SDCL Energy Efficiency Income Trust Plc Annual Report and Audited Financial Statements for the year ended 31 March 2023
SDCL Energy Efficiency Income Trust plc
6th Floor
## SDCL ENERGY EFFICIENCY
125 London Wall
London
## INCOME TRUST PLC
EC2Y 5AS
## Annual Report and Audited Financial Statements
## www.seeitplc.com
### For the year ended 31 March 2023
SEEIT

# Table of Contents

# 1. Highlights and Overview

1.1 Summary of the year to 31 March 2023 1
1.2 Chair's Statement 2
1.3 Company Overview 6
1.4 Investment Proposition 8
1.5 SEEIT Business Model 10

# 2. Strategic Report: The Company and Portfolio Review

2.1 Overview 13
2.2 The Investment Manager's Report 14
2.3 Financial Review and Valuation Update 23
2.4 Portfolio Summary 33
2.5 Company Key Performance Indicators 54
2.6 Stakeholders and Section 172 55

# 3. Strategic Report: ESG and Risk

3.1 Environmental, Social and Governance ("ESG") 58
3.2 Risk Management Framework 68
3.3 Viability Statement 73

# 4. Board and Governance

4.1 Investment Policy and Approach 75
4.2 Board of Directors 76
4.3 Report of the Directors 78
4.4 Corporate Governance Statement 83
4.5 Nomination Committee Report 95
4.6 Audit and Risk Committee Report 97
4.7 Directors' Remuneration Report 103
4.8 Statement of Directors' Responsibilities 109

# 5. Financial Statements

5.1 Independent Auditor's Report 111
5.2 Financial Statements 119
5.3 Notes to the Financial Statements 123

# Additional Information

Company Information 146
Key Company Data 147
SFDR Periodic Disclosure 148
Glossary 154
Glossary of Financial Alternative Performance Measures 156

![img-0.jpeg](img-0.jpeg)
OVERVIEW
## 1. HIGHLIGHTS AND OVERVIEW
## 1.1 Summary of the Year to 31 March 2023
## INVESTING IN ENERGY EFFICIENCY
SDCL Energy Efficiency Income Trust plc (“SEEIT”), managed by Sustainable Development Capital
LLP (“SDCL”), is a constituent of the FTSE 250 index and the first UK listed company of its kind to
invest exclusively in the energy efficiency sector.
Recognising that most energy is lost in the energy system, SEEIT targets energy efficiency
investments that reduce wastage in the supply, demand and distribution of energy. These
solutions in turn reduce carbon emissions and costs and can strengthen energy security, the grid
and the energy market as a whole.
Servicing over 50,000 buildings across its portfolio, SEEIT’s project investments provide a range
of essential energy services, focused on contracts with essential industries in the United States,
Europe, the UK and other select markets with attractive risk-adjusted returns.
## 101.5p £84m 6.0p
(APM)

| Net Asset Value (“NAV”) |  | Investment cash inflow |  |  |  | Aggregate dividends |
| --- | --- | --- | --- | --- | --- | --- |
|  | (APM) |  |  |  | (APM) |  |
| per share |  | from the portfolio |  |  |  | of 6.0p per share declared for the |
| of 101.5p as at 31 March 2023 |  | of £85 million, up 31% on |  |  |  | year ended 31 March 2023, in line |
|  |  |  | (APM) |  |  | with target (March 2022: 5.62p) |
| (31 March 2022: 108.4p), which |  | a portfolio basis |  | (2022: |  |  |
| includes a reduction of 7.3p |  | £65million) |  |  |  |  |

from 70bps increase in weighted
average unlevered discount rate
in the year

| 1.2x |  | 6.24p |  | £18.6m |
| --- | --- | --- | --- | --- |
|  | (APM) |  | 1 |  |
| Dividend cash cover |  | Target dividend |  | Loss before tax |
| of 1.2x for the year to 31 March |  | of 6.24p per share for the year to |  | of £18.6 million for year to 31 |
| 2023 (March 2022: 1.2x) |  | March 2024, a 4% year-on-year |  | March 2023 (31 March 2022: |
|  |  | increase |  | Profit of £79.8 million), includes |

unrealised loss of £81 million from
discount rate increases
## £1,100m c.£240m 1,202,528 tCO2
(APM)
Portfolio valuation Investment Carbon Savings
of £1,100 million as at 31 March of c.£240 million in new of 1,202,528 tCO 2 (March 2022:
2
2023, up from £913 million at 31 and organic investments 1,060,617 tCO 2 ) from Company’s
March 2022 and existing commitments portfolio
during the year and a further
c.£30million invested since the
year end
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
1
The target dividend stated above by the Company is based on a projection by the Investment Manager and should not be treated as a profit forecast for the Company
2
Per SEEIT’s ESG Report, November 2022
APM
Alternative Performance Measure: See Glossary Of Financial Alternative Performance Measures for further details for APM’s used throughout this report.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 1
## 1.2 Chair’s Statement
Tony Roper
Chair of SEEIT
### On behalf of the Board, I am pleased to present the annual report and financial
### statements (the “Annual Report”) for the SDCL Energy Efficiency Income Trust
### plc (“SEEIT” or “the Company”) for the year ended 31 March 2023.

| This financial year has been | The Board and the Investment | One consequence of the tragic |
| --- | --- | --- |
| characterised by global economic | Manager have reflected the higher | Ukraine war and its impact on energy |
| instability, driven by high power | interest rate environment in the | markets has been a growing focus by |
| prices, high inflation, rising interest | Company’s valuation assumptions | governments and corporates on how |
| rates and energy price volatility in | at the year end. SEEIT’s NAV per | to save energy. We believe that energy |
| the wake of Russia’s invasion of | share declined to 101.5p in the year | efficiency should be considered |
| Ukraine. Government interventions | to 31 March 2023 and the Company | one of the three main “pillars” of |
| in energy markets responded to this | recorded a loss before tax of £18.6 | infrastructure investment, alongside |
| environment with varying degrees | million, largely as a result of increases | but distinct from (i) renewable energy |
| of success. An energy crisis was | in discount rates applied in the | and (ii) social and other infrastructure. |
| followed by a liquidity and banking | valuation but including certain project | More detail on what distinguishes |
| crisis as inflation, interest rates | specific adjustments described in | energy efficiency is in Section 1.4, |
| and bond yields rose quickly in the | Section 2.3, Financial Review and | Investment Proposition. |
| second half of the year, accompanied | Valuation Update. |  |

by recessionary concerns in major
Portfolio and Financial
The Company owns a large, diversified
markets where the Company is active.
portfolio of energy-efficiency assets, Performance
A low interest rate, low inflation
which provide several opportunities The portfolio, as a whole, generated
environment is unlikely to return in
for future growth. Our assets reduce sufficient cash to comfortably cover
the short term.
energy wastage and are focussed on the Company’s dividends paid in the
Higher risk-free rates, and higher costs providing essential energy services year.
of capital, have fed through into the often to essential industries. The range
market valuations of all income-oriented During this financial year, levels of
of technologies in SEEIT’s portfolio
investment companies listed on the creates opportunity to provide a wide volatility in global energy markets not
London Stock Exchange. Generally, variety of energy solutions to end seen for many years, and regulatory
share prices moved from a premium to users, helping them cut costs; reduce responses to them, created both
a discount to net asset value across the their carbon footprint; and improve short-term and “one-off” setbacks for
listed infrastructure sector. resilience. some of SEEIT’s investments.
2 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
OVERVIEW
Pictured: On.Energy site
Both SEEIT Oliva and Värtan Gas presenting opportunities to deliver The Company continues to pursue a
(APM)
were materially impacted by higher additional long-term value. low-gearing strategy relative to the
fuel costs combined with regulatory wider infrastructure peer group, with
The Investment Manager is focused
changes that have since been consolidated outstanding debt across
on outperforming the Company’s
updated or appealed. At the same the Group representing approximately
return target. In an environment
time, some investments, such as 32% of NAV as at 31 March 2023, in
characterised by a higher cost

| Primary Energy, Värtan Gas, Onyx |  | line with the Company’s medium-term |  |  |
| --- | --- | --- | --- | --- |
|  | of capital, and given the upside |  | (APM) |  |
| and Future Energy Solutions, faced |  | structural gearing |  | target of 35%. We |

performance potential from the
specific operational challenges. do not have any near-term refinancing
portfolio, we remain confident that
risk. Further details in relation to the
Details in relation to the operational the Company can meet or exceed its
Company’s existing leverage can be
performance of specific projects stated target net total return of 7-8%
found in Section 2.3, Financial Review
3
and asset management initiatives per annum from its IPO price over
and Valuation Update.

| undertaken during the year are outlined | the medium to long term. |  |
| --- | --- | --- |
| in Section 2.4, Portfolio Summary. |  | As we are more focused on value |
|  | Capital Structure | enhancement from the Company’s |
| While SEEIT’s portfolio is positively |  | existing portfolio and our organic |

The Company secured successfully
correlated to inflation over the pipeline than on sourcing new
the equity capital it needed through
medium to long term, in the short investments, our existing liquidity is
a £135 million fundraise conducted
term, increases in labour costs considered sufficient for the
in September 2022, shortly before
impacted returns on certain foreseeable future.
capital markets effectively closed.
investments. Although most of the
We are grateful for the support that
debt financing at the project level
shareholders have given SEEIT since
in SEEIT’s portfolio was secured on
its inception.
fixed terms or hedged at relatively
attractive terms, rising interest This fundraise, along with the existing
rates increased some project-level revolving credit facility (“RCF”),
borrowing costs. underpin the capital position of the
Company, allowing it to manage
Notwithstanding these challenges,
liquidity, invest in growth across
several investments have also
existing portfolio projects and, as
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
made progress, with for example suitable opportunities arise, make
RED-Rochester, Onyx and EVN all attractive new investments.
3 Net of fees and expenses by reference to the IPO Share Price of 100.0 pence per share
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 3
### 1.2 Chair’s Statement
continued
Investment Activity SEEIT generally approaches Share Price and Buyback
investment opportunities with the
The Investment Manager has been Programme
intention to acquire and improve
focused on initiatives within the As noted above, rising interest rates
assets and will thus typically hold
existing portfolio, which involves had a major impact on the valuation of
an investment to the extent that it is
identifying sources of additional listed infrastructure since September
consistent with total return targets
revenue, reducing costs or investing 2022, compounded by a dislocation in
and until value has been optimised.
incremental capital for accretive markets where demand from buyers
The Company will contemplate
returns. Planning and implementation did not match pressure from sellers,
disposing of assets opportunistically
of these initiatives takes time, and particularly those needing to raise
or via targeted sales where it
while some value enhancement liquidity to manage redemptions.
considers that doing so would
activity has been recognised in our
deliver value to shareholders. SEEIT We do not believe that SEEIT’s recent
current valuation of the portfolio, the
materially exited one investment trading price reflects the value of the
majority will not be recognised until its
during the financial year, through portfolio or its total return prospects
implementation is proven.

|  | early repayment of its loan to the | and took proactive steps to address |
| --- | --- | --- |
| During the year, SEEIT invested c.£121 | Biotown green gas project in the | this. |
| million into six new investments | United States at a return above |  |
|  | expected return for this investment. | On 3 April 2023, the Company |

