquisitions.

In October 2019, a second placing of new Ordinary Shares under the placing programme raised gross proceeds of £100 million. The proceeds of this placing were used as part of the financing for Oliva Spanish Cogeneration acquisition.

In December 2019, the Company completed a successful tap issue. The target £54 million raised was significantly oversubscribed. The proceeds of the placing were used as part of the financing for the investment in Primary Energy.

Portfolio

Performance across the operational assets in the portfolio has been in line with expectations. The Investment Manager continues to monitor any impact resulting from the COVID-19 pandemic and government restrictions.

The Company's investment in the Oliva Spanish Cogeneration portfolio in Spain, has avoided shut-downs associated with COVID-19 on account of providing energy to the critical food industry and is operating materially as expected. The Investment Manager, alongside the operations manager, Sacyr, continue to actively manage the portfolio. The Company's investment in the Primary Energy portfolio is performing adequately and operations across the portfolio as a whole are continuing, notwithstanding the temporary idling of one of the client's steel production facilities as a result of the slowdown in demand brought about by the COVID-19 pandemic in March.

The two construction stage assets in the portfolio have been impacted by COVID-19, but currently have no material impact on the Company's financial performance. The commissioning of the Huntsman Energy Centre was delayed due to temporary demobilisation at the construction site with commissioning now expected to complete as access to site resumes. Further work on the installation of rooftop solar projects across Tesco's estate in Supermarket Solar UK was temporarily paused. To date 6 of the initial batch of 19 installations have been completed successfully and are now operational and income generative.

Governance and ESG

The Company is a member of the Association of Investment Companies ("AIC") and has chosen to comply with the latest AIC code on corporate governance during the year. The Company held its Annual General Meeting (''AGM'') on 11 September 2019 where 12 resolutions were tabled. All votes cast were in favour and as a result each of the resolutions proposed at the AGM were approved by shareholders.

The Company's Interim Report for the six months ended 30 September 2019 was published on 18 December 2019 and is available on the Company's website.

During the year, the Investment Manager noted the large volume of attractive investment opportunities for the Company outside of the UK, particularly in Europe and North America. In order to serve the best interests of the Company and its shareholders, in March 2020 the Board convened an Extraordinary General Meeting ("EGM") to seek shareholder approval for a proposed change to the Company's Investment Policy to remove the 25% minimum exposure limit to UK based energy efficiency investments. The resolution proposed at the EGM was approved by shareholders, with no votes against. The removal of this limit ensures that the Company can benefit from additional flexibility when sourcing and investing in projects with attractive risk-adjusted returns across multiple jurisdictions.

In July 2019, the Company published its Principles for Responsible Investment on its website. The policy seeks to ensure that all investments and the associated contractors and delivery partners of the Company's investments apply a set of defined ESG standards. The Investment Manager is tasked with promoting this Responsible Investment Policy to all Service Providers, and to monitor their performance with the aim of ensuring compliance and best practice is followed.

The Company prides itself on the contribution the Company makes on helping deliver a greener future, along with attractive returns. In recognition of this, in December 2019 we were delighted to be awarded the Green Economy Mark by the London Stock Exchange (LSE).

As part of the wider development of the Company's ESG efforts, the Investment Manager is now a signatory to the United Nations Principles for Responsible Investment (UNPRI) and continues to work to strengthen and improve our ESG procedures for both making new investments and managing the existing portfolio.

The Company seeks to maintain an open and constructive dialogue with its shareholders, primarily via meetings with the Investment Manager at regular intervals in the year. As part of good governance, we had planned for a series of shareholder meetings in May 2020. Due to the COVID-19 pandemic this has been deferred to later this year.

The AGM will be held in July 2020, and based on current government guidance, this will take the form of the minimum attendance necessary to conduct the business of the meeting.

As the Company's portfolio has increased in size and diversity, the Board considers it appropriate to recruit a further Director with a complimentary skillset and experience, and a recruitment consultant has been engaged to run the search process.

Key Risks

The key, and dominant, risk-related theme during the first quarter of 2020 has undoubtedly been the global COVID-19 pandemic. This has led to intense focus by the Investment Manager, and the Board, upon the immediate operating issues arising directly from the pandemic (including health and safety related impacts) and the longer-term impacts in relation to portfolio investments, from the potential economic consequences of the global pandemic.

It should be noted that the portfolio is currently divided between the UK, Spain and the USA, which comprise three of the countries to have been most heavily impacted by COVID-19. Nonetheless the portfolio has proved resilient, which is explained by the Company's focus on providing essential energy services to key sectors which have continued to operate during the pandemic (including hospitals, food production and distribution, data-centres, steel production and banking). It is likewise anticipated that the linkage with such essential services will leave the portfolio relatively well placed in respect of the longer term economic impact.

Asset specific impacts of the COVID-19 pandemic include illness of a small number of operational site staff in Spain (now recovered), temporary interruption in the ability to source Solar PV equipment from China (now resolved), project delay in the Huntsman Energy Centre construction project (on-going, but expected soon to be resolved) and a quick transition to working-from-home disciplines across the range of service providers.

The investment Manager continues to pay close attention to the key credit risks arising within the portfolio which relate to applicable counterparties. There were no significant matters to address in this regard during the financial year, but this is subject to rapid revision in the current market environment and the Investment Manager will remain vigilant to any changes in the credit risk profile of the Company's counterparties. In particular, the Investment Manager is working closely with its partners in the United States, where the Company has a limited exposure to mid-market corporate credit and where it also has some limited exposure to energy contracts that depend on the operation of host client facilities, albeit on pre-determined terms.

The Company has relatively limited exposure to risks associated with regulated revenues. However, the Spanish RoRi mechanism, which makes payments administered by the regulator, is designed to mitigate, over the medium term to long term, against fluctuations in commodity prices is an important part of the revenue stream for the Company's investment in Oliva Spanish Cogeneration. Further information is provided in the Investment Manager's Report and Section and the Risk and Risk Management section below.

The Company also has relatively limited exposure to re-contracting risk. The substantial majority of projects in its portfolio are contracted for the medium to long term, however, the Company's investment in the five projects involved in Primary Energy does assume that some re-contracting is achieved. The risk is mitigated by the fact that Primary Energy has a good track record of re-contracting, given inter alia that it is providing a combination of emissions control and renewable energy, providing essential services to the operations of the project clients and at a competitive price compared to the grid. Further details can be found in the Investment Manager's Report and Section and the Risk and Risk Management section below

Pipeline and Outlook

The Company is seeking further investments to build a balanced portfolio, diversified by technology as well as by counterparty, geography and supplier. The Company's investment limits are constantly under review, not just to ensure compliance but also to ensure that they remain appropriate for the Company as global markets develop.

The Board and the Investment Manager regularly review the existing portfolio to find ways in which to unlock additional value and to optimise the portfolio. This includes finding investment opportunities that enhance the value of the portfolio.

The details of how we emerge from the crisis associated with the COVID-19 pandemic remain unclear, but in many of the Company's target markets there is likely to be a focus on the most effective way to re-start and re-invigorate stalled economies. In June 2020 the European Commission announced a series of stimulus and recovery measures that specifically prioritise 'greener' investments, so as to simultaneously address national climate related targets, building amongst other things on the widening public appreciation of the benefits of reduced pollution levels during the economic shutdown and general awareness of climate change. For example, the European Commission's proposal for its recovery plan places the "European Green Deal", which includes the "Renovation Wave" targeting energy efficiency for buildings, at the forefront of investing in the future as well as recovery. Efficient, cheaper, cleaner and more reliable energy solutions should be more attractive to government, businesses and investors than ever before.

I would like to thank shareholders for their continued support of the Company in its first full year of operations and we look ahead to continue delivering upon our objectives and continuing to grow in scale.

Tony Roper

Chairman

18 June 2020

Strategic Report: The Company

The Role of Efficiency in the Energy Market

Energy efficiency and decentralised energy generation play a crucial and growing role in balancing supply and demand in the global energy economy. This growth is set to continue as the market transitions away from traditional forms of energy towards net zero-carbon targets by 2050. The International Renewable Energy Agency (IRENA) anticipates that energy efficiency measures, alongside renewable energy have the potential to achieve most of (up to 90%) the required carbon reduction in the energy market¹. This transition will require fundamental changes to the way we consume energy and the implementation of energy efficiency measures and decentralised generation to facilitate the largest possible contribution of clean energy into a balanced system. The Company is investing into this energy transition via commercially proven technologies and applications.

Most electricity supply in developed markets such as those in the UK, Continental Europe and North America has historically been delivered by large, centralised, grid connected "utility scale" power plants, often using fuels such as natural gas or coal. However, substantial energy losses occur in the generation, transmission and distribution of energy from grid connected power plants. Much of this loss is attributable to the loss of heat associated with the generation process. Overall, this wastage can result in the loss of over 60 per cent. of the energy used to generate electricity. Once delivered to the point of use, one third or more of energy can be wasted in many buildings or infrastructure assets, through sub-optimal lighting, heating, cooling, ventilation, air conditioning, insulation, management systems, controls, or other sources.

Decentralised energy represents a shift away from a centralised system of large-scale energy generation which is reliant on an expansive distribution network. Decentralised energy takes advantage of distributed power and heat solutions based on local generation at or near to the point of use, which can significantly improve efficiency and resilience, and can often be delivered at lower cost than the grid and with little, if any, support from subsidies. Decentralisation in the context of energy efficiency provides three key benefits:

· Financial performance: implementation of energy efficiency solutions provides significant cost savings on energy bills and serves to ensure long term pricing stability.

· Environmental performance: energy efficient solutions from leading technology and service providers seek to deliver reductions in greenhouse gas emissions.

· Infrastructure performance: commercially proven solutions with warranties or performance guarantees deliver high-quality outcomes for heating, power, lighting, cooling, controls, processes and optimisation, thereby upgrading infrastructure solutions to drive revenues and deliver robust performance and reliability.

1  IRENA (2019), Transforming the energy system - and holding the line on the rise of global temperatures, International Renewable Energy Agency, Abu Dhabi. ISBN 978-92-9260-149-2

Investment Proposition

Listed in December 2018 on the Premium segment of the Main Market of the London Stock Exchange ("LSE"), SEEIT is the first investment company of its kind in the UK focused primarily on investments in operational energy efficiency assets located primarily in the UK, Continental Europe and North America.

Investment objective

The Company's investment objective is to generate an attractive total return for investors comprising stable dividend income and capital preservation, with the opportunity for capital growth.

Investment Policy

The Company seeks to achieve its investment objective by investing principally in a diversified portfolio of Energy Efficiency Projects with high quality, private and public sector Counterparties. The contracts governing these Energy Efficiency Projects entitle the Company to receive stable, predictable cash flows in respect of predominantly operational Energy Efficiency Equipment installed at Counterparties' premises. The Company's returns take the form of Contractual Payments by Counterparties in respect of the relevant Energy Efficiency Equipment used by them.

Whilst the Company invests predominantly in operational Energy Efficiency Projects, the Company may under certain circumstances invest in Energy Efficiency Projects while such projects are in a construction phase or development phase.

In respect of each type of Energy Efficiency Equipment, the Company seeks to diversify its exposure to engineers, manufacturers or other service providers by contracting, where commercially practicable, with a range of different engineers, manufacturers or other service providers.

Energy Efficiency Projects may be acquired individually or as a portfolio from a single or a range of vendors. The Company may also invest in Energy Efficiency Projects jointly with a co-investor. The Company aims to achieve diversification by investing in different energy efficiency technologies and contracting with a wide range of Counterparties.

The Company invests and manages its Energy Efficiency Projects with the objective of assembling a high quality, diversified Portfolio.

The Company initially focussed its attention on investing in the UK. However, over time, the Company has made, and may continue to make, investments in continental Europe, North America and the Asia Pacific region and other OECD countries.

Investment restrictions

In order to ensure a spread of investment risk, the Company has adopted the following investment restrictions:

· no Energy Efficiency Project investment by the Company will represent more than 20 per cent. of Gross Asset Value, calculated at the time of investment;

· the aggregate maximum exposure to any Counterparty will not exceed 20 per cent. of Gross Asset Value, calculated at the time of investment;

· the aggregate maximum exposure to Energy Efficiency Projects in either a development phase or construction phase will not exceed 35 per cent. of Gross Asset Value, calculated at the time of investment, provided that, of such aggregate amount, the aggregate maximum exposure to Energy Efficiency Projects in a development phase will not exceed 10 per cent. of Gross Asset Value, calculated at the time of investment; and

· the Company will not invest in other UK listed closed-ended investment companies.

Gearing

The Company maintains a conservative level of aggregate gearing in the interests of capital efficiency, in order to seek to enhance income returns, long term capital growth and capital flexibility. The Company's target medium term gearing is up to 35 per cent. of NAV, calculated at the time of borrowing (the "Structural Gearing").

The Company may also enter into borrowing facilities on a short-term basis to finance acquisitions ("Acquisition Finance"), provided that the aggregate consolidated borrowing of the Company and the Project SPVs, including any Structural Gearing, shall not exceed 50 per cent. of NAV, calculated at the time of borrowing. The Company intends to repay any Acquisition Finance with the proceeds of a Share issue in the short to medium term.