and commitments and a further
Disposals of less strategic or smaller announced a share buyback
c.£119 million into organic follow-on
projects, where a third party could programme in response to the
investments and commitments across
derive greater value, are being discount at which its share price
16 existing portfolio projects. Since the
evaluated. traded relative to its reported NAV per
year end, a further two new investments
(APM)
share . As at the date of this report,
of c.£4 million, plus a further £26 million
the Company has deployed c.£14
in follow-on investments across four Dividends
million of the £20 million total buyback
existing portfolio projects have been In line with previous guidance, in
allocation.
made. Details of these investments June 2023 the Company announced
are provided in Section 2.4, Portfolio its fourth interim dividend for the
Corporate Governance and
Summary. year ended 31 March 2023 of 1.50p
Stakeholder Engagement
per share, providing an aggregate
The Investment Manager continues to
dividend of 6.00p per share declared The Company held its Annual General
focus on new opportunities associated
for the year ended 31 March 2023, Meeting (“AGM”) on 12 September
with our existing portfolio (the
which was fully covered by net cash 2022, at which all resolutions were
“organic” pipeline) typically at rates
income. duly passed by shareholders. The
of return above our stated investment
Articles of the Company provide
objectives, as opposed to acquisitions Based on our assessment of current
that a continuation vote be put
of new projects in the market. cashflow forecasts, the Company is
to shareholders at the first AGM
Opportunities for capital growth could announcing new dividend guidance
following the fourth anniversary (which
also include utilising the capacity the of 6.24p per share for the year to
falls in the current year) of initial
Company has to increase selectively 31 March 2024 (an increase of 4%)
admission and, if passed, at every third
its exposure to construction and and as before, targeting progressive
AGM thereafter.
development phase investments. 4
dividend growth thereafter.
4 The target dividend stated above is based on a projection by the Investment Manager and should not be treated as a profit forecast for the Company
4 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
OVERVIEW
Pictured: Sustainable Living Innovations site
Investment companies undertake Over the past few months, I have The Investment Manager has
continuation votes alongside share met with some of SEEIT’s larger remained selective in making
buybacks as a means, inter alia, for shareholders to discuss their new investments and continues
discount control. Share buybacks can expectations and collect feedback to evaluate organic and inorganic
be an effective means of managing on the performance of the Company. investments that can deliver
short-term dislocations between price These meetings have been helpful attractive risk-adjusted returns for
and value. Continuation votes provide in shaping the Company’s disclosure investors. The Company remains well
investors with the ability to mitigate in this Annual Report, which we capitalised, with a strong balance
(APM)
any long-term fundamental problems have revised and expanded, both sheet and low levels of gearing
with value itself. at Company level and at project relative to the infrastructure
level for our larger investments. investment company sector.
The Board recognises the importance
The Investment Manager and I
of this mechanism for shareholders and The Board recognises the current
look forward to continuing regular
believes that there is no fundamental challenges facing UK-listed investment
dialogue with investors going forward.
concern with the Company’s companies, and is working with the
prospects and our ability to deliver Investment Manager to ensure that
Outlook
value for shareholders. Despite the SEEIT manages and adapts to the
SEEIT is well positioned to be
current macroeconomic situation, current market dislocation evident
able to unlock long-term growth
we believe the Company is well across the sector. Our objective
opportunities from its established and
positioned, with substantial scale and is to provide top quartile levels of
diversified portfolio of investments.
a diversified portfolio able to deliver disclosure to help investors better
Energy efficient technology is a
attractive returns. Further details of understand current performance
critical part of the energy transition
the Company’s first continuation vote and the long-term prospects of
because its implementation is
will be provided to shareholders in the SEEIT, which we expect will evolve.
typically much quicker and cheaper
notice of the 2023 AGM. I would like to thank personally all
compared with the time and cost
our shareholders for their continued
The Investment Manager hosted a to develop new sources of energy
support of the Company, and I look
Capital Markets Day on 14 March generation.
forward to continued engagement in
2023 at the London Stock Exchange.
the year ahead.
More and more private and public
The event explained the key market
sector counterparties are focused on
drivers for energy efficiency and Tony Roper
meeting carbon targets; enhancing
provided greater insight into some of Chair
energy security and resilience; and
the Company’s larger holdings.
seeking to better manage energy
The Board was pleased to visit SEEIT price volatility. Demand for on-site
Oliva in Spain during the year and was generation, efficient distribution, and
able to engage directly with members demand-side reduction solutions
of the management and operations continues to grow substantially.
teams at one of SEEIT’s larger portfolio
of investments to understand the key
risks and growth drivers of the
projects concerned.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 5
## 1.3 Company Overview
SDCL Energy Efficiency Income Trust plc Sustainable Development Capital LLP
(“the Company” or “SEEIT”) (“SDCL” or “Investment Manager”)
SDCL Energy Efficiency Income Trust plc (“the Company” Sustainable Development Capital LLP (“SDCL” or
or “SEEIT”) is the first listed company in the UK to invest “Investment Manager”) is a London-based investment
exclusively in the energy efficiency sector. The Company’s firm with a proven track record of investment in energy
objective is to generate an attractive total return for efficiency and decentralised energy generation projects
investors, comprising stable dividend income and capital in the United Kingdom, Europe, North America and Asia.
preservation, with the opportunity for capital growth. SDCL was established in 2007 and has a team of over 50
professionals across offices in London, Dublin, New York
The Company’s current portfolio comprises assets across
and Singapore.
the United Kingdom, Europe, North America and Asia.
The Company is a FTSE 250, closed-ended investment With over 15 years of sector experience in energy
company incorporated in England and Wales that was efficiency, SDCL has specialist origination, project
admitted to the Official List and to trading on the London development, execution, ESG, asset management and
Stock Exchange’s Main Market on 11 December 2018. portfolio management teams with support from finance,
compliance and risk. Since 2012, the Group has raised
over £2 billion in capital commitments, including seven
funds, all exclusively focused on energy efficiency.
6 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
OVERVIEW
Pictured: FES Lighting site
### SEEIT Board
Fund AdministratorInvestment Manager
### SEEIT Holdco
Project SPV

| (includes |  |  | Corporate |  |
| --- | --- | --- | --- | --- |
|  | Project SPV | Project SPV Project SPV |  | 5 |
| senior debt |  |  | Investments |  |

investments)
SEEIT Management
The Company has been established in the United Kingdom as an investment trust to provide shareholders
with access to investment into energy efficiency infrastructure investments. The Company has an independent
Board of Directors and has appointed SDCL as Investment Manager to manage the investments on its behalf.
The Company makes its investments via its sole direct subsidiary and main investment vehicle, SEEIT Holdco
Limited (“SEEIT Holdco” or “Holdco”).
The Investment Manager controls the actions of Holdco and its direct and indirect subsidiaries manage the existing
investments that Holdco has directly or indirectly invested in. Holdco typically invests in project special purpose
vehicles (“SPVs”), which provide energy efficiency solutions to counterparties through long-term contracts with a
fixed lifespan. An SPV – and by implication the portfolio of investments as a whole – therefore normally has a limited
lifetime over which it provides target returns to Holdco and ultimately the Company. These SPVs are structured so
that they can be sold in an active secondary market for energy efficiency assets although each of the investments
will also have been assessed individually to ensure appropriate alternative exit strategies are in place.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 7
## 1.4 Investment Proposition
• Operational investments have an underlying contract for energy services
Cashflows • Targeting to limit and manage exposure to merchant power pricing over
medium to long term, mitigating risk where possible
underpinned by
5 • Targeting to limit and manage exposure to counterparty demand risk and
contracts
regulatory risk over medium to long term, mitigating risk where possible
Creditworthy
• High proportion of investment grade counterparties
counterparties
• Well diversified by geography, technology,
project and counterparty
A diversified,
• Exposure to construction and
mostly operational
development stage assets limited to 35%
portfolio
of GAV
Investment
• First LSE listed company to
Objectives
invest exclusively in energy
efficiency projects
Generate an attractive
total return for investors, • Government policies highlight
Aiding net zero
role of energy efficiency in
comprising stable
transition
mitigating climate change
dividend income and
capital preservation, • Sustainability considerations
integrated into all processes
with the opportunity for
and operations
capital growth.
• Scale of portfolio provides pipeline of
follow-on investments
Total Return
• Asset management initiatives can
Opportunity
generate incremental cashflows
from long-term accretive investment
opportunities
(APM)
• Medium-term gearing target of 35% of NAV
Low Gearing
(APM)
• Gearing limit of 65% of NAV available for short-term funding
Strategy
of new investments
5 Cashflows are derived from a combination of existing contracts, future growth assumed from existing contracts and extended or new contracts in the future
– see Section 2.3 for further details
8 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
OVERVIEW
### Energy Efficiency: The Third Pillar of Infrastructure Investment
Energy efficiency is considered the third pillar of infrastructure investment, alongside but distinct
from renewable energy infrastructure and social and other infrastructure. It can be distinguished
from other classes of infrastructure in part due to the operational features associated with energy
efficiency assets. In addition, energy efficiency investments usually benefit from relatively low levels
of exposure to energy price fluctuations and policy factors such as price caps, which can affect
traditional renewable energy infrastructure assets from time to time.
### Comparing Types of Infrastructure
Energy Social and other
Renewables
Efficiency infrastructure
Emerging investment Established investment Growing investment
Heritage
class class class
CHP Units, lighting PFI/PPP, hospitals,
Grid-connected wind
Assets / Technology projects, behind-the- toll roads, utilities,
farms, solar farms, etc
meter, etc broadband, schools, etc
Commercial and
Typical counterparty
industrial or government Public sector entity Utilities
entities
Key risk
Counterparty credit Political / regulatory Subsidy / energy pricing
Short: Within 18 months Long: 2+ years,
Typical construction periods

|  | and often within 3-6 |  |  | sometimes extending to |  | Medium: 1-2+ years |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  | months |  | several years |  |  |
|  | Important, particularly |  |  | Not directly tied to |  |  |  |
| Role in energy transition |  |  |  |  |  |  | Important |
|  |  | in short term |  |  | energy transition |  |  |

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Pictured: Baseload Capital's site
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 9
## 1.5 SEEIT Business Model
### SEEIT invests in a portfolio of energy efficiency assets and platforms designed to
### deliver a total return underpinned by long-term contracted cashflows that cover
### a growing dividend. SEEIT assesses investment opportunities based on defined
### characteristics that apply to projects across its portfolio. A project must typically:
1) fit the definition of an energy efficiency investment;
2) have, or will follow, a specified contractual structure with a suitable counterparty or counterparties; and
3) have the potential to generate accretive returns through asset management and follow-on investments.
## 1
Energy Efficiency Investment: All of SEEIT’s investments fall into one or more of three
energy efficiency categories.
Green Energy Point of Use / Cleaner and More
Distribution Demand Reduction Efficient Supply
Connect supply with demand in the Help to manage or reduce the demand Generate energy close to or at the
most efficient way through green for energy at the point of use through point of use, reducing transmission
energy distribution, utilising green energy-efficient technology and and distribution losses.
fuels. initiatives.
Cleaner and
More Efficient
Supply

| Operating renewables |  | 5 cogeneration | 9 cogeneration |
| --- | --- | --- | --- |
|  | portfolio of | projects for steel | projects for olive |
| predominantly solar |  | industry in the US | industry in Spain |

PV projects across 70
sites in the UK

| Portfolio of geothermal |  | Energy efficiency retrofit |  |
| --- | --- | --- | --- |
| power plants across |  | at one of Ireland’s |  |
| multiple regions |  | largest public hospitals |  |
|  | District energy system |  | Manufacturer of |
|  | providing C&I utility services |  | energy efficient |
|  | over 1,200 acre Eastman |  | motor systems |

Business Park in the US

| Stockholm’s gas grid, c.78% | Developer and | Energy efficient data |
| --- | --- | --- |
| biogas, with over 50,000 | operator of energy | centre immersion |
| customers | storage projects, | cooling technology |

Fast electric vehicle
headquartered in provider
charging stations for
the US
operators in the UK
Point of Use
Green Energy
/ Demand
Distribution
Reduction
10 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
OVERVIEW
## 2
Contractual Structure: SEEIT’s operational projects typically have predominantly long-term
contracted cashflows and fixed costs, delivering energy efficiency services directly to the end user.
Net cashflows
Heat, Power, other Energy
Delivery and Services,
Lighting, EV charging service Fuel costs
provided by SEEIT (typically pass through)
Services
### SEEIT Asset:
Fixed overheads
(where applicable)
End User SEEIT Asset: Costs
Lighting, Cogeneration,
Solar, etc
PPA/service Variable costs
Revenue agreement payment (where applicable)
## 3
Potential for Upside to Total Return: The Investment Manager also targets investments with
the ability to generate accretive upside over the medium to long term. This can be through
asset management initiatives or follow-on investment into development-stage opportunities.
### IllustrativeProject NAVOverTime
Onboarding,Planning,
Identifying value
accretive Opportunities
Drivers of Total Return
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
Investment in higher-return
Cost reductions and
projects or new revenue Unlocking platform value
Acquisition efficiency improvements
streams
Year 0Year 1Year 2Year 3Year 4Year 10 Year 15
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 11 SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 11
Underwriting Case:NAV plus distributionsOpportunity foraccretive upside
## 2.
## STRATEGIC REPORT:
## THE COMPANY AND
## PORTFOLIO REVIEW
Pictured: UU Solar site
12 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## 2.1 Overview
• behind-the-meter projects with identifiable end users and counterparties;
• quick to integrate and install, lowering construction risk;
Why Invest in
• results in carbon emissions reductions and helps to improve energy security
Energy Efficiency
STRATEGIC REPORT
and reliability, while cutting energy costs for end users;
Key characteristics of
• predominantly contracted cashflows, with managed exposure to merchant
the energy efficiency power pricing;
investment proposition
• nature of operational projects and relationships with counterparties creates
include some, or all, of opportunity to improve total return through asset management initiatives,
expansion of services for customers and management of costs; and
the following:
• low gearing relative to other forms of infrastructure investment.
• sharply rising interest and discount rates;
Market Landscape
• extreme volatility in energy prices and commodity prices;
A challenging
• high levels of inflation, driving labour, construction and operational costs; and
macroeconomic
• Delay in supply chain and planning capacity.
environment has hurt
Notwithstanding these headwinds, energy efficiency is expected to benefit over
asset values across
the medium to long term from policy tailwinds supporting investment in the
the listed infrastructure sector.
space in the short term
Further detail on the market landscape and policy tailwinds for energy
due to: efficiency can be found in Section 2.2, The Investment Manager’s Report.
• short-term accretive project investments, together with a long-term
investment plan to optimise performance and asset life across the RED-
Rochester portfolio;
Asset Management
Initiatives • investment in project development, including at EVN as well as the newer, low
carbon solutions represented by Turntide (energy efficient motors), Iceotope
Focus on unlocking (data centre cooling); and
additional value from
• working closely with new management at Onyx to progress the development
the existing portfolio. pipeline.
Examples include:
Further detail on the Company’s asset management function can be found
in Section 2.2, The Investment Manager’s Report.
During the year, headwinds from the macroeconomic environment as well
as short-term operational challenges at certain projects impacted on the
Company’s portfolio valuation.
However, The Investment Manager was able to unlock long-term value in certain
projects. A detailed summary of the portfolio performance is outlined in Section
2.4, Portfolio Summary.
Portfolio
Focus during the year has been on value enhancement from the Company’s
Performance,
existing portfolio and organic pipeline.
Pipeline and Exit
The Investment Manager continues to evaluate exit opportunities for certain
Strategy
investments where it believes more value could be delivered to shareholders
versus holding the assets to maturity in line with its typical investment strategy.
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
Further detail on the portfolio performance in the year is outlined in Section
2.4, Portfolio Summary and the Company’s pipeline and strategy in relation
to disposals in Section 2.2, The Investment Manager’s Report.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 13
## 2.2 The Investment Manager's Report

Market Landscape and Macroeconomic Factors

In the current landscape, energy efficiency is providing essential solutions to a growing list of global issues.

Net-Zero

THE PROBLEM:
Market Backdrop/Overview

The Intergovernmental Panel on Climate Change (IPCC) published its most recent synthesis report in March 2023, warning that the world is approaching "irreversible" levels of global heating and emphasising that it is "now or never" to limit warming. Reaching net zero greenhouse gas ("GHG") emissions over the next few decades will be critical to avoid the worst impacts of climate change, such as more frequent and intense heatwaves, droughts, floods, and storms.

THE SOLUTION:
Importance of Energy
Efficiency

Energy efficiency is critical to reducing GHG emissions by reducing energy demand and waste. According to the International Energy Agency ("IEA"), energy efficiency represents more than 40% of the emissions abatement needed by 2040. Energy efficiency initiatives in multiple sectors, including industry, buildings, appliances and transport, are prioritised in the IEA's Net Zero Emissions by 2060 (NZE) scenario due to their easy implementation and high scalability. These measures are anticipated to play a prominent role in reducing energy demand and its related emissions from now to 2030.

Pictured: RED-Indicator site

IA | KIST AWARD/2023/2024 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 | 2048 | 2049 | 2050 | 2051 | 2052 | 2053 | 2054 | 2055 | 2056 | 2057 | 2058 | 2059 | 2060 | 2061 | 2062 | 2063 | 2064 | 2065 | 2066 | 2067 | 2068 | 2069 | 2070 | 2071 | 2072 | 2073 | 2074 | 2075 | 2076 | 2077 | 2078 | 2079 | 2080 | 2081 | 2082 | 2083 | 2084 | 2085 | 2086 | 2087 | 2088 | 2089 | 2090 | 2091 | 2092 | 2093 | 2094 | 2095 | 2096 | 2097 | 2098 | 2099 | 2100 |
## Energy Security

Following Russia's invasion of Ukraine, the global energy landscape changed dramatically, with high prices and supply chain disruptions highlighting the energy security risks associated with relying on polluting fuels supplied by a few major external producers. Extreme weather conditions such as hurricanes, heatwaves and wildfires are also posing challenges to energy infrastructure, leading to power outages and supply chain disruptions.

Additionally, the introduction of variable renewable energy generation is posing structural changes in the generation profile of electricity systems, potentially impacting the grid's ability to provide a reliable energy supply, unless and to the extent it is balanced by alternative generation, storage and demand reduction.

## Energy Prices

Energy commodity prices hit multi-decade highs in most countries following the pandemic and the Russia-Ukraine war, remaining unstable ever since. Average gas prices increased in 2022 to the highest on Eurostat's record, from €7.8 per 100 kWh in 2021 to €11.4 per 100 kWh, while the USA consumers paid 14.3% more for electricity in 2022 than in 2021.

High energy prices have led to inflation and slowed economic growth, impacting energy-intensive industries, transportation costs and consumers.

Energy efficiency plays a crucial role in addressing energy security concerns that arise due to geopolitical conflicts, extreme weather events and infrastructure constraints. By reducing energy consumption and dependence on fossil fuels, countries can reduce their vulnerability to supply disruptions caused by conflicts or infrastructure failures.

Furthermore, energy efficiency measures such as demand response programmes and energy storage technologies help to tackle the energy security risks posed by ageing infrastructure and renewable energy capacity additions.

Energy efficiency is a vital solution to increased energy prices as the solutions reduce demand for energy and therefore reliance on fossil fuels, minimising the impact of price fluctuations.

For example, energy-efficient building retrofits can reduce heating and cooling costs, which can provide relief to households and businesses struggling to pay their energy bills. Energy-efficient transport solutions such as electric vehicles can also help to reduce fuel costs and mitigate the impact of rising energy prices on consumers.

2/4/2024

RFA/RF/SOC REPORT

RFA/RF/SOC REPORT
2.2 The Investment Manager’s Report
continued
Inflation and Discount Rates SEEIT, along with nearly all members The Investment Manager aims to
of its wider listed infrastructure peer construct and maintain a portfolio
Global inflation rates underwent
group, has experienced a decline in that generates year-on-year revenue
significant volatility during the financial
share price because of these factors, growth on a progressive basis.
year, although economic indications
leading to a period of trading at a The Investment Manager does not
suggest we have now seen the peak of
(APM)
discount to NAV per share . The exclusively target investments with
the cycle. The 2022 calendar year saw
Board and the Investment Manager fully inflation-linked returns, but
8.8% global inflation per the IMF.
are focused on managing this discount inflation correlation is a relevant metric
Central banks around the world have through investor engagement and when evaluating new investment
responded to the spikes in inflation measures such as the recent share opportunities and when re-contracting
by raising interest rates. This was buyback, and continue to build a existing projects within the portfolio.
compounded by turmoil in the banking compelling portfolio proposition which
The portfolio includes some flexibility
sector towards the end of the financial offers attractive returns to shareholders
to recontract certain non-inflation-
year, following the collapse of Silicon over the medium to long term.
linked revenues periodically during a
Valley Bank and take-over of Credit
project’s lifecycle. Some examples the
Suisse, which put pressure on banking Inflation Linkage Strategy
Investment Manager actively works
company balance sheets.
Approximately half of SEEIT’s current
with project management teams to
portfolio by value has revenues that
The Company reflected the implement include:
are partly or wholly inflation-linked,
movement in discount rates across
which culminates in an overall positive ■ at Värtan Gas, individual customer
the infrastructure sector, having
inflation correlation. Therefore, higher contracts are re-evaluated on an
raised underlying rates by 50 bps (on
than expected inflation has had an annual basis. Typically, historic
weighted average unlevered basis) at
overall small positive impact on the inflation and short to medium-term
the 30 September 2022 interim period
Company’s returns during the year. inflation is a key consideration when
and a further 20 bps at 31 March 2023,
setting customer tariffs; and
following independent discount rate
The Company’s projects are in a
reviews across SEEIT’s whole portfolio. ■ periodic re-contracting of revenue
number of different geographic
contracts is assumed in the Primary
regions, which diversifies and
Rising interest rates have had a
Energy projects, providing an
mitigates the impact of inflation
significant impact on the listed
opportunity to recover inflation
volatility for the portfolio. The Company
infrastructure investment company
exposure on costs or introduce
has the highest overall exposure, by
sector – not just in terms of short-term
direct inflation linkage.
country, to the USA at 59% by Gross
pressure on discount rates, but also from
(APM)
Asset Value (“GAV”), followed
a yield competitiveness perspective, as
by the UK with 20% and the rest of
alternative fixed income investments,
Europe with 20%.
such as government bonds, have
become comparatively more attractive.
16 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
STRATEGIC REPORT
Pictured: Spark Energy site
SEEIT’s Ability to Adapt to These qualities seek to ensure that Supply chain challenges have also
whether the Company is operating in been a prevailing issue across a
Changing Market Conditions
a high inflationary environment, a high number of industries, particularly in
The Investment Manager has sought
interest rate environment, a volatile the wake of the Covid-19 pandemic.
to construct a resilient portfolio with
merchant pricing environment or a The Company is seeking to leverage
defensive characteristics through
recessionary environment, overall its procurement power across its
its contractual structures and credit
portfolio cashflows can remain portfolio, with the Investment Manager
quality of counterparties.
relatively predictable over the medium connecting certain project company
to long term and downside risk is procurement teams such as UU
Counterparty credit is a key risk
mitigated. Solar and Onyx in order to improve
that the Investment Manager has
their ability to secure key equipment.
focused on when constructing the
Notwithstanding these contractual
In addition, forward purchasing of
portfolio. As at 31 March 2023, c.62%
protections, the Investment Manager’s
equipment has always been a key
of the portfolio by investment value
asset management team also works
part of the Company’s procurement
(March 2022: 60%) is associated
closely with the senior management
strategy, with regular review of stock
with investment grade or equivalent
teams within its portfolio project
inventory and consideration for lead
counterparties. Those which are non-
companies to address the impact
times in all procurement activity at a
investment grade are typically highly
of changing market conditions on
project company level.
diversified or providing vital services,
operations. This includes, for example,
often via essential industries. Since
rising labour costs in certain markets
listing, the Company has not suffered
in which SEEIT operates. Labour is
any material credit defaults across its
actively managed at a project level
portfolio.
through a number of initiatives,
which include but are not limited
SEEIT maintains a relatively low
(APM) to, apprenticeship schemes and
level of gearing versus the wider
### comprehensive succession planning The Investment
infrastructure investment company
strategies at both RED-Rochester and
### peer group, with total Group and Manager has sought
Primary Energy.
project level debt leverage as at 31
### to construct a resilient
March 2023 of 32% of NAV, in line with
### the medium-term target of 35% of NAV. portfolio with defensive
### characteristics
### through its contractual
### structures and
### credit quality of
### counterparties.
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 17
2.2 The Investment Manager’s Report
continued
### Policy Tailwinds for Energy Efficiency
USA

| The Inflation Reduction Act (“IRA”), | The IRA introduces tax credit | Overall, the recent focus on |
| --- | --- | --- |
| passed in August 2022, is the most | support for clean energy generation, | energy efficiency in two of |
| significant climate legislation in US | storage and transmission, which is a | the most significant infrastructure- |
| history, offering funding, programmes | crucial development for renewable | spending bills ever passed in the USA |
| and incentives to accelerate the | energy projects. The legislation | has made investment opportunities |
| transition to a clean energy economy. | provides certainty and continuity for | in the country increasingly appealing |
| The climate and energy industries are | clean energy incentives, benefiting | for SEEIT. The Company is monitoring |
| central to the overall financial support | decentralised energy generation | changes in policies in the USA and |
| extended under the IRA, committing | assets like Onyx Renewables. Along | evaluating areas where legislative |
| c.$369 billion to the energy transition | with the IRA, another significant | support is applicable for both new and |
| and climate change mitigation. A sum | policy development is the Bipartisan | existing investments. |
| of $47 billion has been earmarked | Infrastructure Law (“BIL”), which was |  |
| for tax credits for rebates for energy | signed in November 2021 and will |  |
| efficiency in buildings (commercial and | provide more than $1 trillion in federal |  |
| residential). By 2030, the Act will help | investment to improve the nation’s |  |
| cut US greenhouse gas emissions by | infrastructure. Of the $550 billion |  |
| roughly 42%. | of new funding provided in the BIL, |  |

approximately $76 billion is committed
to be invested in energy.
Pictured: Onyx Renewable Partner site
18 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
STRATEGIC REPORT
European Union

| Throughout the year, the European | Furthermore, in March 2023 a | The impact of the European |
| --- | --- | --- |
| Union has been working on several | provisional political agreement of the | Union’s energy-related |
| legislative packages to guide member | recast Energy Efficiency Directive | policies on the Company varies |
| states through the energy transition. | (“EED”) was reached, outlining the target | widely. The Investment Manager is |
|  | to reduce final energy consumption by | currently assessing how EU directive |

In May 2022, the European Commission
at least 11.7% by 2030. Also in March, revisions can help to unlock additional
published the REPowerEU plan, which
the European Parliament adopted draft opportunities and revenue streams for
aims to rapidly decrease the EU’s
measures on the proposed revision of project companies located within the
dependency on Russian fossil fuels,
the Energy Performance of Buildings EU, such as Värtan Gas.
outlining a legal amendment to raise
Directive (“EPBD”), which would
the target reduction in final energy
mandate that new buildings occupied,
consumption from 9% to 13%. The
operated or owned by public authorities
European Parliament proposed to raise
are zero-emission from 2026, and from
it further, to 14.5% by 2030. The plan
2028 would make rooftop solar panels
recognises that energy efficiency is a
mandatory for new residential buildings.
key solution to the energy crisis resulting
from the Russia-Ukraine conflict.
United Kingdom

| The UK Government has set an | Additionally, the UK government |
| --- | --- |
| ambitious target to reduce final energy | launched its Energy Efficiency Taskforce |
| demand from buildings and industry | in February 2023 to accelerate |
| by 15% by 2030. In order to reach the | improvements that will bring down |
| net zero target, in March 2023 the | energy bills for households and |
| government released a package of | businesses. In March 2023, a £1.8 billion |
| policy plans termed “Powering Up | outlay was announced to increase |
| Britain”, which includes the Great British | energy efficiency and cut emissions |
| Insulation Scheme that aims to deliver | of homes and public buildings across |
| up to £1 billion additional investment | England. |

by March 2026 in energy-efficient
The government’s commitment to
upgrades.
energy efficiency and the energy

| Further, the government strives to | transition has been made more apparent |
| --- | --- |
| continue its support towards the | during the year, and the Investment |
| decarbonisation of the public sector, | Manager expects this to result in |
| with £1.4 billion in grant funding for | greater investment and public-private |
| low-carbon heat and energy efficiency | collaboration opportunities for the |
| retrofits made available over the period | Company in the UK. |