Structural Gearing and Acquisition Finance are employed either at the level of the Company, at the level of the relevant Project SPV or at the level of any intermediate wholly owned subsidiary of the Company, and any limits set out in this investment objective and policy shall apply on a consolidated basis across the Company, the Project SPVs and such intermediate holding company. Structural Gearing and Acquisition Finance primarily comprise bank borrowings, though small overdraft facilities may be utilised for flexibility in corporate actions.

As at 31 March 2020, the Company's gearing (including borrowings at both Company level and portfolio level) represented 46% of NAV, within the acquisition gearing limits of 50% of NAV.

Use of derivatives

The Company may use derivatives for efficient portfolio management but not for investment purposes. In particular, the Company may engage in full or partial interest rate hedging or otherwise seek to mitigate the risk of interest rate increases and full or partial foreign exchange hedging to mitigate the risk of currency inflation.

The Company only enters into hedging contracts and other derivative contracts when they are available in a timely manner and on terms acceptable to it. The Company reserves the right to terminate any hedging arrangement in its absolute discretion.

Cash management

Whilst it is the intention of the Company to be fully or near fully invested in normal market conditions, the Company may hold cash on deposit and may invest in cash equivalent investments, which may include short term investments in money market type funds and tradeable debt securities ("Cash and Cash Equivalents").

There is no restriction on the amount of Cash and Cash Equivalents that the Company may hold and there may be times when it is appropriate for the Company to have a significant Cash and Cash Equivalent position instead of being fully or near fully invested.

Changes to the Investment Policy

No material change will be made to the Company's investment policy without the prior approval by ordinary resolution of Shareholders.

In March 2020, the Company held an EGM to seek approval for a proposed change to the Investment Policy to remove the 25% minimum exposure limit to UK based energy efficiency investments. This change in the Investment Policy was considered by the SEEIT Board to be in the best interest of the Company's shareholders. The resolution proposed at the EGM was approved by shareholders, with no votes against.

Business Model

The Company's simplified group structure

The Company's investments are held directly or indirectly by its sole direct subsidiary and main investment vehicle, SEEIT Holdco Limited.

SDCL, the Investment Manager, and Sanne Group (UK) Limited (''Sanne'') are third party service providers appointed by the Company via, respectively, a management agreement and an administration agreement.

Portfolio construction and investment sourcing

The Company invests with the objective of assembling a portfolio of energy efficiency projects, diversified by:

Investment stage: whilst the Company invests predominantly in operational energy efficiency and distributed generation projects, the Company may under certain circumstances invest in projects that are at construction or development phase;

Equipment/ Service providers: the Company diversifies its exposure to equipment manufacturers, engineers and other service providers through investing in different energy efficiency technologies and contracting with a wide range of counterparties; and

Geography: the existing portfolio comprises projects located in the UK, Continental Europe and the USA. In addition, the company is actively pursuing further investments in other jurisdictions that provide attractive risk-adjusted returns across, including the UK, Europe, North America, the Asia Pacific region and, selectively, other OECD countries.

The Investment Manager sources investments through its long-standing relationships with third party developers, utility companies, project owners, energy service companies, financial intermediaries and directly from counterparties. Each prospective investment is assessed against the Company's investment objectives and Investment Policy and, if considered potentially suitable, an initial analysis and review of the opportunity will be undertaken. Each opportunity is scrutinised on the basis of the investment criteria outlined below.

In selecting potential energy efficiency and distributed generation projects, SDCL employs established criteria and portfolio construction guidelines in order to source projects with some or all of the following characteristics: 

· operational assets installed at energy intensive and inefficient commercial and public buildings and facilities;

· projects utilising commercially proven technologies, with an appropriate level of warranties and performance guarantees;

·   contracting with energy efficiency equipment vendors and manufacturers, subcontractors and counterparties who are strong credit counterparties;

· passing performance risks down to engineering, procurement and construction (''EPC'') contractors, operations and maintenance (''O&M'') contractors, subcontractors, energy efficiency equipment vendors and manufacturers via warranties and guarantees;

· based upon measured and verifiable savings criteria as set forth in an energy services agreement (''ESA'') governing the terms on which energy savings are apportioned between the Counterparty and the Project SPV;

· projects based in the key target markets of the UK, Continental Europe, North America and selectively in Asia Pacific and other OECD countries;

·     achieving economies of scale, either individually or through aggregation;

·     appropriate environmental, social and governance undertakings shall be secured from each Counterparty; and

·   ability to achieve significant reductions in energy use and consequently emissions of greenhouse gases and other pollutants.

Investment Process

Once a potential opportunity that falls within the Company's investment and ESG policies has been identified as additive to the existing investment portfolio, and the Investment Manager wishes to proceed with the acquisition of such project, the Investment Manager undertakes further analysis which sets out the analysis, investment structure, investment rationale, key environmental benefits, risks and returns, capital expenditure budget, proposed revenue model, necessary next steps and recommendations.

Based on the analysis, the Investment Manager will determine whether further detailed financial, legal and technical due diligence should be carried out by the team and/or third party firms and advisers, or whether to proceed with the further negotiation of deal terms with the relevant counterparties. Once the decision to proceed has been made, the Investment Manager will be responsible for further business due diligence, while the appropriate financial, environmental, social, governance, tax, legal, technical and other due diligence processes will be conducted by third party firms and/or advisers.

The Investment Manager will also seek to ensure that the transaction terms with relevant counterparties such as developers, EPC contractors, O&M contractors, advisers, and revenue counterparties meet with the Investment Manager's ESG criteria where applicable.

Once the detailed due diligence process has been completed, the Investment Manager will prepare updated analysis which comprises details of investment opportunity, environmental characteristics, impact on portfolio construction and development, risks and returns, identification of  any investment upside or portfolio enhancement, investment structure based on due diligence process and final contract terms, as a result of negotiations, as well as a financial model illustrating risk and return, including scenario and sensitivity analyses as appropriate.

The Investment Manager will then use all of the material information collated on the investment through the diligence process, along with the potential impact the investment would bring to the construction of a balanced portfolio, to decide on whether to proceed with the investment or not. The Investment Manager will notify the Board of its decision prior to committing to an investment or sale of an asset, including the provision of further papers as required.

Where the Investment Manager intends to acquire projects from another SDCL Client, the Investment Manager will approach the Board at the earliest opportunity to discuss any additional diligence or comfort, such as independent valuation or audits required. The Investment Manager will not execute an acquisition of any project from a SDCL client without prior Board approval.

Company Key Performance Indicators ("KPIs")

The Company sets out below its financial and operational KPIs which 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 2020	31 March 2019	Commentary
NAV per share (pence)	NAV divided by no. of shares outstanding as at 31 March	101.0p	98.4p	NAV has increased compared with the prior year
Share price (pence)	Closing share price as at 31 March	92.50p	102.75p	The share price was greatly affected by extreme market conditions in the short-term as a result of global uncertainty around COVID-19. It has since recovered in the period since financial close
Dividends per share (pence)	Aggregate dividends declared per share in respect of the financial year	5.0p	1.0p	The Company met its stated dividend target of 5.0 pence per share for the year ended 31 March 2020
Cash dividend cover (x)	Operational cash flow divided by dividends paid to shareholders during the year	1.55x	n/a	Dividends were covered by cash flows for the year ended 31 March 2020
Total Return in the year (%)	NAV growth and dividends paid per share in the year	6.2%	n/a	Total return combines the increase in NAV and dividend distributions to shareholders, and reflects continued progress during the initial ramp-up phase.
Ongoing charges ratio (%)	Annualised ongoing charges (i.e. excluding acquisition costs and other non-recurring items) divided by the average published undiluted NAV in the period, calculated in accordance with AIC guidelines	1.17%	1.38%	Ongoing charges have reduced on a comparative basis as economies of scale were achieved through continued growth in the size of the Company

Operational KPIs

KPI	Definition	31 March 2020	31 March 2019	Commentary
Weighted average project life (years)	Weighted average number of years assumed to be remaining in project contracts	11.3	11.3	Maintained through acquisitions during the year
Largest investment as a % of GAV (%)	Value of largest investment divided by the sum of all investments held in the Portfolio together with any Cash and Cash Equivalents, calculated at period end	13%	17%	The Company continues to stay well within the limits set by its Investment Policy, demonstrating diversification of the portfolio
Largest five investments as a % of Portfolio Valuation (%)	Total value of five largest investments divided by the sum of all investments held in the Portfolio together with any Cash and Cash Equivalents, calculated at period end	43%	88%	Achieved further diversification during the year and reflects a lower concentration risk

Investment Manager's Report

The Investment Manager

Sustainable Development Capital LLP is an investment firm with a proven track record of investment in energy efficiency and decentralised energy generation projects.

SDCL was founded in 2007 by Jonathan Maxwell, and since 2012, has raised over £750 million of capital commitments, including four funds exclusively focused on energy efficiency with projects in the UK, Europe, North America and Asia. The Investment Manager is headquartered in London with offices in New York, Dublin, Hong Kong and Singapore and a project office in Madrid. Its team consists of a team of 27, including 15 investment professionals.

Acquisitions in the year for the Company

Project	Investment Date	Counterparty	Technology	Amount
Supermarket Solar UK	June 2019	Tesco plc	Rooftop Solar	£5 million 1
Spark US Energy Efficiency	September 2019	Various (264 contracts)	Lighting and Energy Efficiency Measures	$22 million
Oliva Spanish Cogeneration	November 2019	CNMC	CHP and Biomass	€150 million
Primary Energy	February 2020	Arcelor Mittal and US Steel	Recycled Gas, Cogeneration and Industrial Energy Efficiency	$110 million

The Company completed four additional investments in the year, consistent with SEEIT's targeted technologies and geographies, and with the pipeline previously described. Each one delivers contracted investment returns with strong income generating characteristics.

Each new investment helps to further diversify the portfolio, which is now invested across a larger number of geographies, technologies, sectors and host client counterparties.

The first new investment of the financial year, Supermarket Solar UK, was made in June 2019. This is a development and construction stage investment that comprises a delivery framework to install, own and operate solar rooftop projects across Tesco's estate in the UK. The initial commitment to invest is £5 million which will be invested in several tranches of projects per the terms of the delivery framework. Following completion of the initial tranches there is potential for an additional £10 million investment. Within six months of the delivery framework being signed the first site had achieved power and started generating revenue for SEEIT.   This investment was one of three identified in the IPO Prospectus, along with Northeastern US CHP (completed March 2019) and a Spanish Cogeneration project (see project Oliva below).

In September 2019 SEEIT acquired Spark US Energy Efficiency, a $22 million investment, structured as secured senior and subordinated loans, into a portfolio of 264 loans, leases and subscription agreements relating to energy efficiency projects installed across a wide range of industries in 36 states across the US. SEEIT acquired the portfolio from Sparkfund, a US energy efficiency development company which had developed the portfolio over several years. The portfolio, which continues to be managed by Sparkfund, is well diversified and is structured to provide predictable, stable and fully contracted cash flows. The individual agreements within the portfolio were aggregated with back-to-back funding provided by Hitachi Bank. These investments have been, in effect, refinanced by SEEIT's investment.  The substantial majority of SEEIT's investment is senior debt relating to the underlying Portfolio of energy systems projects, with energy saving technology under management including LED lighting, HVAC, backup generators, and monitoring and controls.

In November 2019, SEEIT secured its first investment in Continental Europe, Oliva Spanish Cogeneration, to date the largest portfolio acquisition in the portfolio at approximately € 150 million. The investment comprises nine projects: five combined heat and power (CHP) projects, two olive processing projects and two biomass projects, which provide, in aggregate, 125 MW of clean and efficient energy generation.

SEEIT's final investment in the financial year, completed in February 2020, was the acquisition of a 50% interest in Primary Energy, a portfolio of recycled energy and cogeneration projects located in Indiana, USA. The acquisition involved an equity cash consideration of approximately $110 million.

1  Supermarket Solar UK represents an initial commitment of £15 million with the first £5 million tranche currently being deployed.

Oliva Spanish Cogeneration

Oliva Spanish Cogeneration comprises nine operating projects which own five efficient natural gas CHP plants with a combined capacity of 100 MW, two olive waste biomass plants with a combined capacity of 25 MW and two olive pomace processing plants, located in Southern Spain.

Oliva Spanish Cogeneration owns three CHP assets that provide heat to third party olive processors that are also converting olive pomace to secondary products.

The portfolio includes two complexes that reduce the risk of availability of fuel supply, given that biomass is sourced from assets owned within each complex. The projects utilise olive pomace, usually a waste product, as biomass fuel in a semi closed looped system. The portfolio operates through a set of individual stages, during the initial stage, the CHP plants generate and sell electricity to the Spanish energy market under the RoRi mechanism ( designed to mitigate, over the medium term to long term, against fluctuations in commodity prices) and heat to adjacent and third-party olive pomace processing plants. In the second stage, the olive pomace processing plants produce olive cake feedstock which is used as feedstock to fuel the biomass plants within the complex. In the final stage, these biomass plants also generate and sell electricity to the Spanish energy market under the RoRi mechanism.

The integrated nature of the complexes ensure that Oliva Spanish Cogeneration maintains control of the inputs and outputs of the plants and as such, has the flexibility to manage these costs and revenues to ensure optimal operations of the plants.