2022/23–2024/25. The UK continues
the decarbonisation of the national heat
network market through the Green Heat
Network Fund and the Heat Network
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW Efficiency Scheme.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 19
2.2 The Investment Manager’s Report
continued
hands-on with management at the driving value through financial
Asset Management
ground-level. Through this approach management and operational
Overview
the Investment Manager aims to improvements;
The Investment Manager manages mitigate downsides, unlock new
■ over 250 full-time employees at
the portfolio to achieve operational revenue streams and improve margins
the project level, predominantly
efficiency, provide reliable and across the portfolio.
dedicated to “on the ground”
sustainable services to customers and
The portfolio is managed through a operations of the Company’s largest
develop value-enhancing projects.
combination of: assets in the UK, Europe and North
While the Investment Manager America; and
■ the active day-to-day involvement
manages operational challenges
of SDCL’s 50+ employees, ■ the coordinated full-time presence
that arise from time to time, it also
including an asset management of on-site teams of professional
benefits from the upside opportunities
team of senior and experienced advisers.
associated with improving project
professionals focused solely on
company operations and working
Unlocking Additional Value
The Investment Manager seeks opportunities to improve margins by enhancing operational and financial performance, unlocking
platform value and expanding the energy efficiency characteristics of an asset. Details of some key asset management initiatives
undertaken during the year can be found in Section 2.4, Portfolio Summary.
Identifying accretive Improving operational and Enhancing sustainability Achieving platform value
investment opportunities financial performance of a characteristics
Energy-as-a-service platforms
project
The Investment Manager allow for the Company
The Investment Manager
The Investment Manager consistently assesses the to achieve scale through
identifies, assesses and
engages with management efficiency of a project to opportunity to make follow-on
implements additional
teams to identify and solve improve its performance and investments in new projects.
investment opportunities
operational inefficiencies seeks to ensure the usage of
for existing projects to
The Investment Manager
and improve the financial the best available technology
achieve higher returns and
helps these platforms unlock
performance of a project. at the point of investment.
provide improved services
potential value through
The Investment Manager
to customers. These
The Investment Manager’s investment and management
also manages the ESG
improvements can include
engagement involves ensuring support, such as governance
performance of companies
unlocking additional revenue
that the management teams and operational reforming.
based on its ESG principles,
streams, identifying new
have the proper governance,
more information about which
customers, renegotiating
leadership and technical
can be found in Section 3.1,
existing contracts, and
support to run the project
ESG.
increasing generation capacity
efficiently.
and efficiency.
Mitigating Downside
Operational issues are ongoing risks in infrastructure-based portfolios, especially in the volatile macroeconomic conditions
defining the market backdrop during the past year. The Investment Manager's asset management team dedicates a similar level
of attention and resource focused on overseeing portfolio performance, managing risks and adapting to potential obstacles facing
projects as it does to unlocking additional value.
Further information in relation to the risks around asset operations performing in line with expectations is outlined in Section 3.2,
Risk Management Framework.
Details of operational issues impacting the operations of the portfolio and mitigation strategies can be found in Section 2.4,
Portfolio Summary.
20 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Pictured: Oliva Spanish Cogeneration site
STRATEGIC REPORT
Investment Pipeline Overview its target markets and geographies, Enhancing Returns Through
preferring to make investments where it
The Investment Manager is focused Development and Construction-
could add value and through a private or
on building a pipeline of investment Stage Investments
bilateral negotiation with a vendor, rather
opportunities that can complement
While the Company invests
than through a competitive auction
the existing portfolio, create synergies
predominantly in operational
process competing on price alone.
between projects and maximise overall
investments, SEEIT may invest in
value for SEEIT.
Over the next 12 to 24 months, the projects that are in a construction phase
Investment Manager expects that or development phase. The Investment
While the prevailing market environment
in excess of £200 million could be Manager recognises the value
can present some interesting
invested into organic opportunities, potential inherent in construction and
opportunities, the Investment
of which approximately £50 million development-stage assets progressing
Manager remains selective in making
is contractually committed and the through stages to become operational.
new investments, with a very small
remaining is at the discretion of the
percentage making it to the stage
The Investment Manager is therefore
Investment Manager.
of Investment Committee review. A
pleased that during the year, multiple
significant proportion of the Investment The organic pipeline includes several
investments under construction
Manager’s focus is currently on investment opportunities within the
became operational. These
evaluating initiatives within the portfolio existing portfolio, which are expected
investments include the first six sites
to optimise assets and unlock additional to contribute positively to portfolio
at EVN in the UK, energy-efficiency
value within individual projects. project valuations, such as:
retrofits at Tallaght Hospital in Ireland
and energy-efficient chillers at Lycra’s
Organic growth of the existing SEEIT ■ efficiency improvement projects at
facility in Singapore. At Red-Rochester,
portfolio currently comprises over 70% RED-Rochester, which contribute
construction work commenced to
of near-term pipeline by value through directly to increasing the project
replace chillers as well as a strategically
follow-on opportunities, often at company’s profit margin;
important new CHP plant (see Section
attractive pre-agreed rates of return.

|  | ■ further scaling of EVN as it | 2.4 Portfolio Summary for details). At |  |  |
| --- | --- | --- | --- | --- |
| Further, the Company is reviewing | continues to establish itself as one | 31 March 2023, the Company had |  |  |
|  | of the UK’s largest EV charging |  | (APM) |  |
| a good pipeline of new investment |  | c.17% of Gross Asset Value |  | (“GAV”) |
| opportunities, taking into account the | developers; and | exposed to construction-stage projects, |  |  |
| higher discount rate environment and |  | well below the 35% of GAV across both |  |  |

■ continued rollout of solar and
focusing on opportunities considered construction and development-stage
storage projects through Onyx,
to be accretive to key portfolio metrics. projects allowed under its investment
which benefits from the substantial
While the Company remains flexible in policy.
policy tailwinds associated with the
terms of which technology to employ
Inflation Reduction Act of 2022.
While construction phase investments
to address client needs and secure
offer opportunities for capital gains
required investment returns, the The Company is also evaluating two
as well as income once they become
Investment Manager seeks opportunities efficient heat project opportunities in
operational, it is important that
with competitive advantages and Europe, utilising biogas technology and
construction risks are managed. The
proprietary pipeline for the Company heat pumps.
Company has seen some construction
by investing in developers, managers
Assuming that current market delays during the year, notably in
or operators of energy efficiency
conditions remain such that the Onyx, but continues to manage those
projects, some of which involve newer,
Company is not able to undertake an situations so that the investments
commercially proven technologies.
equity capital raise, the Investment become operational as close as
Examples include rare-earth-free motors,
Manager is confident it can source possible to budget and expected
liquid cooling for datacentres and, more
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW funding for these investments timelines. The Huntsman Energy Centre,
recently, thermal storage.

|  | through a combination of current | which had previously suffered from |
| --- | --- | --- |
| The Investment Manager exercises | cash resources, existing acquisition | extensive delays, reached steam on |
| robust pricing discipline when | facilities, investment disposals and co- | date, the point at which it generates |
| evaluating any opportunities within | investment opportunities. | revenues, in June 2023. |

SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 21
2.2 The Investment Manager’s Report
continued

| Additionally, within the 35% of GAV that |  | The Company is investing in a sector | The Investment Manager is seeking |
| --- | --- | --- | --- |
| may be invested in construction and |  | for which there is an active secondary | opportunities to improve returns and |
| development-stage projects, the Company |  | market, and the Investment Manager | achieve capital gains from operational |
| may invest up to 3% of GAV in companies |  | has received inbound interest in respect | projects while looking to mitigate any |
| that are developers, | managers, or | of the disposal of certain assets within | potential downsides. Some of these |
| operators of energy efficiency projects. |  | SEEIT’s portfolio. These enquiries are | opportunities have already been included |
| This offers the opportunity for capital |  | evaluated on a case-by-case basis to | in the valuation of underlying projects. A |
| gains but also the ability to access or |  | determine whether pursuing an early | selection of other opportunities identified |
| secure pipeline for project investment, |  | exit would be in the best interests of | and described further in Section 2.4 |
| particularly where such companies |  | shareholders. | Portfolio Summary could seek to offset |
| are innovating in the context of a large |  |  | adverse value impacts experienced in this |
| total addressable market. Examples |  | Capital Markets Day | financial year. |
| of such investments include Iceotope, |  | On 14 March 2023 the Investment |  |

Energy efficiency has significant potential
which provides energy efficient cooling Manager hosted a Capital Markets
as a solution to economic, climate and
technology for datacentres; Turntide, Day for the Company at the London
energy security challenges. Reducing
which provides energy efficient and Stock Exchange. The Board and the
energy usage and energy waste is
rare-earth-free motors; and, after the Investment Manager were grateful for
as valuable as ever, providing new
year end, a company which provides the support for the event, with over 250
opportunities for the Company and its
industrial scale thermal storage in-person and virtual attendees, made up
portfolio.
solutions. More information on these of institutional investors and analysts.
investments is in Section 2.4, Portfolio The Investment Manager is seeking
The event consisted of a video interview
Summary. opportunities to improve returns and
with International Energy Agency (IEA)
achieve capital gains from operational
Executive Director Fatih Birol. This was
Strategy in Relation to Disposals projects while looking to mitigate any
followed by four panel discussions, each
The Company may choose not to exit potential downsides. A selection of these
based around one of the Company’s
certain investments until they reach the opportunities is described further in
larger groups of investments – Onyx
end of their contracted life. At this point, Section 2.4, Portfolio Summary.
Renewable Partners, Oliva Spanish
it may be possible for the Company to
Cogeneration, Primary Energy and RED- The Investment Manager continues to
extend the life of the project, subject to
Rochester. A video about the investment assess potential investment opportunities
contractual negotiations.
preceded each panel, which comprised with a focus on operational and follow-on
SEEIT will contemplate disposing of footage of the sites in operation, with investments, in addition to more limited
assets opportunistically or via targeted commentary from key senior managers investments in the development or
sales, in the near to medium term, where from the relevant project companies. construction phase.
these deliver value to shareholders.
A full video recording of the event, as Against an outlook of heightened risks
Timing of such disposals will be partly
well as the separate video interview and to energy prices, energy security and
driven by market conditions to achieve
the investment introduction videos, can decarbonisation, energy efficiency has
best outcomes for shareholders or in
be found on the SEEIT website. a crucial role to play, with the potential
order to secure capital for potentially
to offer large-scale, proven, rapid and
accretive investments. There may be
Outlook cost-effective solutions. The Investment
instances where a portfolio project is of
Manager believes that SEEIT is well
SEEIT’s portfolio has grown significantly
greater value to an external stakeholder
placed to continue to perform, deliver on
since IPO and continues to deliver
than to the Company – for example due
its investment objectives and remain a
diversified income and growth
to synergies within the third-party’s
leader in energy efficiency investment.
opportunities from a combination of
portfolio, or the ability of a third party to
follow-on investments.
recognise enterprise value or upside
potential earlier in the project’s lifecycle.
22 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## 2.3 Financial Review and
## Valuation Update
STRATEGIC REPORT
Financial Performance
The Company’s investment strategy and the Investment Manager’s focus on asset management helped manage
downside risks and target value accretive opportunities during the year, notwithstanding market volatility.
Efficient financial management, including the focus on treasury management described further below, helped
maintain consistent dividend cover and allowed the Company to capitalise on new investment opportunities.
## £(19)m £85m
(APM)
loss before tax reflects performance below Investment cash inflow from the portfolio , up
(APM)
management expectations, caused by the 31% on a portfolio basis (2022: £65 million),
(APM)
unrealised loss of £81 million from increased providing 1.2x dividend cash cover
discount rates and specific portfolio adjustments
(March 2022: £80 million profit).

| £135m | (1.8)p |
| --- | --- |
| capital raised in September 2022 – accretive to | loss per share, comprising income components |
| NAV, adding 0.7 pence. | of 5.5 pence, made up from inflation increases, |

FX gain and portfolio performance, less capital
component of 7.3 pence, made up of discount rate
movements.
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
Pictured: Capshare site
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 23
2.3 Financial Review and Valuation
continued
### Dividends

| The Company paid a total of £62 million | end of June 2023, thereby delivering | Company announced new dividend |
| --- | --- | --- |
| in dividends to shareholders during the | the target of a 6.00 pence per share | guidance of 6.24p per share for the year |
| year. This included the last quarterly | total dividend related to the year ended | to March 2024 and, as before, will target |
| dividend for the year ended 31 March | March 2023. | a progressive dividend growth thereafter. |
| 2022, and the first three quarterly |  | The Company intends to continue to pay |

Based on the projected investment
dividends for the year ended 31 March interim dividends on a quarterly basis
cashflows from the current portfolio
2023. The Company has declared the through four broadly equal instalments
prepared by the Investment Manager
fourth quarterly dividend for the year (in pence per share).
and approved by the Board, the
ended 31 March 2023, payable at the
Dividend Growth
The Company paid a stub dividend of 1 pence per share for the four-month period between its IPO and March 2019.
Thereafter, dividends reflect the full-year dividends paid or targeted in relation to each financial year.
### Analysis of Movement in NAV
During the year, the investment However there has been an overall As of 31 March 2023, the NAV per
(APM)

| portfolio has seen benefits from net FX | increase in discount rates caused by | share | is 101.5p, a decrease of 6.9p from |
| --- | --- | --- | --- |
| movements and high inflation levels. | global increases of risk-free interest | 108.4p at 31 March 2022. This decrease |  |
| During the year, the performance | rates. This has adversely impacted | reflects the impact of increased discount |  |
| of the operational assets in the | the discount rates of individual | rates (negative 7.3p) on Loss Per Share in |  |
| underlying portfolio has generally | projects in the Company’s investment | the year offset by uplifts in macroeconomic |  |
| been in line with expectations, apart | portfolio, affecting the Company’s | assumptions related to inflation of 1.5p, FX |  |
| from Oliva Spanish Generation (see 2.4 | financial performance and resulting in | movements of 0.9p, portfolio performance |  |
| Portfolio Performance for additional | a decrease in the Company’s overall | of 3.1p and accretive share issue of 0.7p – |  |
| information). | NAV. | each of which is further described below. |  |