The Oliva Spanish Cogeneration portfolio promotes the philosophy of a 'closed loop' recycling process, wherein the complexes maximise use of by-products to both create value and to minimise the environmental impact of waste. In typical olive oil production, only around 20% of the olive harvest is considered useable to produce olive oil. Post-pressing, the remaining 80% (in the form of olive pomace) is considered waste which must be disposed of. The Oliva Spanish Cogeneration complexes utilises this 'waste' to produce secondary products that can be used as forms of renewable energy and fuel:

· Secondary olive oil: for use in commercial application as well as heating;

· Olive stone: used in residential heating; and

· Olive cake: used as a biomass fuel stock to produce electricity

The Spanish RoRi mechanism, which makes payments administered by the regulator, is designed to mitigate, over the medium term to long term, against fluctuations in commodity prices. Calculations of payments under the mechanism are re-based every 6 years and reset mid-term with an adjustment for gas prices made every 6 months and remaining costs and revenues adjusted every 3 years.

Operations and maintenance on the portfolio will continue to be carried out by Sacyr, a major industrial group, and the plants benefit from long-term service agreements with the equipment providers such as  Gestamp Biomass, GE, Rolls Royce, Jenbacher, Mitsubishi and Turbomach.

Primary Energy

SEEIT made a 50% investment in Primary Energy Recycling Corporation ("Primary Energy"), which comprises a portfolio of recycled energy and cogeneration projects in Indiana, USA. Primary Energy owns and operates a 298 MW portfolio of five operating projects comprising three energy recycling projects, one natural gas fired CHP project and a 50% interest in an industrial process efficiency project. These projects are fully integrated into the operations of two steel mills in the United States owned by ArcelorMittal S.A. ("ArcelorMittal") and United States Steel Corporation respectively.

Primary Energy focuses on the recycling of waste gases, to generate low-cost, more efficient energy to the offtaker's blast furnaces, compared with alternative energy sources. By recycling waste gases, Primary Energy's activities help to reduce CO2 emissions, SO2 and other particulate matter and, in some instances, act as the sole source for fuel handling and emissions control equipment that is critical for the operations of the offtaker.

Approximately 75% of the revenues from the projects are expected to be derived from energy services to blast furnace 7 at Indiana Harbor Works ("IH7"), which is considered to be the largest and most competitive furnace facility of its kind in North America, ranked in the top quartile and with significant strategic importance to ArcelorMittal.

These projects are contracted to provide electricity, steam, water and, in one case, coking material, in return for the contractual payments via service agreements. The projects benefit from a right of first dispatch to provide energy services when the steel mills are operating. Approximately 75% of the revenues from the projects have availability-based characteristics, in that payments remain stable or fixed and do not vary substantially depending on demand, while approximately 25% of the revenues have capacity-based characteristics, in that payments can vary depending on demand. Demand for energy services by the steel mills has, on average, materially exceeded supply by the projects over their long operating history.

The five projects comprise the following:

Cokenergy

Consists of 16 heat recovery steam generators, one 95 MW GE extraction / condensing steam turbine generator, cooling tower, flue gas treatment system and ancillary equipment. Cokenergy receives waste gas and converts this to electricity and steam for IH7.

North Lake

Consists of one 90 MW steam turbine generator, cooling tower and ancillary equipment located at Indiana Harbor Works East for IH7. Northlake receives steam from boilers run by waste gas from ArcelorMittal's blast furnace IH7 and converts this to electricity and steam for use back in IH7.

PCI Associates

The project increases the efficiency of the steel making process and results in blast furnace gas with a higher energy content and lower air emissions compared to the alternatives: coke, fuel oil, and natural gas. The project allows increased energy recovery potential for producing process steam and electricity.

Ironside

Consists of a boiler and a 50 MW steam turbine generator, cooling tower and ancillary equipment providing services to an ArcelorMittal's blast furnaces IH4 at Indiana Harbor West. Ironside receives blast furnace gas from the host facility's blast furnaces and converts this to electricity and steam.

Portside

Consists of 64 MW natural gas fired CHP facility, two auxiliary boilers, hot softened water plant, condensing economizer and ancillary equipment located at a blast furnace 14 at U.S. Steel's Gary Works facility, one of U.S. Steel's core assets. Portside provides steam, electricity, hot softened water to U.S. Steel.

Primary Energy has overall responsibility for the operation and maintenance of the projects but subcontracts some or all of these activities back to ArcelorMittal and US Steel.

The weighted average term of the contracts in Primary Energy is approximately 9 years and the Company assumes that some re-contracting is achieved. Risk is mitigated by the fact that Primary Energy has a good track record of re-contracting, given inter alia that it is providing a combination of emissions control and renewable energy, providing essential services to the operations of the project clients and at a competitive price compared to the grid.

The strong environmental credentials of the assets qualify them annually for Renewable Energy Certificates (RECs), which, due to the efficiency and positive environmental impact of the assets are equivalent to those generated by 536 MW of solar or 374 MW of wind projects.

Operational Performance

Performance across the operational assets in the portfolio was materially in line with expectations. March 2020 saw the initial impact of COVID-19 in so far as some of the host client operations and the operation and maintenance regimes for the project assets were concerned. The Investment Manager placed a focus on assessing and managing the impact on the portfolio and continues to monitor any impact resulting from the impact of the COVID-19 pandemic and government restrictions. To date this has generally been restricted to introducing new protocols for workplace health and safety, ensuring effectiveness of remote working practices and arranging contingency measures where required. Overall the impact to date on operational performance has therefore been limited.

UK

Santander UK Lighting: In January 2019, Santander announced a potential of up to 140 branch closures over 2019. To date, Santander has provided details of c.70 of the branch closures for which SEEIT received an early termination payment as per the energy services agreement in line with forecast returns. Santander has yet to confirm timing for the remaining c.70 closures - the notice is expected this calendar year.

Huntsman Energy Centre: Commissioning for the project was temporarily paused owing  to the project EPC, Engie, having to demobilise all on-site commissioning works due to initial government advice on COVID-19 - following updated government guidance remobilisation is however slowly taking place again. Current commencement of operations is targeted before the end of the financial year although this could be subject to further delay, dependent upon the length of the COVID-19 related restrictions. The Investment Manager continues to work constructively with all parties to complete the construction phase per the revised timetable. The term of the contract once the project becomes operational is 15 years.

Supermarket Solar UK

Following successful installation, the first two roof-top solar PV projects commenced generation in November 2019. An additional four sites have now been completed and are generating, whilst further roll out was paused due to COVID-19 although now slowly recovering. Further sites will be developed as part of the initial batch of solar projects of a first phase of c.5 megawatts with an additional 13 solar projects to be scheduled under the framework agreement with Tesco.

The remaining UK assets in the portfolio are all operating in line with or above expectations, with no significant operational updates to report for the period.

Continental Europe

Oliva Spanish Cogeneration: All nine assets within the Oliva Spanish Cogeneration portfolio are generating in line with expectations. The portfolio has managed any disruption due to COVID-19 through effective operations management at the sites, which are located in a remote agricultural setting.

The three-cogeneration assets that provide steam to third party olive processors have been operating materially in line with expectations as the off takers have been exempt from Spanish government mandated shutdowns given the criticality of the food industry.

The O&M activities have been managed effectively by Sacyr, with oversight from the Investment Manager, ensuring revenue and operational stability. In addition to the normal operations, several portfolio initiatives are underway to optimise revenues and minimise costs over the medium-long term.

North America

Primary Energy:   The portfolio has been performing materially as expected since the acquisition in February 2020. Upgrades to the Cokenergy asset were successfully completed in December 2019. The key blast furnaces for Arcelor Mittal and US Steel continue to operate during the downturn given their strategic importance to the hosts. As the portfolio of assets benefit from capacity contracts from the host clients, i.e. that the assets have rights of first despatch, the exposure to demand risk is generally mitigated, as past performance attests to. However, Arcelor Mittal has temporarily idled one of the smaller operations, Blast Furnace 4, as a direct impact of the immediate temporary shutdown of US car manufacturing facilities.  This is expected to be temporary and is not expected to have a material financial impact on performance.

Spark US Energy Efficiency: The debt investment into Spark US Energy Efficiency has performed as expected with scheduled payments being made on time. Whilst the underlying portfolio of loans has seen a delay in a small number payments from some of its clients so far due to the COVID-19 repercussions and lockdown restrictions in the USA, the client base is substantially diversified to minimise the impact from any single credit counterparty. While some further payment delays are expected, the Investment Manager is monitoring the situation closely, including a review of all contractual rights and remedies, a material impact on performance is not currently expected.

The other US portfolio, Northeastern US CHP, is operating in line with or above expectations, with no significant operational updates to report.

Funding

Equity Fundraising

SEEIT has returned to the capital markets three times over the course of the year. As a result, the Company's market capitalisation has more than trebled in size. Each time, funds were raised with a view to deploying in a near-term project or portfolio of projects, ensuring efficient deployment of capital.

In April 2019, the Company raised £72 million, which was subsequently committed to Supermarket Solar UK, Spark US Energy Efficiency investments and Oliva Spanish Cogeneration. The capital raise in April 2019 was originally intended to fund an identified pipeline of investment opportunities, including the above.

In October 2019, the Company raised gross proceeds of £100 million which was used, in part, along with the Company's borrowing facilities (see below) to finance the Oliva Spanish Cogeneration portfolio investment.

In December 2019, the Company completed a successful tap issue. The target of £54 million was significantly oversubscribed. The proceeds of the placing were used as part of the financing for the investment in Primary Energy.

Debt Financing

In the interests of capital efficiency and to enhance income returns, long-term capital growth and capital flexibility, SEEIT is permitted to maintain a conservative level of gearing. To allow flexibility with making new investments, in April 2019 SEEIT, through its main investment vehicle, SEEIT Holdco, secured a revolving credit facility ("RCF") of £25 million with Investec Bank plc as well as access to acquisition financing of up to £40 million. The acquisition facility, in its entirety, as well as the majority of the RCF was used to part-finance the Oliva Spanish Cogeneration portfolio investment. The RCF has an expiry of 30 June 2022 and is available to be used to fund the Company's active deal pipeline. The acquisition financing is repayable in July 2020 and is expected to be repaid from existing cash resources by end of June 2020.

Key Risks

See the Risk and Risk Management section below for further details on key risks.

COVID-19

The global COVID-19 pandemic prompted an immediate review by the Investment Manager, and the Board, of the operating issues arising directly from the pandemic (including health and safety related impacts) and the longer-term impacts in relation to portfolio investments.

The investment portfolio is located in three of the countries heavily impacted by the COVID-19 pandemic - the UK, Spain and the USA. Nonetheless the portfolio has proved resilient, which can be explained through the Company's focus upon providing essential energy services to key sectors which have continued to operate during the pandemic (including hospitals, food production and distribution, data-centres, steel production and banking). In respect of longer-term potential economic impacts, it is likewise anticipated that the portfolio is relatively well-placed and defensively positioned, given the association with such essential services.

Asset specific impacts of the COVID-19 pandemic include illness of several operational site staff in Spain (now recovered), temporary interruption in the ability to source Solar PV equipment from China (now resolved), project delays on the Huntsman Energy Centre construction project (on-going, but expected soon to be resolved) and a quick transition to working-from-home disciplines across the range of service providers.

The Investment Manager continues to monitor the impact of the COVID-19 pandemic on the workforce at each of the investments and their ability to deliver the critical energy services to each of SEEIT's counterparties.

Counterparty credit risk

The key credit risks arising within the portfolio relate to applicable off-take counterparties. There are no specific credit events or impairments to highlight in this respect currently. However, it is noted that beyond the direct counterparty risks there is a related risk of reduced output from some of the portfolio's energy centres in Primary Energy, where some projects have capacity-based characteristics rather than availability-based characteristics. This means that, in some circumstances, notwithstanding that the energy centres benefit from a right of first despatch, significant reductions in demand could reduce the amount of energy acquired by the host client counterparty from time to time. This risk is generally mitigated by the scale of demand reduction that would be required for a significant impact to be felt in the short term, as well as by the long term nature of the assets and true-up mechanisms.

Operational risk

Operational risk will inevitably vary by project, but risks will inherently tend to be higher within development/construction projects, than with stable operating assets, which benefit from established operation and maintenance regimes, high levels of automation and contingency plans and procedures. Within the current portfolio, a key construction project, Huntsman Energy Centre, has been subject to construction delays, this highlights the inherent additional risk in construction stage assets. As stated in the Operational Highlights review above, this delay has currently had no material impact on returns.

Impact of energy market volatility

The Company has limited exposure to short term energy market volatility as the project contracts in its portfolio tend to be structured on pre-determined terms. Any short-term changes in commodity prices are generally passed through to off-takers and compensated for over the short, medium or long term.

The current period of low natural gas prices may however present opportunities for high quality, clean and efficient CHP and/or projects fuelled by lower carbon or green gas. Meanwhile, lower wholesale energy prices may not translate into lower delivered energy costs for consumers and clients - considering systems costs associated with transmission and distribution etc. leading to continued and potentially increasing interest in opportunities to reduce costs and improve productivity through efficiency. This would increase the opportunities available to Company over the long run and, in the short run, present some construction phase opportunities to the extent that they were consistent with the Company's investment policy and risk appetite.

Environmental, social and governance

Overview

The Investment Manager believes that the energy efficiency opportunity - using less energy and therefore less carbon and waste - for the same outcome attests to the fact that greener business can be better business. The operation and performance of SEEIT's portfolio of energy efficient assets and the essential nature of the energy services that it provides, has resulted in significant environmental benefits and outcomes, ranging from greenhouse gas emission reductions to other forms of pollution prevention and green energy supply. This has gone hand in hand with, not at the expense of, financial performance both for SEEIT's project asset and clients. SEEIT will be producing a comprehensive sustainability report, quantifying the impacts and outcomes, later in the year.

The Investment Manager, on behalf of, SEEIT is focused on conducting business responsibly. That means behaving ethically, respecting people and the environment. The Investment Manager maintains a high standard of business conduct and stakeholder engagement so as to ensure a positive impact on the community and environment in which it operates. This requires monitoring and consideration of its stakeholders by building strong relationships with suppliers, customers, communities and authorities among others. The Investment Manager's relationships with its stakeholders, and its dedication to maintain a responsible approach to investment, is essential to position SEEIT well for the longer term - and is expected by its shareholders.

In order to strengthen and develop the Company's ESG efforts, the Investment Manager is now a signatory to the United Nations Principles for Responsible Investment (UNPRI) and continues to work to strengthen and improve its ESG procedures for both making new investments and managing the existing portfolio.

In recognition of SEEIT's contribution to long-term sustainability, in 2019 the Company was awarded the London Stock Exchange Group's new Green Economy Mark which recognises listed companies who derive 50% or more of their revenues from environmental solutions.

Sustainability  

The integration of distributed generation and energy efficiency projects into the broader global energy generation mix serves to provide positive and sustainable long-term environmental impacts, providing a significant reduction in energy used to generate electricity, representing tangible and repeatable reductions in greenhouse gas emissions.

SDCL will seek to ensure that all suppliers have appropriate sustainability policies in place, with a focus on procurement and employment policies.

SDCL also seeks to minimise any local impacts in the implementation of development stage investments through extensive consultation with statutory consultees, local authorities and, where appropriate, local communities. Engagement with stakeholders is maintained to the highest standards once assets become operational.

Anti-bribery and Corruption

Although SEEIT has no employees, the Company is committed to respecting human rights in its broader relationships. SEEIT does not tolerate corruption, fraud, the receiving of bribes or breaches in human rights. Both SEEIT and SDCL have anti-corruption and bribery policies in place in order to maintain standards of business integrity, a commitment to truth and fair dealing and a commitment to complying with all applicable laws and regulations.

SDCL employees are provided with training for anti-bribery and corruption which is completed annually. All counterparties are assessed by the Investment Manager to mitigate against bribery and corruption. When SDCL completes acquisitions on behalf of SEEIT, there is vendor due diligence and all sales and purchase agreements are required to have anti-bribery and corruption prevention clauses.

Corporate Culture  

The Company's approach to sustainability and corporate culture includes:

· Considering the risk culture of the Company on a regular basis to confirm it is appropriate, is expected to support the sustainability of the company, and is consistent with the risk appetite;

· Embedding and improving on good practices in the day-to-day management processes - which are assessed by the Board in the course of the quarterly Board meetings as well as in a wide range of ad hoc interactions during the year;

· Promoting an appropriate culture of stewardship, responsibility, accountability and openness; and

· A focus by the Board and SDCL on appropriate interaction with key stakeholders, including shareholders, lenders, regulators, vendors, co-investors and suppliers.

As the Company has no employees, the Directors look through to the culture of the Company's key service providers on an ongoing basis including annual reviews. The Board interacts regularly with staff of the Investment Manager both at senior and operational levels, in both formal and informal settings. This promotes greater openness and trust between the key individuals engaged in delivering against the Company's objectives and ensures the Investment Manager remains fully aligned with the Company's corporate culture and approach to sustainability. The Board also engages closely throughout the year with the Company's administrator, brokers, and legal and public relations advisers to gauge the broader positioning and direction of the business.

In addition to the Board Meetings being attended by the senior SDCL team, other more junior members from the Investment Manager are encouraged to join. Not only does this aid their development, but it also allows the Board to gain insight into how senior management are supported and how prepared the Investment Manager is in relation to key man risk and long-term succession planning.

Section 172(1) Statement

The Directors discharge their duties under Section 172 of the Companies Act 2006 to act in good faith and to promote the success of the Company for the benefit of shareholders as a whole. Details can be found in the Report of the Directors section below.

Carbon Reporting

During the year, the Company's portfolio produced 71,256 MWh of electricity and has provided carbon savings of 43,231 tCO2, which has been calculated proportional to the Company's holding off each underlying investment and the period of the ownership.

The calculation approach in each case follow 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 the Company mid way through the reporting period,                only the portion of the period after commissioning or purchase date has been recognised.

The total project savings is reduced pro-rata with the Company's ownership percentage.

Outlook

Governments have taken, in many ways, unprecedented coordinated and simultaneous action to the COVID-19 pandemic crisis. The crises associated with the environment and climate change are comparable to the pandemic in being universal challenges that require governments to take coordinated and simultaneous actions. The Investment Manager believes that the Company's portfolio is well positioned for a slow recovery. As countries emerge from the COVID-19 crisis, actions associated with energy efficiency do not, however, ask society to make sacrifices but instead help reduce costs, improve productivity and strengthen the security of supply of essential services, while delivering the biggest bang for the buck from a greenhouse gas emission reduction perspective. The Investment Manager believes that energy efficiency will be a cornerstone of recovery and action plans developed by government as well as companies.

Efficient and sustainable sources of power, such as efficient cogeneration and renewable energy, now present the most attractive option for new build generation. With demand currently supressed, variable supply renewables now represent a higher proportion of power supply than ever before. Low prices of carbon fuels and structural issues within the grid could lead to this proportion being temporarily scaled back to pre-crisis levels, but investment in simple and cost-effective on-site generation, demand reduction and storage projects can help to consolidate and balance the increased proportion of renewable energy over the long term. In general, cheaper, cleaner and more reliable energy solutions should be at least as attractive to government, businesses and investors as ever before.

Substantial investment is required by this energy transition to achieve a lower carbon, cost effective and reliable outcome. IRENA anticipates that the cost of implementing these measures will amount to investment of $1.1 trillion annually in energy efficiency measures, more than four times the current level. IRENA anticipates that the economic benefits of the energy transition would create 7 million more jobs and boost global GDP by 2.5%. This represents transformational growth in the market opportunity available to the Company in the medium-to-long term.

Once the effects of the COVID-19 pandemic have subsided, attention will move to figuring out the most effective way to re-start and re-invigorate stalled economies. This presents an historic opportunity for investment in sustainable, clean and efficient energy generation and demand reduction projects to act as critical economic levers.

Pipeline

New potential investment opportunities continue to be sourced by the Investment Manager, which is currently evaluating a substantial pipeline of investment opportunities in excess of £400 million over the short to medium term. The Investment Manager is focussed on achieving value and, as such, continues to concentrate in specialised areas of activity that offer a combination of scale, knowledge and track record, particularly where the Investment Manager can add value and consequently secure attractive returns and greater diversification for SEEIT on a risk-adjusted basis. SEEIT's investments so far this year attest to this, for example in the greenfield development and de-risking of the Supermarket Solar UK project with Tesco, the privately negotiated refinancing of Sparkfund's portfolio and the acquisition of specialist CHP assets from Sacyr in Spain.

By contrast, the Investment Manager is, at the present time, placing less emphasis on highly competitive and established markets such as operational commercial and industrial solar, or opportunities that require a substantial exposure to merchant risk. It is also exercising pricing discipline and continues to take a prudent view in its asset pricing assumptions that are consistent with achieving SEEIT's total returns targets. This results in some attrition of the pipeline, or in some cases lost deals, in favour of ensuring stability of cash flows, earnings and capital value for SEEIT.

The current pipeline includes a wide range of lower carbon and energy efficiency technologies, including but not limited to CHP, local area network solutions, solar, storage, lighting, heating, cooling and other solutions. The Company is seeking to build a balanced portfolio, diversified by technology as well as by counterparty, geography and suppliers.

The Company's investment limits are constantly under review, not just to ensure compliance but also to ensure that they remain appropriate for the Company as global markets develop. The Investment Manager remains focused on portfolio construction, having regard to the contribution any new investment would make to the Company's total return prospects. Such considerations will include, from time to time, seeking opportunities for some capital growth as well as income, to preserve capital value of the portfolio as a whole and therefore NAV in the context of finite life project agreements and contracts. The Investment Manager will also consider geographic exposure, which has been orienting towards Europe, North America and selected other jurisdictions and away from the UK in the short term, driven by the relative value and depth of the markets, but which is expected to rebalance in the future.

The current pipeline includes a wide range of lower carbon and energy efficiency technologies and solutions, including but not limited to CHP, district energy, local area network solutions, solar, storage, lighting, heating, cooling, EV charging infrastructure and other solutions. The Company is seeking to build a balanced portfolio, diversified by technology as well as by counterparty, geography and supplier.

Strategic Report: Portfolio Review

Financial Review

Financial information

In accordance with IFRS 10 the Company carries investments at fair value as it meets the conditions of being an Investment Entity (see Note 2 for details).

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 Limited ("Holdco") were to be consolidated on a line-by-line basis. The Directors consider the non-statutory Portfolio Basis to be a more helpful basis for users of the accounts to understand the performance and position of the Company. This is because key balances such as cash and debt balances carried in Holdco and all expenses incurred in Holdco, including debt financing costs, are shown in full rather than being netted off.

The pro forma tables that follow show the Company's result for the year ended 31 March 2020 compared to the pro forma balance sheet at 31 March 2019 and the pro forma Income statement and Cash Flow for the short period from IPO in December 2018 to 31 March 2019.

The impact of including Holdco is shown in the Holdco reallocation column which reconciles back to the statutory financial statements ("IFRS") and constitute a reallocation between line items rather than affecting NAV and Earnings.

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 2020				Period to 31 March 2019
£'000	Portfolio Basis	Holdco reallocation	IFRS (Company)	Portfolio Basis	Holdco reallocation	IFRS (Company)
Total income	17,054	(2,554)	14,500	1,626	(64)	1,562
Expenses & Finance Costs	(5,442)	2,554	(2,888)	(1,211)	64	(1,147)
Profit before Tax	11,612	-	11,612	415	-	415
Earnings	11,612	-	11,612	415	-	415
Earnings per share (pence)	5.2	-	5.2	0.4	-	0.4

On the Portfolio Basis, Total Income of £17,054k (2019: £1,626k) represents the return from the portfolio recognised as income comprising dividends, interest and valuation movements. Further detail on the valuation movements is given in Valuation of the Portfolio section below.

On an IFRS basis, Total income of £14,500k (2019: £1,562k) comprises income received by the Company and valuation movements in its investment. Both Total Income and Expenses & 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 & Finance Costs.

Increases in both Total income and Expenses & Finance costs in the year to 31 March 2020 as compared to the period to 31 March 2019 are as a result of the first full year compared to a part year and also reflect the increase in the size of the portfolio.

Profit before tax of £11,612k (2019: £415k) included net foreign exchange gains of £2,261k (2019: £23k) comprising a £9,103k gain on revaluing of non-GBP investments at 31 March 2020 offset by losses on hedging of £6,842k

Total fees accruing to the Investment Manager were £1,973k for the year (2019: 241k), comprising the 0.9% p.a. management fee for assets up to £750m.

In the year, the Company and Holdco incurred £624k (2019: £680k) of abort costs on unsuccessful bids and bids in progress (mainly legal, technical and tax due diligence).

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

On both the Portfolio Basis and IFRS basis, Earnings were £11,612k (2019: £415k) and Earnings per share were 5.2p (2019: 0.4p).

 Portfolio Basis Balance Sheet

Year to 31 March 2020				Period to 31 March 2019
£'000	Portfolio Basis	Holdco reallocation	IFRS (Company)	Portfolio Basis	Holdco reallocation	IFRS (Company)
Investments at fair value	319,802	(65,707)	254,095	60,850	484	61,334
Working capital	(4,209)	5,465	1,256	(2,004)	1,078	(926)
Debt	(62,826)	62,826	-	-	-	-
Cash	70,763	(2,584)	68,179	39,569	(1,562)	38,007
Net assets attributable to Ordinary Shares	323,530	-	323,530	98,415	-	98,415
NAV per share	101.0	-	101.0	98.4	-	98.4

On a Portfolio Basis, Investments at fair value are £319,802k (2019: £60,850k), representing the Portfolio Valuation. The increase of £258,952 is predominantly due to acquisitions during the year. Further detail on the movement in Investments at fair value is given in Valuation of the Portfolio section below.

On a Portfolio Basis, cash at 31 March 2020 was £70,763k (2019: £39,569k); mainly reflecting cash from equity capital raised and cash received from investments, net of cash used for acquisitions. The Company is expecting to utilise the cash balance in paying the second interim dividend on 30 June 2020, delivering the identified pipeline and repayment of acquisition financing of c. £40m by end of June 2020.