Movement in NAV in the year (pence per share)
120
0.7
3.1
115
0.9
1.5
110 108.4 108.7
6.24
6.00 (5.9)
5.50 5.62
5.00
105
101.5
(7.3)
100
Opening Change in FX Portfolio Accretive Dividends NAV before Discount Closing
NAV macroeconomic movement issue paid Future discount rate rates NAV
performance
1.00 assumptions targets
Pence per share
24 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc Increase Decrease Total
2019 2020 2021 2022 2023 2024 2025
(APM)
### Portfolio Valuation
STRATEGIC REPORT
(APM)
The Investment Manager is responsible The Portfolio Valuation as at 31 Based on the above characteristics, as
for carrying out the fair market valuation March 2023 includes assumptions on at 31 March 2023, 79% (March 2022:
(APM)
of SEEIT’s portfolio of investments future project level revenues that are 76%) of the Portfolio Valuation by
(APM)

| (the “Portfolio Valuation” | ) which | both contracted and uncontracted (as | value is considered to be contracted |
| --- | --- | --- | --- |
| is presented to the Directors for their |  | at 31 March 2023). The definition of | and 21% (March 2022: 24%) is |
| consideration and approval. A valuation |  | contracted revenues include: | considered to be uncontracted. |

is carried out on a six-monthly basis, as
■ long-term fixed contracts Furthermore , based on the assumed
at 31 March and 30 September each

|  | (APM) |  |  | cash flows in the March 2023 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
| year. The Portfolio Valuation |  | is the |  |  |  |  |
|  |  |  | ■ rolling annual contracts (e.g. in |  | (APM) |  |
|  |  |  |  | Portfolio Valuation |  | , approximately |

key component in determining the
Värtan Gas where the majority of
73% (March 2022: 77%) of
Company’s NAV.
customers have contracts that are
portfolio revenues (contracted and
rolled over automatically on an
The Company has a single investment uncontracted as described above) are
annual basis)
in a directly and wholly owned holding linked to contracts with availability-
company, SEEIT Holdco. It recognises based, regulated or pre-determined
■ contracts due to be recontracted in
this investment at fair value. To derive the revenue characteristics, with a further
future, where there is a clear history
fair value of SEEIT Holdco, the Company 19% (March 2022: 18%) of portfolio
of recontracting and the customer
determines the fair value of investments revenues having capacity-based
does not have another viable or
held directly or indirectly by Holdco (the characteristics where there is typically
contractual source of energy (e.g.
(APM)
Portfolio Valuation ) and adjusted a right of first dispatch, whereby an
extension of existing contracts in
for any other assets and liabilities. The offtaker agrees to pay for a volume of
Red-Rochester and Primary Energy)
valuation methodology applied by output to the extent that it has demand
Holdco to determine the fair value of its The uncontracted revenues typically for it.
investments is materially unchanged relate to where assumptions have
The analysis above is based on the
from the Company’s IPO and has been been made for:
revenue projections included in the
applied consistently in each subsequent
(APM)
■ expansion of developer platforms March 2023 Portfolio Valuation
valuation. See Note 3 for further details on
(e.g., future C&I solar portfolios and excludes costs and terminal value
the valuation methodology and approach.
developed by Onyx) assumptions.
(APM)
The Portfolio Valuation as at 31
■ growth assumptions based on The weighted average remaining life of
March 2023 was £1,100 million, an
existing contracts (e.g., Red- investments as 31 March 2023 is 15.9
increase of 20% compared with
Rochester where revenue growth is years (March 2022: 14.8 years), when
£913 million as at 31 March 2022. A
assumed from successful delivery calculated purely on when current
reconciliation between the Portfolio
(APM) of value accretive capital expansion contracts end. When based on the
Valuation at 31 March 2023 and
(APM)
and addition of new customers), and March 2023 Portfolio Valuation ,
Investment at fair value shown in the
which includes recontracting and
financial statements is given in Note 11.
■ contract life extensions where the
contract life extensions, the weighted
customer can be considered to
After allowing for investments of £240 average remaining life is 28.0 years
have a viable alternative source
million (see Section 2.4, Portfolio (March 2022: 21.7 years).
of energy at the end of the
Summary for more details) and cash
existing contract (e.g., UU Solar Further information on key assets and
receipts from investments of £85 million,
(APM) and Onyx where it is assumed potential future valuation movements
the Rebased Portfolio Valuation
that the customer will seek an can be found in Section 2.4 Portfolio
is £1,069 million. After adjusting
extension for a few years instead of Summary and Note 3.
for changes in macroeconomic
decommissioning)
assumptions, foreign exchange
movements and changes in discount
■ ancillary revenues that are
rates, this resulted in a portfolio return
considered side products of
of £49 million, equating to a 4.6% return
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW primary revenues in certain
in the year. The return was affected by
projects (e.g., olive oil sales at
a number of project specific valuation
Oliva Spanish Cogeneration and
movements described under Balance of
merchant revenues from excess
Portfolio Return below.
capacity at UU Solar).
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 25
2.3 Financial Review and Valuation
continued
### Valuation Movements
(APM)
A breakdown of the movement in the Portfolio Valuation in the year is illustrated in the chart and set out in the table below.
12 month Valuation movement
(APM)
Return from the Portfolio off the Rebased Portfolio Valuation
(APM)
Each movement between the Rebased Portfolio Valuation of £1,069 million and the 31 March 2023 valuation of £1,100
million is considered in turn below:
(i) Changes in Macroeconomic Assumptions of £16.9 million:
■ Inflation assumptions: consistent with March 2022, the approach in all jurisdictions is to apply a three-year near-term
bridge to the relevant long-term inflation assumption. Given the rises in global inflation in the last 12 months, this has
resulted in an uplift in the valuation due to high near-term inflation, compared with the assumptions applied for the
March 2022 valuation or at the time of investments during the year.
■ Tax rate assumptions: there were no changes to corporation tax rate assumptions during the year.
■ Further details on the macroeconomic assumptions applied to the 31 March 2023 valuation and comparison to previous
periods can be found in Note 3.
(ii) Changes in Foreign Exchange Rates of £46.6 million (before hedging):
■ The investment portfolio gained £46.6 million during the year from movements in foreign exchange rates, driven by the
movement of GBP against the US dollar, Euro, Singapore dollar and Swedish krona since 31 March 2022 or since new
investments were made in the year. The most significant impact was due to the GBP's weakening against the US dollar,
which had a pronounced effect on portfolio valuations as SEEIT has a significant portfolio exposure to the USA.
■ However, it is important to note that this only reflects the movement in underlying investment values, and it does not take into
(APM)
account the offsetting effect of foreign exchange hedging that SEEIT Holdco applies outside of the Portfolio Valuation .
■ SEEIT Holdco experienced an aggregate loss of £36.3 million due to foreign exchange hedging. The overall foreign
exchange movements did not have a significant impact on NAV during the year, resulting in a net gain of £10.3 million
from foreign exchange movement.
(iii) Changes in Valuation Discount Rates of £(81.2) million:
■ The discount rate used for valuing each investment represents an assessment of the rate of return at which infrastructure
1,400 investments with similar risk profiles would trade on the open market.

|  |  |  | 240.3 |  |  |  | 46.6 |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 1,200 |  |  |  |  |  | 16.9 |  | 48.8 1,099.6 |
|  | ■ During the year, and in particular since early September 2022, there were significant increases in interest rates globally, |  |  |  | 1,068.5 |  |  |  |
| 1,000 | 912.7 | including in SEEIT’s key geographical areas. This has stemmed from geopolitical uncertainties and a high inflationary |  | (84.5) |  |  |  |  |

(81.2)
800 environment due, in part, to high energy costs. This has led to an increase in discount rates across the whole investment
(APM)
£m portfolio that in aggregate resulted in a decrease in the Portfolio Valuation of £81.2 million
600
400 ■ Since September 2022 there has been very little market activity to help set benchmarks for appropriate discount rates for
(APM)
the investments in the Portfolio Valuation .
200
-

|  | Valuation |  | New |  | Cash | Rebased | Macro | Foreign | Change | Balance |  | Valuation |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | as at | investments |  | receipts from |  | Portfolio | changes | Exchange | in Discount | of Portfolio |  | as at |
| 31 March 2022 |  |  |  | investments |  | Valuation | (infl. & tax) |  | Rates | Return | 31 March 2023 |  |

26 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Increase Decrease Total
- The Investment Manager considered it necessary to apply a significant increase to discount rates, and having assessed geographical areas as a whole and each project individually, has applied discount rate increases that increased the weighted average discount rate by approximately 70bps to 7.7% on an unlevered basis (March 2022: 7.0%) and 8.5% on a levered basis (March 2022: 8.0%).
- For the valuation as at 31 March 2023, the Directors commissioned a report from a third-party valuation expert to provide their assessment of the appropriate discount rate range for each investment (excluding small investments with an aggregate value of less than 2% of the Portfolio Valuation$^{iv}$) in order to further benchmark the valuation prepared by the Investment Manager. The discount rate applied to each investment by the Investment Manager were within the ranges advised by the third-party valuation expert.

# **Weighted average discount rate as at March 2023 (compared to March 2022)**

|  Levered/Unlevered | UK | US | Europe/Asia | Combined  |
| --- | --- | --- | --- | --- |
|  Levered | 7.1% (6.7%) | 8.9% (8.3%) | 8.4% (7.5%) | 8.5% (8.0%)  |
|  Unlevered | 7.1% (6.7%) | 7.9% (7.2%) | 7.4% (6.5%) | 7.7% (7.0%)  |

# **Discount rate ranges (unlevered) as at March 2023 (compared to March 2022)**

|  UK | US | Europe/Asia | Combined  |
| --- | --- | --- | --- |
|  4.75% - 8.75% | 6.50% - 9.00% | 4.75% - 10.25% | 4.75% - 10.25%  |
|  (4.0% - 8.0%) | (5.2% - 10.0%) | (4.6% - 10.0%) | (4.0% - 10.0%)  |

# **(iv) Balance of Portfolio Return of £48.8 million:**

- This refers to the balance of valuation movements in the year (excluding (i) to (iii) above), which provided an uplift of £48.8 million. The balance of portfolio return reflects the net present value of the cashflows unwinding over the year at the average prevailing portfolio discount rate, and various additional valuation adjustments described below. The portfolio delivered a return of c.5% in the year, lower than expected with details on key movements described below.
- The Portfolio Valuation$^{iv}$ as at 31 March 2023, and by implication the return achieved over the year, includes several key estimates and judgements of future cash flows expected from different investments. In addition, specific adjustments were required for events during the year that affected the actual outcome from certain investments.
- The key estimates, judgements and adjustments described below summarise those that have had a material impact on the March 2023 Portfolio Valuation$^{iv}$ and therefore the Company's NAV, defined for the purpose of this section as having a 1% impact or higher. The below movements are all between c. 1% and c. 3% of NAV.

# **Primary Energy**

- Estimates of medium to long-term energy demand expected at PCI in the Primary Energy portfolio has been lowered materially, resulting in an adverse impact on the valuation of c. £16m.

# **RED-Rochester**

- The projected growth of earnings is assumed to deliver a business capable of continuing to serve customers at the Eastman Business Park for a further 20 years beyond the lifetime previously assumed. As a result, estimates have been included, based on the assumed projected growth of earnings, that a gain share pay-out will be made to the external asset management team tasked with delivering the growth. The net positive impact of these is estimated at c. £30 million.
- Assumptions for operating costs over the life of the investment have been increased, including labour costs, chemical costs and maintenance costs. This has had an adverse impact of c. £24 million.
- Changes in the assumed future commodity pricing affecting both revenues and costs had a favourable impact of c. £17 million. In addition, due to changes in the expected energy demands of customers in the future and the increasing importance of providing electrical loads, the methodology for calculating power pricing has been updated to more closely align to current market pricing. A third-party power curve is now the basis of electricity pricing and this has had a positive impact of c. £12 million.

2023/2024

FINANCIAL REPORT

CO-OPERATION

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

EDCL Energy Efficiency Income Trust plc | DEBIT ANNUAL REPORT 2023 | 27
## 2.3 Financial Review and Valuation
continued

### Onyx

- Based on the number of underlying assets that reached completion during 2022 and a revised target set for asset completions in 2023 and 2024 caused by operational delays, there is a reduction in value of c. £16 million in the construction portfolio (Obsidian III) of Onyx, after taking into account positive impact from the Inflation Reduction Act.
- An estimate has been included that assumes Onyx continues to deliver annual portfolios of C&I solar assets until the end of 2029 (previously 2026) with no terminal value thereafter for the development platform, which has positively impacted the valuation of the development platform of Onyx by c. £30 million. This is further substantiated through the acquisition after 31 March 2023 of the remaining 50% stake of the development platform as described in Note 18.

### Oliva Spanish Cogeneration

- Following a long delay, in late 2022 and early 2023 the Spanish government published regulatory updates to the RoRi (incentive scheme to provide a return on operations and investments) for 2021 and the first half of 2022. The updates were below expectations and caused an adverse one-off impact of c. £21 million to the actual outcome of Oliva for 2022 and the expected outcome for 2023.
- The lack of RoRi updates and highly volatile commodity markets in 2022 resulted in a utilisation of the plants well below expectations, especially in the second half of 2022 – this had an adverse one-off impact of over £10 million to the actual outcome of Oliva for 2022.

### Värtan Gas

- The periodic regulatory update relevant to Värtan Gas changed both the WACC and RAB used in calculating the value of the regulated investment, causing an adverse impact on the valuation of c. £17 million. There is no impact on medium term cashflows stemming from this update as the forecast revenues at Värtan remain comfortably below the allowed revenue cap. The valuation impact is primarily driven by the impact on the assumed terminal value which is calculated as a multiple of the RAB in line with broader market practice.
- Using third-party advice, long term assumptions on the rate of growth assumed for the use of biogas in the Stockholm transport industry have been revised downwards in the Värtan Gas investment by c. £11 million, although partially offset by assumed growth in revenues generated from restaurants of c. £2 million.

### Other

- The availability of group relief for UK corporation tax has increased during the year, resulting in a positive impact on the Portfolio Valuation(29) as a whole of c. £13 million.
- A provision of c. £13 million has been included for the recoverability of a loan to FES Lighting while it is undergoing a comprehensive review of its sales strategy, led by the Investment Manager.

Additional information and sensitivities are disclosed in the critical estimates and judgements section of Note 3.