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

On an IFRS basis, Investments at fair value were £254,095k (2019: £61,334k), reflecting the Portfolio Valuation adjusted for cash, working capital and debt held by Holdco. A further reconciliation is provided in the Valuation of the Portfolio section below.

NAV per share at 31 March 2020 was 101.0p (2019: 98.4p). NAV per share has increased by 2.6p since last year, reflecting the earnings in the year of 5.2p, interim dividends paid during the year of 3.5p and accretive share issues in the year of 0.9p.

Analysis of growth in NAV

	NAV per share (pence)
NAV per share at 31 March 2019	98.4
Earnings to 31 March 2020	5.2
Interim dividends paid 1	(3.5)
	100.1
NAV accretive share issues 2	0.9
NAV per share at 31 March 2020	101.0

1   Consisting of an interim dividend of 1.0 pence per share paid in June 2019 for the period ending 31 March 2019 and an interim dividend of 2.5 pence per share paid in December 2019 for the year ending 31 March 2020

2   Arising from issuing of shares in the Company in April 2019, October 2019 and December 2019 at a price higher than the prevailing NAV

Portfolio Basis Cash Flow Statement

31 March 2020				31 March 2019
£'000	Portfolio Basis	Holdco reallocation	IFRS (Company)	Portfolio Basis	Holdco reallocation	IFRS (Company)
Cash from investments	17,087	(13,033)	4,054	1,687	(1,653)	34
Operating and finance costs outflow	(4,028)	1,723	(2,305)	(425)	11	(414)
Net cash inflow before capital movements	13,059	(11,310)	1,749	1,262	(1,642)	(380)
Cost of new investments including acquisition costs	(254,312)	70,719	(183,593)	(59,507)	80	(59,427)
Share capital raised net of costs	222,058	-	222,058	97,813	-	97,813
Movement in borrowings	62,826	(62,826)	-	-	-	-
Movement in capitalised debt costs and FX hedging	(4,015)	2,395	(1,620)	-	-	-
Dividend paid	(8,422)	-	(8,422)	-	-	-
Movement in the year / period	31,195	(1,022)	30,172	39,569	(1,562)	38,007
Cash at start of the year / period	39,569	(1,562)	38,007	-	-	-
Cash at end of the year / period	70,763	(2,584)	68,179	39,569	(1,562)	38,007

Cash inflows from the portfolio on a Portfolio Basis were £17,087k (2019: £1,687k), in line with expectations. The increase in cash received compared with the previous period reflects the increase in the size of the portfolio and a full year of operations.

The cost of new investments by the SEEIT group on a Portfolio Basis of £254,312k (2019: £59,507k) includes the cash cost of the Oliva Spanish Cogeneration portfolio of c. £76m and the Primary Energy investment of c. £85m. The acquisition of the Oliva Spanish Cogeneration portfolio also included a revolving credit facility drawn down of c. £61m.  On an IFRS basis, costs of new investments of £183,593k (2019: £59,427k) reflects funding extended by the Company to Holdco in the year to make portfolio acquisitions.

Net cash flow before capital movements in the year on a Portfolio Basis was £13,059k (2019: £1,262k) and covers dividends paid of £8,422k in the year (2019: nil) by 1.55 times.

Share capital raised (net of costs) totalled £222,058k (2019: £97,813k) reflecting the net proceeds of the 220,374k shares issued during the year under the share issuance programme.

Hedging for the Group is undertaken by Holdco and therefore the Company had no cash flows for this on an IFRS basis. Holdco enters into forward sales to hedge foreign exchange 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 outflow of £2,501k 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 acquisition costs and other non-recurring items) divided by the average published undiluted net asset value in the year. On this basis the Ongoing charges ratio is 1.17% (2019: 1.38%) 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 fixed (ongoing) costs of the Company is spread across a larger base.

Group Drawings and Gearing Levels

A revolving credit facility ("RCF") was put in place in April 2019 and the RCF was entered into by Holdco for £25 million and has an expiry date of 30 June 2022. It also provides for access to additional £40 million of acquisition financing, repayable in July 2020.

In November Holdco utilised €45 million from the acquisition financing facility and €26 million from the RCF for the acquisition of the Oliva Spanish Cogeneration portfolio. As at 31 March 2020, both amounts were still outstanding with the acquisition financing expected to be repaid in full from existing cash resources by end of June 2020.

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.

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 value of both near-term income and capital elements of the portfolio from a material impact on NAV arising from movements in foreign exchange rates, and to provide stability and predictability of 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 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.

Net foreign exchange gains in the year ended 31 March 2020 was £2,261k, representing less than 1% 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 section below.

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.

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 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 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. 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.

For the valuation as at 31 March 2020, the Directors commissioned a report from a third-party valuation expert to provide their assessment of the appropriate discount rate range for each project in order to further benchmark the valuation prepared by the Investment Manager.

The valuation methodology is unchanged from the Company's IPO and details of the valuation methodology can be found in the Company's Prospectus.

Portfolio Valuation

The Portfolio Valuation as at 31 March 2020 was £319,802k, an increase of £258,952k compared to the Portfolio Valuation of £60,850k as at 31 March 2020 and an increase of £238,481k compared to the Portfolio Valuation  of £81,320k at 30 September 2019 - the increase is a result of the acquisitions during the year. A reconciliation between the Portfolio Valuation at 31 March 2020 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.

	£'000
Portfolio Valuation	319,802
Holdco cash	2,584
Holdco debt	(62,826)
Holdco net working capital	(5,465)
Investment at fair value (see Note 11)	254,095

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 2020 (£'000)
Portfolio Valuation - 31 March 2019		60,850
New Investments	241,525
Cash from Investments	(17,087)
		224,438
Rebased Portfolio Valuation		285,288
Changes in Macroeconomic Assumptions	1,881
Changes in Foreign Exchange	9,103
Changes in Discount Rates	5,718
Balance of Portfolio Return	17,812
		34,514
Portfolio Valuation - 31 March 2020		319,802

The opening Portfolio Valuation at 31 March 2019 was £60,850k. Allowing for investments of £241,525k and cash receipts from investments of £17,087k, the rebased Portfolio Valuation is £285,288k.

Additional investments of £241,525k in the year include the following:

· a £18,148k investment in Spark US Energy Efficiency

· a £1,267k investment in Supermarket Solar UK

· a £135,109k investment in Oliva Spanish Cogeneration portfolio

· a £87,001k investment in Primary Energy portfolio

Return from the Portfolio

Each movement between the rebased valuation of £285,288k and the 31 March 2020 valuation of £319,802k is considered in turn below:

(i)  Changes in macroeconomic assumptions:

Inflation assumptions: The near-term assumption applied to the Spanish assets was lowered in March 2020 from the acquisition assumption to reflect updated near-term inflation forecasts in Spain. This resulted in a net increase in the valuation as there is a higher proportion of costs linked to inflation than revenues in these assets. There were no changes to inflation assumption in the UK or USA.

Tax rate assumptions: There were no changes to forecast corporation tax rate assumptions in the US and Spain in the year. UK corporation tax rate assumptions were changed to 19% for all years from 1 April 2020 onwards (previously 17%). As a result of utilising tax group relief within the UK part of the group, this had negligible impact on the valuation as at 31 March 2020 (see '(iv) Balance of portfolio return' below for more details.

(ii)  Changes in foreign exchange rates:

The movement of £9,103k in the period reflects the material weakening of GBP against USD and EUR in the period from when Oliva Spanish Cogeneration was acquired in November 2019 and Primary Energy in February 2020.  The effect of the foreign exchange movements is shown before the offsetting effect of hedging undertaken by SEEIT Holdco. See Foreign Exchange Hedging in the Financial Review section above for more details.

(iii)  Changes in valuation discount rates:

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 £5,718k. The Investment Manager observed strong competition and downwards pressure on discount rates in the US markets, notably in onsite generation assets, and as a result lowered the discount rate for the investments in Primary Energy and Northeastern US CHP.

The Directors of the Company have received a report from a third-party valuation expert to benchmark the discount rates used by the Investment Manager. The Directors noted that the discount rates used by the Investment Manager were within the ranges advised by the third-party expert with one exception, in the case of Primary Energy, where the discount rate applied by the Investment Manager was higher.

The weighted average portfolio valuation discount rate as at 31 March 2020 was 7.5% (March 2019: 6.5% and September 2019: 7.1%) with changes in the year driven by the portfolio assets acquired during the year.

(iv)  Balance of portfolio return:

This refers to the balance of valuation movements in the year (excluding (i) to (iii) above) and represents an uplift of £17,812k. The balance of portfolio return mostly reflects the net present value of the cash flows brought forward for the period at the average prevailing portfolio discount rate, various additional valuation adjustments described below and reflects good operational cashflow performance.

The portfolio return also includes some additional valuation adjustments:

· The Spanish RoRi mechanism, which makes payments administered by the regulator, is designed to mitigate, over the medium term to long term, against fluctuations in commodity prices. Calculations of payments under the mechanism are re-based every 6 years and reset mid-term with an adjustment for gas prices made every 6 months and remaining costs and revenues adjusted every 3 years. The periodic adjustment made by the regulator in Q1 2020 was not in line with the expectations of the Company or the market and reduced significantly the projected revenues associated with the Oliva Spanish Cogeneration assets. Nonetheless, upsides in the value attributable to renewable energy production from biomass, compensation for CO2 and other factors approximately equally mitigated the adverse impact.

· The valuation of the investment in the Huntsman Energy Centre has seen a reduction of £600k as a result of a change in the forecast completion of the construction commissioning which is forecast to occur later this year. The NAV of the Company is however only minimally affected at 31 March 2020 as the contractual retention payable to the vendor in relation to this project has decreased by a similar amount.

· One-off optimisation for tax reliefs (group relief) available in the UK whereby common ownership in a group allows for offsetting of profits and losses across the common group. This has resulted in a benefit to the portfolio of £5.3 million.

Valuation Assumptions

		31 March 2020	30 September 2019	31 March 2019
Inflation rates	UK (RPI)	2.75% p.a.	2.75% p.a.	2.75% p.a.
	Spain (CPI)	1.1% in 2020/21, 1.6% in 2022, 2.0% p.a. thereafter	n/a	n/a
	USA (CPI)	2.00% p.a.	2.00% p.a.	2.00% p.a.
Tax rates	UK	19%	19% to March 2020, 17% thereafter	19% to March 2020, 17% thereafter
	Spain	25%	n/a	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	0.88	n/a	n/a
	USD/GBP	0.80	0.81	0.77

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.

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 3.8p based on the Portfolio Valuation as at 31 March 2020. A 0.5% decrease in the discount rates would result in a NAV per share increase of 4.1p based on the Portfolio Valuation as at 31 March 2020.

Corporation Tax Rate Sensitivity

This sensitivity considers a 0.5% p.a. movement in corporation tax rates in the UK, Spain 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 2.7p based on the Portfolio Valuation as at 31 March 2020. A 5% p.a. decrease in corporation tax rates would result in a NAV per share increase of 2.8p based on the Portfolio Valuation as at 31 March 2020.

The UK exposure in the portfolio is structured in an optimal but prudent manner such that the portfolio has negligible sensitivity to movements in UK corporation tax rates as a result of UK entities within the group being able to offset profits and losses. The sensitivity therefore mainly shows the impact of changes in US and Spanish tax rates.

Inflation Rate Sensitivity

This sensitivity considers a 0.5% p.a. movement in long term inflation in the UK, Spain and USA.

A 0.5% p.a. increase in inflation rates would result in a NAV per share reduction of 1.3p based on the Portfolio Valuation as at 31 March 2020. A 0.5% p.a. decrease in inflation rates would result in a NAV per share increase of 1.0p based on the Portfolio Valuation as at 31 March 2020. The Company's NAV has limited exposure to inflation which is not expected to increase materially in the future.

The Company's investments often benefit from fixed or escalating revenue that are not inflation linked, whereas costs such as O&M after often inflation linked. Within the portfolio of investments there are some natural offsetting or protection for inflation - should the long-term exposure increase adversely, the Investment Manager will consider implementing mitigant strategies that include, but are not limited to, hedging. 

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 2020 is US Dollar and Euro, from the foreign exchange rates used at 31 March 2020 - the sensitivity is shown below pre and post mitigation from hedging.

This sensitivity is presented after taking into account the effect of hedging implemented by the Company - a 10% increase in foreign exchange rates would result in a NAV per share reduction of 0.7p and 10% decrease in foreign exchange rates would result in a NAV per share increase of 0.8p.

Without any hedging, a 10% increase in foreign exchange rates would result in a NAV per share reduction of 7.4p based on the Portfolio Valuation as at 31 March 2020. A 10% decrease in foreign exchange rates would result in a NAV per share increase of 8.2p based on the Portfolio Valuation as at 31 March 2020.

Please refer to Note 3 in the Notes to the Financial Statements for further detail.

Investment Portfolio

Portfolio Analysis

Five largest investments in the portfolio

The table below shows the five largest investments in the Investment Portfolio as a proportion of the overall Portfolio Valuation, which excludes cash held by the Company, at 31 March 2020.