### Valuation movements during the year to 31 March 2023 (£'m)

|  Portfolio Valuation - 31 March 2022 | **912.7** |   |
| --- | --- | --- |
|  New investments | 240.3 |   |
|  Cash receipts from investments | (84.5) |   |
|   | **155.8** |   |
|  **Rebased Portfolio Valuation** | **1,068.5** |   |
|  Changes in macroeconomic assumptions | 16.9 | 1.6%  |
|  Changes in foreign exchange | 46.6 | 4.4%  |
|  Change in Discount Rates | (81.2) | (7.6%)  |
|  Balance of Portfolio Return | 48.8 | 4.6%  |
|   | **31.1** |   |
|  **Valuation as at 31 March 2023** | **1,099.6** |   |

28 | SESIT ANNUAL REPORT 2023 | ISICL Change Efficiency Income Trust plc
# Financial information

As described in detail in Note 2, the Company meets the conditions of being an Investment Entity in accordance with IFRS 10. This report is prepared on a consistent basis to previous reports whereby the IFRS 10 Investment Entity exemption is applied to the financial statements.

To provide shareholders with more transparency into the Company's capacity for investment, ability to make distributions, operating costs and gearing(APM) levels, results have been reported in the pro forma tables below on a non-statutory

"portfolio basis"(APM), as it has been done in previous years, to include the impact if SEEIT Holdco were to be consolidated by the Company on a line-by-line basis.

The Directors consider the non-statutory portfolio basis(APM) 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 impact of including Holdco is shown in the Holdco reallocation column in the Income Statement and Balance Sheet, which reconciles back to the statutory financial statements ("IFRS") and constitutes a reallocation between line items rather than affecting NAV and Earnings. In the Cashflow statement the Holdco reallocation column simply represents the net difference between the portfolio basis(APM) and IFRS for movements that may occur only in Holdco or only in the Company.

NAV per share(APM) and Earnings per share are the same under the portfolio basis(APM) and the IFRS basis.

# Summary Financial Statements

Portfolio Basis Summary Income Statement

|  £ million | 12 Month period to 31 March 2023 |   |   | 12 Month period to 31 March 2022  |   |   |
| --- | --- | --- | --- | --- | --- | --- |
|   |  Financial Basis | Holdco reallocation | IFRS (Company) | Portfolio Basis | Holdco reallocation | IFRS (Company)  |
|  Total (loss)/Income | (1.8) | (4.8) | (6.6) | 92.5 | (3.8) | 88.8  |
|  Expenses & Finance Costs | (16.7) | 4.7 | (12.0) | (12.7) | (3.7) | (9.0)  |
|  Profit/(loss) before Tax | (18.5) | (0.1) | (18.6) | 79.8 | - | 79.8  |
|  Tax | (0.1) | 0.1 | - | - | - | -  |
|  (Loss)/Earnings | (18.6) | - | (18.6) | 79.8 | - | 79.8  |
|  (Loss)/Earnings per share (pence) | (1.8) | - | (1.8) | 10.0 | - | 10.0  |

Portfolio Basis Balance Sheet

|  £ million | 31 March 2023 |   |   | 31 March 2022  |   |   |
| --- | --- | --- | --- | --- | --- | --- |
|   |  Financial Basis | Holdco reallocation | IFRS (Company) | Portfolio Basis | Holdco reallocation | IFRS (Company)  |
|  Investments at fair value | 1,099.6 | 28.3 | 1,127.8 | 912.7 | 15.5 | 928.2  |
|  Working capital | (39.9) | 37.2 | (2.7) | (10.6) | 9.4 | (1.2)  |
|  Debt | - | - | - | - | - | -  |
|  Net cash | 65.7 | (65.4) | 0.3 | 170.9 | (24.9) | 146.1  |
|  Net assets attributable to Ordinary Shares | 1,125.4 | - | 1,125.4 | 1,073.1 | - | 1,073.1  |
|  NAV per share (pence) | 101.5 | - | 101.5 | 108.4 | - | 108.4  |

■ Total income: Income at the Company level is the income it receives from Holdco which contrasts to Portfolio Basis where the income is received from the portfolio assets.

■ Expenses & finance costs: Investment transaction costs are incurred at Holdco only and therefore not included in the Company Income Statement.

■ Investment at fair value: Company valuation excludes Holdco's other net assets (see note 11 for detailed reconciliation).

■ Working Capital and cash: Holdco working capital includes a large payable to a FX hedging counterparty.

EDCL Change Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 29

10/29/2024

IFRS/IFRS/SEEDIT

COVERED BY

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION
2.3 Financial Review and Valuation
continued
Treasury Management The heightened volatility in foreign foreign exchange forward sales.
(APM) exchange markets has increased the On a capital basis, it is achieved
Cash cover for dividends paid
need for available liquidity to cover cash by hedging a significant portion of
The financial year saw cash inflow
collateral requirements and mark-to- the portfolio value through rolling
from investments (on a portfolio
market losses associated with foreign foreign exchange forward sales. The
(APM)
basis ) of £84.5 million, an increase
exchange trades. In the year, due to Investment Manager also seeks to
of circa 30% from the previous year’s
sudden sharp movements in GBP/ utilise corporate debt facilities in
£64.7 million. After allowing for fund
USD, the highest amount reached for the local currency to reduce foreign
level costs of £13.5m (March 2022:
cash collateral posted was £56 million. exchange exposure.
£10.8m), this enabled the Company
As at 31 March 2023, the amount
to cover its cash dividends of £62 As part of the Company’s hedging
outstanding for cash collateral was nil.
million by 1.2 times, maintaining the strategy, the Investment Manager
same level as the previous year. The To further manage liquidity risk, regularly reviews the non-sterling
(APM)

| Company’s average cash cover | is | the Investment Manager has taken | exposure in the portfolio and adjusts |
| --- | --- | --- | --- |
| around 1.3x since its IPO to date, and |  | measures to increase cash collateral | the hedging levels accordingly |
| the Investment Manager is targeting to |  | thresholds and diversify its exposure | while considering the cost-benefit |
| grow the near to medium-term levels |  | across multiple hedge counterparties. | of the hedging activity. The hedging |
| to above the historic average. |  | This approach has significantly | strategy also involves ensuring |
|  |  | reduced Holdco’s liquidity risk, | regular calculation of sufficient cash |

Maintaining these levels of cash
ensuring that Holdco and the headroom, so as to meet potential
(APM)
cover has resulted in cumulative
Company maintained ample liquidity liquidity requirements imposed
(APM)
excess cash cover of c. £29
levels throughout and beyond the by hedging counterparties during
million since IPO, demonstrating the
reporting period. periods of volatility that may adversely
consistent nature of the income from
affect the Company.

| the underlying assets in the portfolio, | The Company’s hedging strategy is |  |
| --- | --- | --- |
| as well as the ability of the portfolio | executed at the level of Holdco, so | As demonstrated on the next page, |
| to generate excess cash that can be | the Company itself is only indirectly | the portfolio has a substantial |
| reinvested for an accretive return. | exposed to foreign exchange | exposure to non-GBP assets. In the |
| Post year end, the surplus cash | movements. The objective of the | execution of hedging strategy, the |
| has assisted the Company with its | Company’s hedging strategy is to | Investment Manager has chosen to |
| programme of share buybacks. | protect the value of both near-term | retain high levels of hedging during |
|  | income and capital elements of the | the year, typically ranging between 90- |

Liquidity and The Company’s
portfolio from a material impact on 100% of the value of the underlying
Hedging Strategy
NAV arising from movements in non-GBP investments.
The Investment Manager has been
foreign exchange rates.
proactive in ensuring significant

| liquidity headroom to meet existing | This is achieved on an income basis |
| --- | --- |
| investment commitments and | by hedging forecast investment |
| capitalise on emerging opportunities in | income from non-sterling investments |
| both organic and inorganic pipelines. | for up to 24 months through |

30 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### FX Hedging position (local currency) as at 31 March 2023

![img-1.jpeg](img-1.jpeg)

During the year marked by sharp fluctuations in GBP/USD and the USD's strengthening, the increase in portfolio value attributed to foreign exchange was mostly negated by the hedging's foreign exchange loss. Consequently, the impact on the Net Asset Value$^{(a)(b)}$ due to currency exchange was limited to £10.3 million (0.9p/share), which equates to less than 1% of NAV.

### Impact on NAV arising from FX (£'m) in FY23

![img-2.jpeg](img-2.jpeg)

Following an assessment of liquidity risk and medium-term projections, the Investment Manager has concluded that SEEIT Holdco should lower its current hedging level and focus on hedging 75% to 90% of its non-GBP assets going forward. This target range remains within the parameters previously agreed with the Directors through the Company's Treasury Policy, thus the overall hedging strategy and objective are unchanged from before. This move is expected to result in reduced liquidity risks and increased cash and RCF availability, enabling the Investment Manager to invest in new and existing projects accretive to the Company's total return prospects without the need for higher levels of cash/RCF buffers for hedging commitments.

OVERVIEW

WINNEGIE REPORT

GOVERNANCE

FINANCIAL INVESTMENTS

ADDITIONAL INFORMATION

EDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 31
2.3 Financial Review and Valuation
continued
Revolving Credit Facility Ongoing Charges Ongoing charges, in accordance
with AIC guidance, are defined as
The Investment Manager periodically The Portfolio’s ongoing charges
(APM) annualised ongoing charges (i.e.
considers refinancing options aligned ratio remained in line with before
excluding acquisition costs and other
to the pipeline of new and existing at 1.02% (March 2022: 1.00%),
non-recurring items) divided by the
investments. During the year SEEIT the marginal increase stemming
average published undiluted net asset
Holdco increased its RCF by £35 predominantly from the impact of
value in the year). Ongoing Charges
million to £180 million, through a increased discount rates and the
percentage has been calculated on
partial exercising of the accordion associated adverse impact on NAV as
(APM)
the portfolio basis to take into
option. At 31 March 2023 the RCF described elsewhere in this section.
consideration the expenses of the
was undrawn.
Company and Holdco.
Portfolio Basis Cash Flow Statement
31 March 2023 31 March 2022
Portfolio Holdco IFRS Portfolio IFRS
£ millions Basis reallocation (Company) Basis Holdco (Company)
Cash from investments 85.1 (0.3) 84.8 64.7 (11.7) 53.0
Operating and finance costs
outflow (13.1) 3.1 (10.0) (11.8) 2.9 (8.9)
Net cash inflow before
capital movements 72.0 2.8 74.8 52.9 (8.8) 44.1
Cost of new investments
including acquisition costs (240.2) (52.2) (292.4) (304.9) (14.9) (319.8)
Share capital raised net of
costs 132.6 – 132.6 343.9 – 343.9
Movement in borrowings 29.6 (29.6) – (1.7) 1.7 –
Movement in capitalised debt
costs and FX hedging (37.3) 38.5 1.2 (1.3) 1.3 –
Dividends paid (62.0) – (62.0) (44.2) – (44.2)
Movement in the period (105.3) (40.5) (145.8) 44.7 (20.7) 24.0
Net cash at start of the period 170.9 (24.9) 146.1 126.2 (4.1) 122.1
Net cash at end of the
period 65.6 (65.3) 0.3 170.9 (24.9) 146.1
Investment cash inflows from the £119 million invested as follow-on in in operational existence for the
(APM)

| portfolio | on a Portfolio Basis were | existing investments and transaction | foreseeable future. Therefore, they |
| --- | --- | --- | --- |
| £85.1 million (2021: £64.7 million), |  | costs (transaction costs are included | continue to adopt the going concern |
| includes £84.5 million cash from |  | at Holdco and not included in the | basis of accounting in preparing the |
| portfolio investments plus other |  | Company Income Statement). Further | financial statements. Further details of |
| interest income. |  | details can be found in Section 2.4, | the processes carried by the Company |
|  |  | Portfolio Summary. | in determining that the going concern |

The total cost of investments by the
basis continues to be appropriate
(APM)
SEEIT group on a portfolio basis Going Concern
including the upcoming continuation
was £240.2 million (March 2022:
The Directors believe that the Group vote, can be found in Section 4.3,
£304.9 million), including a further
has adequate resources to continue Report of the Directors and Note 2.
32 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## 2.4 Portfolio Summary
### Investment Update
STRATEGIC REPORT

| During the financial year, SEEIT | The Investment Manager has actively | ■ geothermal power and heating; |
| --- | --- | --- |
| successfully invested c.£240 million | sought to make investments in a wider | ■ energy-efficient motors, free of |
| in six new and seven follow-on | range of technological solutions for | rare earth minerals; |
| investments and commitments. | energy efficiency. For example, since |  |