Project	As a % of the Investment Portfolio
Primary Cokenergy	13%
Oliva Biolinares	8%
Oliva Celinares	8%
Oliva Cepuente	7%
Oliva Bipuge	7%
Five largest assets - total	43%
Remaining Investment Portfolio assets	57%
Total	100%

Overview of the five largest portfolio investments

Cokenergy - USA

Cokenergy is an 95MW waste heat recovery CHP plant that provides electricity and steam to Arcelor Mittal's steel-making operations. The facility has capacity to supply up to one-fourth of ArcelorMittal's total electrical requirements or more than half of its process steam needs, replacing onsite, coal-fired generation that was shut down soon after the facility came on-line.

The facility uses waste heat produced by the coke battery facility. This waste heat is recovered to create steam, which in turn supplies a portion of the steel plant's process heating needs and is used to drive a steam turbine to generate electricity. Cokeenergy improves the efficiency of the historically dirty and energy inefficient coke-making process while reducing plant costs and lowering emissions.

Oliva Biolinares - Biomass - Spain

Biolinares is a 15MW biomass boiler that sits within the Linares complex. It utilises olive cake from the adjacent Colinares processing plant to produce electricity which is sold to the grid under the Spanish RoRi regulatory regime and as such, is not exposed to power commodity fluctuations over the life the asset. The plant benefits from a long-term O&M arrangement with Sacyr.

Oliva Celinares - CHP Plant - Spain

Celinares is a high efficiency combined heat and power asset within the Oliva Spanish Cogeneration portfolio. It sits within the Linares complex and utilises natural gas to produce heat and electricity. The heat is sold as a fixed price to the adjacent Colinares processing plant within the same Linares complex. The electricity is sold to the grid under the Spanish RoRi regulatory regime and as such, is not exposed to gas and power commodity fluctuations over the life the asset. Celinares benefits from a long -erm O&M with Sacyr as well as a long-term service agreement with Rolls Royce.

Oliva Cepuente - Spain

Celinares is a high efficiency combined heat and power asset within the Oliva Spanish Cogeneration portfolio ad utilises natural gas to produce heat and electricity. The heat is sold under a long-term contract at a fixed price to Aceites del Sur - Coosur. The electricity is sold to the grid under the Spanish RoRi regulatory regime and as such, is not exposed to gas and power commodity fluctuations over the life the asset. Cepuente benefits from a long-term O&M arrangement with Sacyr as well as a long-term service agreement with Rolls Royce.

Oliva Bipuge - Spain

Biolinares is a 9.8 MW biomass boiler that sits within the Linares complex. It utilises olive cake from the adjacent Sedebisa processing plant within the Puente Genil complex to produce electricity which is sold to the grid under the Spanish RoRi regulatory regime and as such, is not exposed to power commodity fluctuations over the life the asset. The plant benefits from a long-term O&M arrangement with Sacyr.

Portfolio diversification by technology

The largest technology component within the portfolio is CHP, which accounts for 53%. This comprises a number of the Oliva Spanish Cogeneration and Primary Energy portfolio projects along with a number of stand-alone projects.

The second largest technology represented in the portfolio is Biomass with 21%, this comprises the two biomass assets within the Oliva Spanish Cogeneration portfolio, along with the assets within the Moy Park Biomass portfolio.

Portfolio diversification by geography

SEEIT's assets located in Spain comprise the entirety of the Oliva Spanish Cogeneration portfolio and also represents c.45% of the SEEIT portfolio.

The US portion of the portfolio is dominated by Primary Energy, with the remainder comprising Spark US Energy Efficiency and Northeastern US CHP.

The UK portion of the portfolio comprises the Seed Portfolio and Supermarket Solar UK. This represents c.18% of the portfolio. The inclusion of the £71m cash held in in the Company and Holdco as at 31 March 2020, increases the UK exposure to 33% (of Gross Asset Value).

 

Risk & Risk Management

Risk Management Framework

SDCL operates SEEIT's risk management framework, which includes systems and procedures designed to enable the Company to ensure that all applicable risks pertaining to the Company can be identified, monitored and managed.

The risk management framework is overseen by the Company's Audit & Risk Committee, which meets at least three times each year. The remit of the Audit & Risk Committee includes a requirement to monitor and keep under review the adequacy and effectiveness of the Company's internal financial controls, internal controls and risk management systems. The Committee receives periodic risk management reports from the Investment Manager to support its assessment, in addition to updates to the risk register, whereby each risk is rated, risk mitigating factors detailed and applicable controls highlighted.

Part of SEEIT's wider risk management framework includes the activities of key service providers, including the Investment Manager, which has its own risk management function.

The Company's approach to risk management is calibrated according to the specific characteristics of the Company's investment strategy, namely investing principally in a diversified portfolio of energy efficiency projects, with high quality private and public sector counterparties.

The tables below summarise the key risks to the Company and details the mitigations of such risks as applicable.

Key Risks	Mitigation
Market and investment related risks
Energy-market exposure	Energy-market exposures can be limited via hedging strategies and appropriate contractual protections, delivering more predictable cashflows. Specifically, the Investment Manager seeks opportunities that avoid substantial energy market price exposures, such as through provision of essential energy generated on-site, under long-term contractual arrangements.
Risk that Investment Manager may be unable to deploy capital on a timely basis, which may result in reduced performance via cash-drag.	An extensive and varied pipeline of energy efficiency projects is developed, and maintained, by an investment management team with an international footprint. Significant focus is applied to the alignment of capital raising and deployment.
Substantial portfolio of new assets acquired which may include risks not fully identified in due diligence processes.	Ensuring resourcing of specialist operational staff for significant new operating assets, including Spanish olive oil sector energy efficiency assets. New assets are promptly integrated into the portfolio reporting framework and risks management systems. The Investment Manager is highly experienced in co-ordinating due diligence processes for energy efficiency project opportunities, utilising leading specialist advisers as appropriate, to support the due diligence reviews.
Portfolio concentration risks potentially higher during the early life of the Company (including significant portfolio weighting in energy efficiency assets related to both Spanish olive oil sector and US steel sector).	Close oversight of portfolio weightings, seeking diversification by energy efficiency assets class, geography, technology, counterparty, economic sector and contractor. Portfolio concentration risks were significantly mitigated by the initial acquisition of a diversified seed portfolio, in December 2018, and further diversification has followed, including through US and European investments and broader sectorial exposures.

Key Risks	Mitigation
Credit and Counterparty Risks
Default risks relating to counterparties for energy services contracts and relating to key service providers.	Counterparty due diligence is undertaken on prospective investments, which includes credit rating assessments. On-going counterparty risks are mitigated via credit risk management disciplines relating to counterparties (including off-take, through credit risk assessments and diversification across such counterparties.  Additional protections such as parent company guarantees may also be available.  Otherwise, prospective investment due diligence processes include assessments of the likely rate of recoverability of project capital, in the unlikely event of any counterparty default, for example via the potential of alternative off-taker arrangements or through expected continuing plant operations. Due diligence is also undertaken on key energy efficiency project service providers, including with respect to financial stability, which would also assess replaceability factors.
Counterparty risks relating to re-contracting	The Company has relatively limited exposure to re-contracting risk. The substantial majority of projects in its portfolio are contracted for the medium to long term, however, the Company's investment in the five projects involved in Primary Energy does assume that some re-contracting is achieved. The risk is mitigated by the fact that Primary Energy has a good track record of re-contracting, given inter alia that it is providing a combination of emissions control and renewable energy and providing essential services to the operations of the project clients, at a competitive price compared to the grid.
Counterparty risks relating to cash balances	Exposures to deposit-takers, during any periods of relatively high portfolio cash weightings, are mitigated by diversification of credit exposures.
Risks relating to renewal of debt facilities	The robust and resilient nature of the portfolio has limited the risk of any difficulty in obtaining satisfactory borrowing facilities, in the otherwise challenging environment of COVID-19 lockdown. Further, the Company only seeks a moderate level of target leverage. Portfolio liquidity and cash flow management is also designed to enable repayment of any maturing debt facilities, as appropriate, in case of any sudden reduction in credit availability.

Key Risks	Mitigation
Liquidity Risks
Investments in the underlying energy efficiency projects are typically highly illiquid and it may be not realistic to realise such assets promptly.	The Company is a closed-ended fund (not subject to redemptions) with medium term gearing limited to 35%, hence there is limited scope by which the portfolio would be obliged to realise assets. Assets are typically purchased upon the basis of immediate positive cashflows, which also may have benefit in respect of the availability of liquidity for the portfolio. The Investment Manager closely oversees portfolio liquidity, but also would benefit from its market expertise if the need ever arose to realise an investment.

Key Risks	Mitigation
Risks relating to COVID-19 pandemic
Risk of interruption to operation, or construction, of energy efficiency projects (including relating to supply chains, health of key staff or access to equipment sites), including the potential for a reduction in the value of investments.	The Investment Manager has implemented weekly senior management meetings to ensure optimal continuity of operations, effectiveness of remote working practices across portfolio assets, health and safety protocols and contingency arrangements, as appropriate.
Investment risks, relating to the impact of reduction in economic activity, arising from COVID-19 pandemic.	The Company's investments primarily relate to key sectors, for which energy services have continued throughout the lockdown. Such key sectors notably include hospitals, food production and distribution, data-centres, steel production and banking. Accordingly, the Company is relatively-well placed to come through the COVID-19 pandemic.

Key Risks	Mitigation
Other Operational Risks
Cyber and other security risks	Cyber security controls are operated by, and on behalf of, the Investment Manager and other key contractors. Strong security access controls are in place at host energy efficiency equipment sites, reflecting the essential nature of energy services provided to such hosts.
Risks relating to installing, operating and decommissioning energy efficiency equipment, risks that the equipment may not be properly and adequately maintained or otherwise underperform.	Experienced and skilled contractors are employed for projects and appropriate contractual performance assurances may further mitigate such risks. Due diligence undertaken on prospective investments seeks to identify risks relating to decommissioning and on-going maintenance. Leading equipment manufacturers are selected, and the Company seeks only to adopt tried-and-tested technology, in mitigation of operational risks.
Market risks relating to lack of available feedstock, energy price exposures or regulated revenues.	At the stage of prospective investment due diligence, careful consideration is provided to any potential exposures relating to feedstock future availability or prices, or any reliance of energy pricing or subsidies. Portfolio investments are not typically dependent upon feedstock prices or any energy-related subsidies, whilst noting that there is a significant element of reliance upon the Spanish RoRi mechanism, which makes payments administered by the regulator and which is carefully monitored
Risks relating to any unhedged currency exposure	Non-UK currency exposures are substantially hedged, through forward foreign exchange contracts typically of maturity of up to 2 years.
Brexit-related risks	Brexit has not, and is not expected to have, any material impact upon the portfolio, due to the nature of the portfolio operations, contingency plans in place and the geographical diversification achieved.

Risk Diversification

In order to ensure a spread of investment risk, the Company has adopted certain investment restrictions to diversify the portfolio per the Investment Policy, these are outlined in the Business Model section above.  Furthermore, dynamic internal paraments for risk management and portfolio construction, agreed between the Board and the Investment Manager, act to supplement the more formal permanent investment restrictions. Since the Company's launch in December 2018, the deployment of additional capital has facilitated further portfolio diversification as outlined above in the key risks table. Most notably, during the last year the portfolio has achieved substantial geographical diversification through significant investments in the US and Spain.

Key Risk Indicators and Metrics

The Company monitors a number of key risk indicators and metrics including, as applicable:

(i)  gearing;

(ii)  Portfolio concentration by project, counterparty, country and industry sector;

(iii)  Development and construction project portfolio weighting;

(iv)  Subcontractor exposure

(v)  Off-taker credit rating weighting;

(vi)  Technology exposure weighting; and

(vii)  Contract lifespan distribution.

Emerging risks

The Company ensures that any potential emerging risks are raised and debated at each Audit and Risk Committee, with suitable actions being taken. Quite clearly, the COVID-19 pandemic has been the dominant risk theme, as emerging in early 2020.

COVID-19

 The impact upon the Company of the COVID-19 pandemic can be divided into two components; the operating issues arising directly from the pandemic (including health and safety related impacts) and the longer-term impacts in relation to portfolio investments, from the economic consequences of the global pandemic.

It should be noted that the portfolio's investments are located in the UK, Spain and the US, which have been impacted by COVID-19. Nonetheless the portfolio has proved resilient, which can be explained through the Company's focus upon providing essential energy services to key sectors which have continued to operate during the pandemic (including hospitals, food production and distribution, data-centres, steel production and banking.) On this basis it is felt that the current portfolio is relatively well-placed vis a vis longer-term potential economic impact. Nevertheless, the Company remains cognisant that future macro-economic uncertainty may impact in areas such as inflation, international trade or energy demand, and will closely monitor and respond to conditions as they evolve.

Asset specific impacts of COVID-19 include illness to several operational site staff in Spain (now recovered), temporary interruption in the ability to source Solar PV equipment from China (now resolved), project delay in the UK Huntsman development project (on-going, but expected soon to be resolved) and a quick transition to working-from-home disciplines across the range of service providers.

Viability Statement

The Directors have assessed the prospects of the Company over a five-year period to 31 March 2025. The Directors have determined that a five-year period is an appropriate period over which to provide this viability statement as this period accords with the Company's business planning exercises and is appropriate for the investments owned by the Company and the nature of the Company.

In making this statement the Directors have considered the resilience of the Company, taking account of its current position, the principal risks facing the business in severe but plausible downside scenarios, and the effectiveness of any mitigating actions.

The Company benefits from investments with predictable long-term cash flows and a set of risks that can be identified and assessed. The investments are each supported by detailed financial models. The Directors believe that the diversification within the portfolio of predominantly operational investments helps to withstand and mitigate for the risks it has identified that the Company may face.

The Investment Manager prepares and the Directors review summary five-year cash flow projections each year as part of business planning. The projections consider cash flows, dividend cover, investment policy compliance and other key financial indicators over the period. These projections are based on the Investment Manager's expectations of future asset performance, income and costs, and are consistent with the methodology applied to provide the valuation of the investments.

The Investment Manager provided analysis on these projections at various points through the year that considers the potential impact of the Company's principal risks actually occurring in severe but plausible downside scenarios. The Audit & Risk Committee had the opportunity to review and challenge the analysis which included the potential impact of significant adverse changes to macro-economic changes, counterparty credit deterioration, global recession-like adverse impact on cash flows and a significant adverse impact on cash flows from the largest assets.

Based on the reviews conducted throughout the year, the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to March 2025.

On behalf of the Board

Tony Roper,

Chairman

Directors' Responsibility Statement

The 2020 Annual Report which will be published in June 2020 contains a responsibility statement in compliance with DTR 4.1.12. This states that on 18 June 2020, the date of the approval of the Annual Report, the Directors confirm that to the best of their knowledge:

• the Company's financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Company: and

• the Strategic Report in the Annual Report 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 2020

	Note	For the year ended 31 March 2020 £'000	For the period from 12 October 2018 (date of incorporation) to 31 March 2019 £'000
Income
Investment income	5	14,500	1,562
Total income		14,500	1,562
Fund expenses	6	(2,888)	(1,147)
Operating profit		11,612	415
Profit for the year/period before tax		11,612	415
Tax	7	-	-
Profit and total comprehensive income for the year/period after tax		11,612	415
Profit and total comprehensive income for the year/period attributable to: Equity holders of the Company		11,612	415
Earnings Per Ordinary Share (pence)	8	5.2	0.4

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 2020

	Note	31 March 2020 £'000	31 March 2019 £'000
Non-current assets
Investment at fair value through profit or loss	11	254,095	61,334
		254,095	61,334
Current assets
Trade and other receivables	12	1,840	2,001
Cash and cash equivalents	2	68,179	38,007
		70,019	40,008
Current liabilities
Trade and other payables	13	(584)	(2,927)
Net current assets		69,435	37,081
Net assets		323,530	98,415
Capital and reserves
Share capital	14	3,204	1,000
Share premium	14	219,721	-
Other distributable reserves	14	88,578	97,000
Retained earnings		12,027	415
Total equity		323,530	98,415
Net assets per share (pence)		101.0	98.4

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

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED 31 MARCH 2020

	Note	Share Capital £'000	Share Premium £'000	Other distributable reserves £'000	Retained earnings £'000	Total £'000
Balance at 1 April 2019		1,000	-	97,000	415	98,415
Shares issued	14	2,204	223,876	-	-	226,080
Share issue costs	14	-	(4,155)	-	-	(4,155)
Dividends paid	9	-	-	(8,422)	-	(8,422)
Profit and total comprehensive income for the year		-	-	-	11,612	11,612
Shareholders' equity at 31 March 2020		3,204	219,721	88,578	12,027	323,530

	Note	Share Capital £'000	Share Premium £'000	Other distributable reserves £'000	Retained earnings £'000	Total £'000
Balance at 12 October 2018		-	-	-	-	-
Shares issued	14	1,000	99,000	-	-	100,000
Share issue costs	14	-	(2,000)	-	-	(2,000)
Reserves transfer			(97,000)	97,000	-	-
Profit and total comprehensive income for the period		-	-	-	415	415
Shareholders' equity at 31 March 2019		1,000	-	97,000	415	98,415

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.

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

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2020

	Note	For the year ended 31 March 2020 £'000	For the period 12 October 2018 (date of incorporation) to 31 March 2019 £'000
Cash flows from operating activities
Operating profit for the year/period		11,612	415
Adjustments for:
Gain on investment at fair value through profit or loss		(11,895)	(78)
Operating cash flows before movements in working capital		(283)	337
Changes in working capital
Movement in trade and other receivables	12	161	(2,001)
Movement in trade and other payables	13	(2,342)	227
Net cash used in operating activities		(2,464)	(1,437)
Cash flows from investing activities
Purchase of investment		(180,866)	(58,556)
Net cash used in investing activities		(180,866)	(58,556)
Cash flows from financing activities
Net proceeds from the issue of shares Dividends paid	14 9	221,924 (8,422)	98,000 -
Net cash generated from financing activities		213,502	98,000
Net movement in cash and cash equivalents during the year/period		30,172	38,007
Cash and cash equivalents at the beginning of the year/period	2	38,007	-
Cash and cash equivalents at the end of the year/period	2	68,179	38,007

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

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2020

1.    General Information

The Company is registered in England and Wales under number 11620959 pursuant to the Companies Act 2006 and is domiciled in the United Kingdom. The Company's registered office and principal place of business is Asticus Building, 2nd Floor, 21 Palmer Street, London, SW1H 0AD. The Company was incorporated on 12 October 2018 and is a Public Company and the ultimate controlling party of the group.

The Company's ordinary shares were 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, which raised gross proceeds of £100m. Subsequent fundraisings are detailed in Note 14.

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 efficient 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 current year financial information is from 1 April 2019 to 31 March 2020 whilst the comparative information is for the period 12 October 2018 (date of incorporation) to 31 March 2019 and is therefore not comparable.

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

The financial information set out above does not constitute the statutory accounts of SDCL Energy Efficiency Income Trust plc for the year ended 31 March 2020, but is derived from those statutory accounts, which have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union and therefore they comply with Article 4 of the EU lAS Regulation. The statutory financial statements for 2019 have been delivered to the Registrar of Companies and those for 2020 will be delivered later in the year.

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.

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

  There are no standards, amendments to standards or interpretations that are effective for annual   periods beginning on 1 April 2019 that have a material effect on the financial statements of the     Company nor the value of investments. This includes the new IFRS 16 Leases standard which the   Company adopted during the year.

  Non-mandatory New Accounting Requirements not yet adopted

All non-mandatory New Accounting Requirements in issue are either not yet permitted to be adopted or, in the Directors' opinion, would have no material effect on the reported performance, financial position, or disclosures of the Company and consequently have neither been adopted, nor listed.

b)  IFRS 10, Investment entities exemption

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 efficient projects, via individual corporate entities. The Holdco issues equity and loans to finance the projects.

As in the previous period, 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 needs to be met.

During the year the Company made significant new investments, notably in Spain and the USA, and as a result the size of the Company more than tripled. In light of these changes, the Directors assessed each acquisition 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 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 business 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

· Each new investment is measured at fair value.

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:

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

(ii) 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).

(iii) The performance of substantially all investments is measured and evaluated on a fair value basis.

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

(i) 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 efficient 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 and are not to be held indefinitely; and

(iii) 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

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 that it is appropriate to prepare the financial statements on a going concern basis. Accordingly, they continue to adopt the going concern basis in preparing its financial statements. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report.

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 efficient 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 is 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

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 Annual General Meeting.

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

In line with IFRS 3 (Revised), 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.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary differences arise from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit or the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments, except where the Company is able to control the timing of the reversal of the difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the Statement of Comprehensive Income except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Deferred tax assets and liabilities are not discounted.

j)  Cash and cash equivalents

Cash and cash equivalents includes deposits held at call with banks and other short-term deposits with original maturities of three months or less. 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.

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 using the effective interest method, less provision for impairment.

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 where necessary.

n)  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. 

o)  Share Capital

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, IFRS 12 and IAS 27. 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 Board of Directors has appointed the Investment Manager to produce investment valuations based upon projected future cash flows. These valuations are reviewed and approved by the Board. The investments are held indirectly through the Holdco and its intermediate holding companies.

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 bases the fair value of the investments on the information received from the Investment Manager.

Fair values for those investments for which a market quote is not available, in this instance being all investments, are determined using the income approach which discounts the expected cash flows at the appropriate rate. The investment at fair value through profit or loss is valued by discounting future cash flows to the group from investments in both equity cash flows, such as dividends and equity redemptions, and subordinated loans cash flows, such as interest and principal repayments, at an appropriate discount rate for the underlying asset.

The weighted average discount rate applied in the March 2020 valuation was 7.5% (2019: 6.5%). 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.

The valuation at 31 March 2020 includes estimates of future cash flows that have the potential to have a material effect on measurement of fair value. These include estimates on near, medium and long-term cash flows on the investment in the nine assets in Oliva Spanish Cogeneration in relation to thermal revenues from off takers, the operations of the olive processing plants and the terms on which future regulatory periods for cogeneration assets will be renewed. For the five assets in the Primary Energy, estimates have been made to determine the demand for generation by the off takers.

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.

4.  Financial Instruments (continued)

Valuation methodology

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 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 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.

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.

Fair value measurement by level (continued)

Investment at fair value through profit or loss	Level 1 £'000	Level 2 £'000	Level 3 £'000
31 March 2020	-	-	254,095
31 March 2019	-	-	61,334

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 2020	31 March 2019
Inflation rates	UK (RPI)	2.75% p.a.	2.75% p.a.
	Spain (CPI)	1.1% in 2020, 1.6% in 2022 and 2.0% 2023 and thereafter	n/a
	USA (CPI)	2.00% p.a.	2.00% p.a.
Tax rates	UK	19%	19% to March 2020, 17% thereafter
	Spain	25%	n/a
	USA	21% Federal & 3-9% State rates	21% Federal & 3-9% State rates
Foreign exchange rates	USD/GBP	0.80	0.77
	EUR/GBP	0.88	n/a

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 2020	31 March 2019
Weighted Average discount rate	7.5%	6.5%
Discount rates	4.5% to 8.5%	4.5% to 9.5%

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 2020	4.1p	£13,101k	£323,530k	(£12,322k)	(3.8p)
31 March 2019	1.5p	£1,455k	£98,415k	(£1,395k)	(1.4p)

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 2020	1.0p	£3,264k	£323,530k	(4,242k)	(1.3p)
31 March 2019	0.2p	£209k	£98,415k	(£289k)	(0.3p)

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 2020	2.8p	£8,812k	£323,530k	(£8,781k)	2.7p
31 March 2019	0.9p	£891k	£98,415k	(£886k)	(0.9p)

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 and USD) 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 2020	0.8p	£2,618k	£323,530	(£2,380k)	(0.7p)
31 March 2019	0.3p	£260k	98,415k	(£260k)	(0.3p)

5.  Investment Income

	Year ended 31 March 2020 £'000	Period from 12 October 2018 to 31 March 2019 £'000
Dividend income	1,500	1,450
Bank interest received	166	34
Gain on investment at fair value through profit or loss (Note 11) Loan interest income	11,895 939	78 -
Investment income	14,500	1,562

Loan interest income is in respect of coupon bearing loan notes issued to the Company by Holdco (Note 17). 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.

6.  Fund Expenses

	Year ended 31 March 2020 £'000	Period from 12 October 2018 to 31 March 2019 £'000
Investment management fees	1,973	241
Transaction costs	-	629
Non-executive directors' fees (Note 17)	125	34
Other expenses	610	145
Fees to the Company's independent auditor:
- for the audit of the statutory financial statements	140	98
- for audit-related assurance services	40	-
Fund Expenses	2,888	1,147

As at 31 March 2020, the Company had no employees (31 March 2019: nil) apart from Directors in office. The Company confirms that it has no key management personnel, apart from the Directors disclosed in Directors' Remuneration Report. There is no other compensation apart from those disclosed.

7.  Taxation

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

	Year ended 31 March 2020 £'000	Period from 12 October 2018 to 31 March 2019 £'000
Profit for the period before taxation	11,612	415
Profit for the year/period multiplied by the standard rate of corporation tax of 19%	2,206	79
Fair value movements (not subject to taxation)	(2,260)	(15)
Dividends received (not subject to tax)	(285)	(276)
Surrendering of tax losses to unconsolidated subsidiaries	339	212
UK Corporation Tax	-	-

8.  Earnings per Ordinary Share

	Year ended 31 March 2020	Period from 12 October 2018 to 31 March 2019
Profit and comprehensive income for the year/period (£'000)	11,612	415
Weighted average number of ordinary shares ('000)	225,422	100,000
Earnings per ordinary share (pence)	5.2	0.4

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

9.  Dividends

	31 March 2020 £'000	Period from 12 October 2018 to 31 March 2019£'000
Amounts recognised as distributions to equity holders during the year/period:
Interim dividend for the period ended 31 March 2019 of 1.0p per share	1,713	-
First Interim dividend for the year ended 31 March 2020 of 2.5p per share	6,709	-

The Company has declared a second interim dividend of 2.5 pence per share in respect of the year to 31 March 2020 on 22 May 2020 (See Note 19). The dividend, which is payable on 30 June 2020, is expected to total £8,010k.