■ datacentre liquid cooling; and
A further c.£30 million has been 31 March 2022, SEEIT has made
■ behind-the-meter solar PV, wind
invested since 31 March 2023 investments focused on supply and
and hydropower.
into two new and four follow-on distribution and demand reduction
investments and commitments. involving:
Inorganic Investments Made During the Year
Investment/
Investment/ commitment
Project Description commitment date Location amount
6
Baseload Convertible debt investment into a May 2022 Sweden c.£4m
portfolio of small-scale geothermal
projects that utilise existing heat sources.
Sweden
Turntide Energy-efficient variable-speed motor May 2022 USA c.£8m
USA systems technology that reduces carbon
emissions, providing energy cost savings
to various industries without incorporating
environmentally damaging rare earth
minerals used in alternatives.
Iceotope Data centre immersion cooling technology June 2022 UK c.£3m
UK
providing significant reduction in energy
usage and associated CO2 emissions
versus traditional air-cooling technology.
UU Solar Portfolio of predominantly solar PV assets, July 2022 UK c.£100m
UK
providing renewable energy generated on
site directly to the end user across North
West England.
7
On.Energy Investment in battery energy storage August 2022 USA c.£4m
USA systems (“BESS”) and microgrids solutions
provider, focusing on delivering long-term,
on-site “energy storage as a service”
projects.
8
Bloc Power Energy efficiency solutions, including heat November 2022 USA c.£0.2m
USA pumps, LED lighting, solar PV, battery
storage, etc, for small and medium-sized
enterprises and low-to-moderate income
communities in New York State.
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
6 A total commitment of c.£21m (€25m), of which c.£4m had been deployed by 31 March 2023
7 A total commitment of up to c.£9m (US$10m), of which c.£4m had been deployed by 31 March 2023
8 A total commitment of c.£6m ($8m), of which c.£0.2m had been deployed by 31 March 2023
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 33
2.4 Portfolio Summary
continued
Organic Investment Activity During the Year
Investment/
Project Location commitment amount
Biotown USA c.£1m
Onyx USA c.£50m
Spark US Energy Efficiency II USA c.£13m
9
Tallaght Hospital Ireland c.£4m
EV Network UK c.£23m
FES Lighting USA c.£6m
Lycra Asia c.£3m
RED-Rochester USA c.£16m
Investment Activity Since Year End
Investment/
Project Investment Date Type Location Commitment Amount
10
Onyx Development June 2023 Follow-on USA c.£4m
Platform – remaining
50% interest
CPP Biomass June 2023 Inorganic USA c.£1m
Thermal energy June 2023 Inorganic USA c.£2m
storage company
Spark US Energy Various Follow-on USA c.£7m
Efficiency
RED-Rochester Various Follow-on USA c.£12m
Onyx Various Follow-on USA c.£1m
FES Lighting Various Follow-on USA c.£2m
9 A total commitment of up to c.£6m (€6m), of which c.£4m had been deployed by 31 March 2023
10 £4m ($5m) upfront consideration, plus performance related contingent deferred consideration in future periods
34 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## Portfolio – Key Updates
### Overview
STRATEGIC REPORT
Pictured: Oliva Spanish Cogeneration site

| SEEIT has made several larger | Manager will continue to engage with | by the Investment Manager across |
| --- | --- | --- |
| investments since listing, which form | the Company’s shareholders and | the larger investments but not yet |
| a foundation for overall portfolio | evaluate the benefits of increasing | included in the March 2023 Portfolio |

(APM)

| cashflows as well as providing | disclosure further in future. | Valuation | . These opportunities |
| --- | --- | --- | --- |
| established platforms to generate |  | alone could potentially add over |  |
| growth opportunities. Some of these | For a more comprehensive | £150 million to the NAV over the next |  |
| investments consist of a number | understanding of these investments, | 2-5 years, although there can be no |  |
| of distinct individual projects and | Section 2.3, Financial Review and | guarantee that this will be realised. In |  |
| therefore 21 individual projects are | Valuation Movements, the principal | addition there is a pipeline of identified |  |
| represented by this section. | risks in Section 3.2, Risk Management | upside opportunities that are yet to |  |
|  | Framework and Note 3 in the financial | be reliably quantified. As a result, the |  |
| The largest six investments | statements provide further details. | Investment Manager expects the NAV |  |
| (consolidated) are diversified across |  | accretive opportunities to continue to |  |
| the UK, North America and Europe | The revenues referred to in this | develop over the next few years. |  |
| and make up c.78% of SEEIT’s | section describe the revenues that are |  |  |

(APM)

| total portfolio by value. A detailed | assumed in the Portfolio Valuation | Data shown below in this Section 2.4, |
| --- | --- | --- |
| summary of these investments and | and therefore includes both contracted | Portfolio Summary is as at 31 March |
| their performance during the year is | and uncontracted revenues. This |  |

2023 unless otherwise stated.
outlined below. is explained further in Section 2.3,
Financial Review and Valuation
In comparison to previous periods, Update.
this section increases the overall
disclosure of SEEIT’s key underlying This section also highlights some of
portfolio investments, including the the upside opportunities, a number of
provision of specific project-level which would require further upfront
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
KPIs. The Board and the Investment investment, that are being developed
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 35
## RED-Rochester
### One of the largest commercial district energy systems in North America
Investment Highlights Investment
Investment type Direct equity (100%)
RED-Rochester is the exclusive provider of select utility services to
Acquisition date May 2021
customers within the Eastman Business Park (“EBP”), for which it has
Asset location Rochester, NY contractual and regulated utility-status franchise rights.
No. of projects 1 The asset provides 16 on-site services to customers that reduce
Project equity value c.$314 million customer energy demand compared with local utility and third-party
and as a percentage (c. GBP 254 million) service providers. These services include electricity, steam, chilled
of SEEIT’s GAV (c.22%) water, industrial wastewater treatment, compressed air, nitrogen, water
Project level debt treatment, industrial water and high-purity water distribution.
c.$75 million
Capacity 117MW RED-Rochester provides SEEIT with a platform to grow the delivery
of on-site energy efficient services to the local region, including the
Technology 16 on-site services, primarily process/heating steam,
electricity, and process/conditioning cooling expansion of operations beyond the EBP to greater Rochester and the
Northeast of the USA.
Forecast project life c. 40 years
remaining

| Lifecycle stage | Operational | 11 |
| --- | --- | --- |
| Counterparties / | Over 115, including Eastman Kodak, Li-Cycle, Amazon, |  |
| offtakers | among others |  |
| O&M | RED-Rochester staff |  |
| Fuel supply | Natural gas supplied from Rochester Gas & Energy Corporation |  |

RED-Rochester Revenues and Cost Model
Net Cash Flows
Power & other
services
End User Natural gas:
Services passthrough to end user
Customers in
Eastman Business Various
Park Long-term
fi xed tariff
Usage based
variable costs

|  | Usage-based |  | Various | Costs |
| --- | --- | --- | --- | --- |
|  | variable tariff | District energy system |  |  |
| Revenue |  | providing 16 utility |  |  |

services to Eastman
Business Park Fixed Overheads
Overhead Red Rochester
margin tariff
The project is underpinned by predominantly long-term contracted cashflows with positive inflation correlation. RED-Rochester has contracts with
over 115 commercial and industrial customers on fixed terms under an approved tariff structure as follows:
(APM)
• Customers typically sign a 20-year contract with no break clauses. Contract extensions are assumed in the March 2023 Portfolio Valuation .
Revenues are split:
• Fixed charge: c.40% of revenues are generated from fixed fees paid, unrelated to demand or services procured.
• Capacity based charge: c.50% of revenues are from a pre-determined tariff, based on the cost of delivery of the service and the customer’s
demand.
• Overhead: c.10% of revenues are from a fixed mark-up for each customer on the total utility bill.
11 With opportunity to undertake construction/development stage accretive capital enhancements
36 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Future cashflows are also assumed from growth opportunities, including the accretive capital enhancements such
as the CHP plant described below that is expected to increase revenues in the future.
Investment Risks and Mitigants
Risk Type: Description Mitigation
Operational Construction delays of capex The Investment Manager ensures that, where appropriate, project contracts include
projects, including the CHP liquidated damages for delays should they overrun schedule. The schedules also assume a
plant. buffer for delays.
STRATEGIC REPORT
Credit Default of counterparties. By providing services to over 100 customers across the park, the credit risk is diversified. The
Manager works with other stakeholders to ensure the creditworthiness of new customers
does not degrade the overall credit profile. In addition, the fixed charge component of the tariff
is joint and several between customers, thus limiting the impact of any potential default.
Operational Demand risk resulting in the Demand from the customers at RED-Rochester is relatively stable. The majority of the
lower-than-expected customers were deemed as “critical industry” during the Covid-19 pandemic period, with
variable tariff revenues. demand remaining in line with expectations. The diversification across 100 customers
helps mitigate against individual customer demand volatility.
Project Key Performance Indicators (KPIs)
## $14,628 7,005,222
13
EBITDA (US$ ‘000’s) MMBTUs delivered to customers
12
Year to 31 December 2022 Year to 31 December 2022
Value Accretion Potential Investment Updates in the Year
There are two potential sources of value accretion at RED-Rochester: The Investment Manager has progressed several growth initiatives that will
support the operational and financial performance at RED-Rochester.
■ Increasing Fixed Revenues: EBP is currently underutilised and has
In July 2022, a three-year asset management agreement was signed with
capacity to service more customers. As new tenants join EBP, RED-
Ironclad for management oversight of the asset’s administration, finance,
Rochester can benefit from increased profits from the additional fixed fee
operations and maintenance activities, as well as project management and
that each new customer will pay.
execution of major accretive projects. As part of this agreement, the Investment
■ Improving Efficiency: the variable charge is based on a baseline efficiency Manager and Ironclad agreed on incentives aimed at growing RED-Rochester’s
of the cost of delivering services. If RED-Rochester is able to improve the EBITDA through marketing efforts to attract new customers and implement
efficiency of its operations and reduce this cost, it is able to capture the value-added projects.
financial benefit of this reduced cost. The Investment Manager also completed negotiations to bring lithium-ion
battery recycler Li-Cycle to the EBP, providing a new processing centre and
There are several examples of upside opportunities at RED-Rochester that
warehousing multiple utility services.
have not been reflected in its current valuation, but could provide additional
value over the short to medium term, including: Several capital projects were also approved in the year, including:
■ a c. £7 million new chiller installation, for which construction commenced in
Increasing Fixed Revenues:
2022 and is expected to complete in 2024.
Converting 5% higher new customers to the EBP above forecasted in the
(APM) ■ a c. £69 million CHP plant (cogeneration turbine generator and heat recovery
Portfolio Valuation .
steam generator), for which construction commenced in 2023 and expected
Estimated potential value uplift: £10 million - £20 million to complete in 2025.
Time period: 2-4 years ■ a c. £13 million investment to support Li-Cycle’s new processing centre and
warehouse, for which construction commenced in 2022 and is expected to
Improving Efficiency:
complete in 2024.
(APM)
CHP plant constructed on time and on budget (the Portfolio Valuation at
Finally, the Investment Manager engaged with the RED-Rochester management
31 March 2023 applied a probability factor and higher discount rate for the
team to strengthen governance and employment opportunities, including:
construction activity).
■ The appointment of a new CEO to RED-Rochester to support business
Estimated potential value uplift: £10 million - £15 million
development at EBP and pursue new opportunities in district energy in the
Time period: 2-3 years northeast USA.
■ the creation of staffing and leadership succession plans to manage eventual
Investment in other energy efficiency projects that result in cost savings
(APM) staff changes and employee resource efficiency.
(the Portfolio Valuation at 31 March 2023 applied a probability factor and
higher discount rate for the construction activity). ■ the implementation of an internship programme to bring undergraduates
and technical students to RED-Rochester and therefore support
Estimated potential value uplift: £5 million - £10 million educational programmes, promote ESG community outreach and identify
potential new hires.
Time period: 1-3 years
■ the hiring of additional managerial and technical staffing at the EBP
Cost recovery of future fixed overheads based on management’s planned wastewater treatment facility in order to improve environmental compliance.
actions over the medium-term. EBITDA was c.11% below budget for the year to December 2022, primarily driven
by some unplanned maintenance as well as higher than expected chemical costs,

|  | Estimated potential value uplift: | £5 million - £10 million |  |
| --- | --- | --- | --- |
| GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW |  |  | which could not be passed through during the period. This cost increase has been |
|  | Time period: 3-5 years |  | incorporated into the current valuation. |

Additionally, the MMBTUs delivered were c.4% under budget, driven by lower
heat demand due to a milder winter in Rochester. Slight weather adjusted
fluctuations in output, both up and down, are to be expected over the long term.
12 Unaudited figures
13 Million British Thermal Units. This KPI represents annual heat demand from the customers.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 37
## Onyx Renewable Partners (“Onyx”)
### C&I Solar and Storage Platform in the USA

| Investment Highlights |  | Investment |
| --- | --- | --- |
| Investment type | Direct equity (100% of operational assets, 50% JV |  |
|  | in development platform) | Onyx Renewable Partners is a large and established C&I solar and |

storage platform, with over 200 commercial and industrial customers
Acquisition date February 2021
across its operational, construction and development stage assets.
Asset location Currently operational in over 13 states in the USA
SEEIT’s investment is structured as follows:

| No. of projects | 6 |  |  |
| --- | --- | --- | --- |
| Project equity value | c.$200 million (c. GBP 161 million) | • 100% ownership of portfolios of projects that are operational (SMIII, |  |
| and as a percentage | - Onyx – SM III, Janus II, and CTAZ operational portfolios |  | Janus II, CTAZ, and Obsidian I, totalling 72MW) or in construction/ |
| of SEEIT’s GAV | (c.3%) |  | late-stage development (Obsidian II totalling 106MW). |

- Onyx – Obsidian I operational portfolio and Obsidian II
construction/late-stage development portfolio (c.10%) • 50% ownership of the Onyx development platform with Blackstone,
- Onyx – Development Platform (c.2%) with SEEIT retaining the right to acquire pipeline projects at a pre-
Project level debt c.$81 million agreed price.
Capacity 72 MW operational Onyx provides SEEIT with a well-established platform to expand its
on-site solar and storage presence in North America. The investments
Technology Solar and storage
have strong energy efficiency characteristics, increasing the supply
Forecast project life c. 34 years
of on-site renewable energy and helping to reduce greenhouse gas
remaining
emissions from the supply, distribution and consumption of energy.
Lifecycle stage Development, construction, operational
Counterparties / Over 80 across operational and construction sites
offtakers
O&M Various
Fuel supply N/A
Onyx Portfolio Revenues and Cost Model
The 100% owned portfolio consists of
operational, construction and late-stage
development projects and makes up c.88%
of the investment’s value. The projects in
the portfolio have the following revenue
Net Cash Flows
structure once they are operational:

|  |  | Onsite Power | • Power Purchase Agreements (“PPAs”): |
| --- | --- | --- | --- |
| Services | End User |  |  |
|  | Commercial & |  | c.95% of asset revenues are generated |

Industrial Customers
O&M: Fixed price – from the end users. PPAs have fixed
annual rolling contract
Long-term PPA indexation and are typically 20 years
Various
(weighted average of c.18 years).