10. Net assets per ordinary share

	31 March 2020	31 March 2019
Shareholders' equity (£'000)	323,530	98,415
Number of ordinary shares ('000)	320,374	100,000
Net assets per ordinary share (pence)	101.0	98.4

11. Investment at fair value through profit or loss

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

	Year ended 31 March 2020 £'000	Period from 12 October 2018 to 31 March 2019 £'000
Brought forward investment at fair value through profit or loss	61,334	-
Acquisitions at cost at IPO	-	57,156
New investments in year/period	180,866	4,100
Movement in fair value	11,895	78
Closing investment at fair value through profit or loss	254,095	61,334

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

Investments in the year/period reflect funds paid to the Holdco following issuance of equity to shareholders.

The Company, made the following acquisitions during the year ended 31 March 2020:

In August 2019, an investment was made into Holdco of £1.5m in relation to financing rooftop solar projects across the estate of Tesco in the UK.

In September 2019, an investment was made into Holdco of £18.4m in relation to a senior debt investment into a portfolio developed by Sparkfund, a US-based energy systems-as-a-service company.

In September 2019 to November 2019, investments of £76.0m were made into Holdco in relation to acquiring a cogeneration portfolio in Spain, the Oliva Spanish Cogeneration portfolio of nine assets. 

In December 2019 and January 2020, investments of £85.0m were made into Holdco in relation to the acquisition of the Primary Energy portfolio of five assets in the US A.

A reconciliation between the Portfolio Valuation, 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 2020 £'000	31 March 2019 £'000
Portfolio Valuation (see Financial Review section for details)	319,802	60,850
Holdco cash	2,584	1,562
Holdco debt	(62,826)	-
Holdco net working capital	(5,465)	(1,077)
Investment at fair value per Statement of Financial Position	254,095	61,334

Due to the nature of the investments, they are always expected to be classified as Level 3 for fair value measurements. There have accordingly been no transfers between levels during the year/period.

12. Trade and other receivables

	31 March 2020 £'000	31 March 2019 £'000
Dividend receivable	-	1,450
Prepayments	211	236
VAT receivable	9	206
Other receivables	1,620	109
Total trade and other receivables	1,840	2,001

13. Trade and other payables

	31 March 2020 £'000	31 March 2019 £'000
Due to investment	-	2,700
Other payables	584	227
Total trade and other payables	584	2,927

14. Share capital and reserves

	Number of shares '000	Gross amount raised £'000	Issue costs £'000	Share capital £'000	Share premium £'000	Other Distributable Reserves £'000
Total as at 31 March 2019	100,000	100,000	(2,000)	1,000	-	97,000
Shares Issued during the year	220,374	226,080	(4,155)	2,204	219,721	-
Dividends paid during the year	-	-	-	-	-	(8,422)
Total as at 31 March 2020	320,374	326,080	(6,155)	3,204	219,721	88,578

In April 2019, the Company issued 71,287,129 new ordinary shares at a price of 101.0 pence per share raising gross proceeds of £72m.

In October 2019, the Company issued 97,087,378 new ordinary shares at a price of 103.0 pence per share raising gross proceeds of £100m.

In December 2019, the Company issued 52,000,000 new ordinary shares at a price of 104.0 pence per share raising gross proceeds of £54m.

The Compan y currently has one class of ordinary share in issue with a par value of 1 pence per share. The total authority is for 1bn shares. All the holders of the ordinary shares, which total 320,374k 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. All of the shares issued are fully paid.

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.

15. Financial risk management

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 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, reserves and retained earnings).

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

Financial risk management objectives

The Board, with the assistance of the Investment Manager, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyses exposures by degree and magnitude of risk.

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 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 is indirectly exposed to currency risk through its Holdco as investments are held in GBP, EUR and USD.

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'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.

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.

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 2020 there were no receivables considered impaired. At 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 is subject to credit loss on its loans, receivables, cash and deposits. Investments are held 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 impairment 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 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.

As at 31 March 2020	Up to 3 months £'000	Between 3 and 12 months £'000	Between 1 and 5 years £'000	Total £'000
Assets
Cash and cash equivalents	68,179	-	-	68,179
Trade and other receivables	1,620	-	-	1,620
Liabilities
Trade and other payables	(584)	-	-	(584)
Total	69,215	-	-	69,215

As at 31 March 2019	Up to 3 months £'000	Between 3 and 12 months £'000	Between 1 and 5 years £'000	Total £'000
Assets
Cash and cash equivalents	38,007	-	-	38,007
Trade and other receivables	1,559	-	-	1,559
Liabilities
Trade and other payables	(2,927)	-	-	(2,927)
Total	36,639	-	-	36,639

16. Subsidiaries

The following table shows the subsidiaries and related undertakings of the Company. As the Company applies IFRS 10 and Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (see Note 2), these entities have not been consolidated in the preparation of these financial statements.

Investment	Place of Business	Shareholding at 31 March 2020
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%
EECo Car Parks No. 2 Limited	United Kingdom	50%
SmartEnergy Finance Two Limited	United Kingdom	49%
SDCL VCO Energy Limited	United Kingdom	100%
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%
SDCL TG Cogen LLC	USA	71%
Walworth Invest S.L.	Spain	100%
PERC Midco LLC	USA	50%
SEEIT Capital LLC	USA	100%

All subsidiaries that have a place of business of the United Kingdom are registered at Foxglove House, 166 Piccadilly, London, United Kingdom, W1J 9EF.

SEEIT Capital LLC and SDCL TG Cogen, LLC are registered in Delaware, USA and their place of business is 1120 Avenue of the Americas, New York, New York 10036, USA.

PERC Midco LLC is registered in Delaware, USA and its place of business is 1209 Orange Street, Wilmington, Delaware, USA.

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

17. 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 cent, per annum of the adjusted NAV in respect of the Net Asset Value of up to, and including, £750 million; and

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

The management fee is calculated and accrues monthly and is invoiced monthly in arrears. During the year ended 31 March 2020, management fees of £1,973k (31 March 2019: £241k) were incurred of which £472k (31 March 2019: £69k) was payable at the year end.

The Directors of the Company, who are considered to be key management, received fees for their services. Their fees were £125k (disclosed as Non-executive directors' fees in Note 6) in the year (31 March 2019: £34k).

During the year ended 31 March 2020, £180.9m of funding was provided by the Company to the Holdco for investment acquisitions, consisting of issued share capital and coupon bearing loan notes. Of this, £36.2 million of coupon bearing loan notes were issued which accrue interest at 6%. In the year to 31 March 2020, £939k interest had accrued on the loan notes of which £nil is outstanding at the year end.

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.

18. Guarantees and other commitments

In April 2019, the Company became the Guarantor of the Revolving Credit Facility ("RCF") secured by its subsidiary (Holdco). The RCF includes a three-year revolving tranche of £25 million ("Facility A") and acquisition finance of up to EUR45million ("Facility B"). On 4 November 2019, Holdco utilised EUR26 million of Facility A and EUR45 million of Facility B in order to acquire the Oliva Spanish Cogeneration portfolio. These balances remain outstanding as at 31 March 2020.

19. 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. There were no subsequent events identified which require adjustment or disclosure in these financial statements other than those stated below.

On 22 May 2020 the Company declared a second interim dividend of 2.5 pence per share for the year ending 31 March 2020. The dividend is payable on 30 June 2020.

  COMPANY INFORMATION

Directors	Sponsor, Broker and Placing Agent
Tony Roper, Chairman	Jefferies International Limited
Christopher Knowles	100 Bishopsgate
Helen Clarkson	London, EC2N 4JL
Registered Office	Legal Adviser
Asticus Building	Herbert Smith Freehills LLP
2nd Floor	Exchange House
21 Palmer Street	Primrose Street
London	London
United Kingdom	EC2A 2EG
SW1H 0AD
Company Secretary and Administrator	Depositary
Sanne Group (UK) Limited	Sanne Group Administration Limited
21 Palmer Street	21 Palmer Street
London	London
United Kingdom	United Kingdom
SW1H 0AD	SW1H 0AD
Investment Manager	Registrar
Sustainable Development Capital LLP	Computershare Investor Services plc
Foxglove House	The Pavilions
166 Piccadilly	Bridgwater Road
London	Bristol
W1J 9EF	BS13 8AE
Independent Auditor	Bankers
PricewaterhouseCoopers LLP	RBS International
The Atrium	280 Bishopsgate
1 Harefield Road	London
Uxbridge	EC2M 4RB
Middlesex
UB8 1EX
Public Relations
TB Cardew
5 Chancery Lane
Holborn, London EC4A 1BL

Key Company Data

Company name   SDCL ENERGY EFFICIENCY INCOME TRUST PLC

Registered address  Asticus Building 2nd Floor,  

21 Palmer Street,

London, SW1H 0AD

Listing  London Stock Exchange - Premium Listing

Ticker symbol  SEIT

SEDOL   BGHVZM4

Index inclusion   FTSE All-Share, FTSE SmallCap

Company year-end  31^st March

Dividend payments   Quarterly (from year beginning on 1 April 2020)

Investment Manager   Sustainable Development Capital LLP

Company Secretary & Administrator   Sanne Group (UK) Limited

Shareholders' funds  £323.5m as at 31 March 2020

Market capitalisation   £296.3m as at 31 March 2020

Management fees  0.9% p.a. of NAV (adjusted for uncommitted cash)

ISA, PEP and SIPP status The Ordinary Shares are eligible for inclusion in PEPs and ISAs (subject to applicable subscription limits) provided that they have been acquired by purchase in the market, and they are permissible assets for SIPPs

Website    www.sdcleeit.com

GLOSSARY

AIC Code the AIC Code of Corporate Governance, as revised or updated from time to time

AIFM an alternative investment fund manager, within the meaning of the AIFM Directive

AIFM Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No. 1095/2010; the Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision

Board the Board of Directors of the Company, who have overall responsibility for the Company

Biomass boiler a wood-fuelled heating system, which burns wood pellets, chips or logs to provide warmth in a single room or to power central heating and hot water boilers

BMS building management systems

CCHP combined cooling/heating and power

CHP combined heating and power

Company SDCL Energy Efficiency Income Trust plc, a limited liability company incorporated under the Act in England and Wales on 12 October 2018 with registered number 11620959, whose registered office is at Asticus Building 2nd Floor, 21 Palmer Street, London, SW1H 0AD

Company SPV a Project SPV owned by the Company or one of its Affiliates through which investments are made

Contractual payment the payments by the Counterparty to the Company or relevant Project SPV under the contractual arrangements governing an Energy Efficiency Project, whether such payments take the form of a service charge, a fee, a loan repayment or other forms of payments as may be appropriate from time to time

Counterparty the host of the Energy Efficiency Equipment with whom the Company has entered into the Energy Efficiency Project, either directly or indirectly through the use of one or more Project SPVs

Decentralised energy is energy which is produced close to where it will be used, rather than at a large centralised plant elsewhere, delivered through a centralised grid infrastructure

Energy efficiency using less energy to provide the same level of energy. Efficient energy use is achieved primarily through implementation of a more efficient technology or process

Energy efficiency equipment the equipment that is installed at the premises of a Counterparty or a site directly connected to the premises of a Counterparty in connection with an Energy Efficiency Project, including but not limited to CHP units, CCHP plant schemes, HVAC units, lighting equipment, biomass boilers and steam raising boilers (including IP steam processors)

Energy efficiency project has the meaning given in paragraph 3 of Part II (Industry Overview, Investment Opportunity and Seed Portfolio) of the November 2018 Prospectus

Energy efficiency technology technologies deployed to achieve an improvement in energy efficiency

EPC Engineering, procurement and construction

ESA an energy saving agreement governing the terms on which energy savings are apportioned between the counterparty and the relevant Project

GHG greenhouse gases

Holdco is SEEIT Holdco Limited, the Company's single wholly owned subsidiary

HVAC heating, ventilation and air conditioning

Investment Manager Sustainable Development Capital LLP, a limited liability partnership incorporated in England and Wales under the Limited Liability Partnership Act 2000 with registered number OC330266

Investment Portfolio is the portfolio of energy efficiency investments held by the Company via its single wholly owned subsidiary, SEEIT Holdco Limited

KWh kilowatts used or generated per hour

Lighting equipment energy efficient lighting used in connection with an Energy Efficiency Project, including but not limited to LEDs and associated fittings

November 2018 Prospectus is the prospectus issued by the Company on 22 November 2018

Ordinary Shares an ordinary share of £0.01 in the capital of the Company issued and designated as ''Ordinary Shares'' of such class (denominated in such currency) as the Directors may determine in accordance with the Articles and having such rights and being subject to such restrictions as are contained in the Articles

O&M Contractors operations and maintenance contractors. the contractor appointed by the Company or the relevant Project SPV to perform maintenance obligations in relation to the relevant Energy Efficiency Equipment

RoRi the "Return on Operations" incentive payment and the "Return on Investment" incentive payment under Spain's Royal Decree-Law 9/2013 under which qualifying energy generation assets are compensated, in the medium to long term, for fluctuations in revenues and costs against an established base case

SDCL Group the Investment Manager and the SDCL Affiliates

Steam Raising Boiler Technology is technology through which pressurised water is transformed into steam through the application of heat

 

END

 

 

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