|  | Existing asset |  | Costs |  |
| --- | --- | --- | --- | --- |
|  |  | AM: fi xed price – |  | • SRECs: c.5% of asset revenues are |
| Revenue | portfolio |  |  |  |

annual rolling contract
generated from SRECs.

|  | 100% SEEIT | Onyx |  |
| --- | --- | --- | --- |
| RECs: medium term | Owned asset |  |  |
| fi xed price |  |  | The valuation assumes that the current |

US Gov
construction and development stage
projects within this portfolio will become
operational within a defined timeframe.
Onyx Developer Revenues and Cost Model
The Onyx development platform makes up
c.12% of the total Onyx value and has the
following revenue structure:
• Asset Management fees: c.52%,
Net Cash Flows
generated from AM fees charged by
Proceed of Sales Onyx for managing operational portfolios.
including
original capex
• EPC Development margin: c.33%,
achieved on commercial operation date
EPC margin and

|  | development fees from |  |  | for delivery of certain assets. |
| --- | --- | --- | --- | --- |
|  | sale of assests to SEEIT | Development |  |  |
| Asset Buyer | (or another thrid party) | platform | Capex payment for |  |
|  |  |  | devleopments of new | • Asset sales: c.15%, based on the net |
|  |  | 50:50 JV with | projects, jointly funded |  |

proceeds from the future sale of assets
Blackstone to
Asset management develop and sell developed in the pipeline after the
revenue assets to SEEIT
130MW of 100% SEEIT-owned projects
are constructed.
38 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
# Investment Risks and Mitigants

|  Risk Type | Description | Mitigation  |
| --- | --- | --- |
|  Operational | Delay in the deployment of the short-term pipeline impacts the receipt of cashflows for the 100% owned assets as the valuation assumes from reaching commercial operations date ("COD") within a defined time period. Conversion of development pipeline to operational projects is less than projected. | The Investment Manager has been focused on accelerating the conversion of Onyx's pipeline by streamlining the development process and hiring key individuals. In addition, the pipeline has increased substantially so that, should some projects experience significant delays, other projects can make up the MW target.  |
|  Operational | Underperformance of operational projects. | Onyx minimises the potential of underperformance by building projects using tier 1 equipment with equipment warranties and using local subcontractors, with oversight, for O&M.  |
|  Operational | Supply chain issues/cost increases. | As projects are being developed, PPA pricing takes into account construction and operational costs identified at the time of signing. Additionally, recordability opportunities exist to further enhance revenues to protect margins, if required.  |

# Project Key Performance Indicators (KPIs)

14MW

New projects at COD

Year end 31 December 2022*

64,942

MWh produced (operational

projects only)

Year end 31 December 2022

95%

Performance ratio*

Year end 31 December 2022

# Value Accretion Potential

There are two potential sources of activity for value accretion:

■ Increasing the pipeline of solar and storage projects in the Onyx development platform. This creates value uplift as follows:

- The Onyx development platform valuation assumes a forecast level of MW under management over a period, with value created through cashflows from AM, EPC and Asset Sales. Increasing the MW in the pipeline increases the value of the platform.

■ Improving the economics of new individual solar projects will create value for SEIST given it has an option to acquire the projects at pre-agreed rates of return.

There are several examples of upside opportunities at Onyx that have not been reflected in SEIST's valuation, but could provide additional value over the short to medium term, including:

A potential 10% increase in expected annual MW deployment in 2024 and 2025 would accelerate the receipt of cashflows for the 100% owned portfolio.

Estimated potential value uplift: £5 million - £10 million

Time period: 3 years

In addition, the value of the Onyx development platform assumed a level of MW of projects developed per year and any increase in MW would increase the value of the platform.

Estimated potential value uplift: £5 million - £10 million

Time period: 3+ years

Improved economics with the Inflation Reduction Act: this benefits the Onyx development platform as it improves the economics of any assets sales.

Estimated potential value uplift: £2 million - £5 million

Time period: 3-5 years

14 Unscathed figures

15 MWh annual / MWh expected based on budget and available incidence

# Investment Updates in the Year

The Investment Manager has worked closely with the Onyx team to ensure that the investment has the right leadership and support to develop and convert its project opportunity pipeline. Specific actions included:

■ The integration of a new CIES, who joined in January 2022 to oversee operations, asset management and business development.

■ The expansion of the management team to enhance governance and leadership at Onyx, through the hiring of a Chief Commercial Officer and Executive Vice President, Operations.

■ The reorganisation and prioritisation of business initiatives to drive improvements in portfolio operational performance, improve timely completion of development projects, and expand services and product offerings.

Additionally, the new management team is putting a focus on the business development strategy to expand beyond commercial and industrial solar and storage development. The Investment Manager continues to pursue new opportunities for behind-the-meter solar and storage development from Onyx's relationship network, as well as through the Company's portfolio through ongoing discussions at Primary Energy, RED Rochester and FES Lighting.

The Company was also pleased, after year end, to acquire the remaining 90% interest in the Onyx Development Platform from Blackstone giving it 100% ownership of the entire Onyx Investment.

Annual delivery of projects to COD increased c.76% in the year to December 2023. However, this was under budget by c.74% due to continued supply chain issues relating to certain major components, partly resulting from lingering effects of Covid-19. Furthermore, permitting and inspection delays for construction activities have slowed the ability for projects to reach COD. In the short term, this has been mainly a timing issue rather than losing projects. As a result of positive changes in the business over the past year, management has brought a number of projects back on track and in the first quarter of 2023 Onyx achieved a new record for project PPA's signed since SEIST's investment of 28MW.

Certain one of maintenance issues with the operational projects resulted in c.5% lower production and performance than budgeted for the period. These issues are in the process of being resolved by the Onyx management team and are not expected to materially affect production going forward.

SDCL Energy Efficiency Income Trust plc | SEIST ANNUAL REPORT 2023 | 39

2/4/2024

WPA/PAGE REPORT

CO-OPERATION

FINANCIAL INFORMATION

ADDITIONAL INFORMATION
# Primary Energy

Portfolio of on-site waste recycling cogeneration units, servicing the largest steel blast furnace in the USA

Investment Highlights

|  Investment type | Direct Equity (100% in four projects and 50% in one project)  |
| --- | --- |
|  Acquisition date | December 2016 (50%), December 2020 (15%), September 2021 (30%)  |
|  Asset location | Indiana, USA  |
|  No. of projects | 5  |
|  Project equity value and as a percentage of SEEIT's NAV | ≤ $241 million (i.e. GBP 100 million) Consisting of: - Primary - Coleman (c.9%) - Primary - North Lake (c.4%) - Primary - Portside (c.2%) - Primary - Inconel (c.1%) - Primary - PCI Associates (c.2%)  |
|  Project level debt | ≤ $140 million  |
|  Capacity | 2500MJ  |
|  Technology | On-site cogeneration, waste heat recovery process efficiency  |
|  Forecast project life remaining | c. 22 years  |
|  Lifecycle stage | Operational  |
|  Counterparties / offshoot | Cleveland Cliffs, US Steel ("US$")  |
|  O&M | Primary Energy, Cleveland Cliffs, USA Steel  |
|  Fuel supply | Waste gases from CO, Natural gas supplied via CC  |

Investment

|  Primary Energy is a 2500MJ portfolio 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 USA, one owned by Cleveland Cliffs ("CC") and the other by Midwest Steel, a subsidiary of United States Steel Corporation ("US$"). The projects provide services critical to the operations of the steel mills, including fuel handling and emissions control equipment. Primary Energy has overall responsibility for the O&M of the projects but uses line staff seconded from CC and US$ under contracts for site operations.  |
|  Primary Energy generates energy for the blast furnaces at the steel mills through the recycling of waste gases, playing a crucial role in reducing harmful emissions such as CO2 and SO2, and in certain cases, serving as the sole source for emissions control equipment and fuel handling. Primary Energy also improves energy efficiency by bringing energy generation closer to the point of use and reducing heat wasted in the steel making process.  |
|  The projects qualify for RECs that, due to their efficiency and environmental impact, are equivalent to those generated by approximately $200MJ of solar or $74MM of wind projects.  |

Primary Energy Revenues and Cost Model

![img-3.jpeg](img-3.jpeg)

Approximately 50% of Primary Energy's revenue can demand from energy services to CC's Blast Furnace ("BF") #1 at Midwest Harbor Works, which is considered to be the largest and most competitive furnace facility of its kind in North America. The remaining revenues are derived from the Portable Project which services US$ BF #14. Primary Energy's revenues are split in the following way between the five different projects:

- Cokenergy (c.57% of revenues): the project receives waste gas and converts to power and steam to sell to CC's BF #7 through a long-term PPA that is index linked. The revenues are protected from demand fluctuations through a true-up mechanism.
- North Lake (c.19% of revenues): the project receives waste gas steam and converts into power and steam and sells back to BF #7 through a long-term PPA, which is index linked. The revenues are protected from demand fluctuations through a true-up mechanism.
- PCI (c.7% of revenues): the project is 50% owned with Cleveland Cliffs, the asset pulverises coal for steel production. Revenues are demand based.
- Portside (c.17% of revenues): the project's revenues generated through the sale of heat, power and softened water through a long-term PPA. Revenues are capacity based.
- Renewable Energy Certificates ("RECs") (c.4% of revenues): the RECs are generated by Cokenergy and North Lake and are sold in the open market.

40

SEEIT ANNUAL REPORT 2023 / SDCL Energy Efficiency Income Trust plc
# Investment Risks and Mitigants

|  Risk Type: | Description | Mitigation  |
| --- | --- | --- |
|  Operational: | Recontracting of existing PPAe is assumed in the forecasts and risk of recontracting terms being below forecasts. | Primary Energy assets play a critical role in the operations of two of the most profitable and critical (best furnaces in North America by providing significant cost savings and emissions reductions). The Investment Manager believes that alternative energy sources would not be able to compete on the same terms and associated benefits.  |
|  Credit: | Offtaker is currently sub-investment grade. | Further to the sale by Arestol Mittal N.A. to CC in 2021, the largest offtaker within the Primary Energy portfolio is sub-investment grade. The ticket furnaces associated with the Primary Energy assets are some of the largest in the USA and are highly profitable. Given their importance to the North America steel market, the likelihood of not finding a buyer, in the event of a credit default by CC, is considered low.  |
|  Climate: | Development of new technologies may displace or make obsolete existing pulverised coal injection ("PCI") technology, leading to reduction in revenues. | The Investment Manager is working with CC to assess options for employing best available technologies and will display, and/or replace, them into existing assets if necessary.  |

# Project Key Performance Indicators (KPIs)

$36,450

163.4

EBITDA (US$ '000's)

Year end 31 December 2022

Average Net Production (MWh)

Year end 31 December 2022

# Value Accretion Potential

Examples of upside opportunities at Primary Energy that have not been reflected in SEBIT's valuation, but could provide additional value over the short to medium term, include:

Additional revenue streams and contracts from existing assets e.g. capacity contracts.

|  Estimated potential value uplift: | £5 million - £10 million  |
| --- | --- |
|  Time period: | 2-5 years  |
|  Additional energy efficiency capex to improve operations that also generate attractive returns.  |   |
|  Estimated potential value uplift: | £2 million - £5 million  |
|  Time period: | 2-3 years  |
|  BF #4 restarted by Cleveland-Clift's resulting in Ironside returning to operations but at reduced output  |   |
|  Estimated potential value uplift: | £20 million - £40 million  |
|  Time period: | Uncertain  |

# Investment Updates in the Year

The focus at Primary Energy has been on maximising operational performance at the Primary Energy sites. In March 2022, Primary Energy customer CC announced the idling of its BF #4 steel manufacturing facility, resulting in operational idling of Primary Energy's Ironside project. This was provided for as at March 2022. The Investment Manager has supported Primary Energy leadership in their development of an interim operating agreement proposal, signed in Q1 2023, for the continuation of select operations at Ironside that save CC costs.

This extended the existing contract from a day-to-day basis, creating the potential for incremental revenues in the future.

The Investment Manager is collaborating with Primary Energy and CC on operations at PCI, which provides pulverised elemental coal, essential for steelmaking in CC's largest North American blast furnace. The Investment Manager has identified options to extend the asset life as well as end-of-life technology alternatives.

Additionally, the Investment Manager is supporting the negotiations between Primary Energy and CC in renewing the existing ten-year operations agreement and therefore continue supplying CC with essential energy and environmental services.

The Investment Manager also initiated reviews with brokers and underwriters to take credit for existing Primary Energy initiatives and outage planning to lower the overall cost of insurance, resulting in premium rate decreases in 2022.

The 2022 EBITDA was c.18% below budget, primarily due to idling of BF #4 and resultant operational idling of the Ironside project facility. The valuation of Ironside assumes that BF #4 will remain idled indefinitely and does not consider the possibility of it being re-started.

Additionally, operations and maintenance costs at Cokemergy and Portside projects came in higher than budgeted during the year, which has also been reflected in future cashflows, adversely affecting the valuation of these projects. The Investment Manager is working with stakeholders through ongoing contractual negotiations with the objective of recovering these costs in future periods.

Unplanned outages at CC facilities, Primary Energy's source of waste heat, affected production at North Lake and Cokemergy which contributed to Average Net Production being c.8% below budget for the year to December 2022. Some of the revenues related to this lost production will be recovered via a contractual true-up in the next calendar year.

18 Unpublished figures

EDCL Energy Efficiency Income Trust plc | SEBIT ANNUAL REPORT 2023 | 41

DIAGNOSIS

HYDROGEN REPORT

GEOTECHNICS

HYDROGEN OPTIMISTICS

ADDITIONAL INFORMATION
## Oliva Spanish Cogeneration (“Oliva”)
Portfolio of on-site waste recycling, on-site generation and process efficiency supporting
the olive oil industry in Spain

| Investment Highlights |  | Investment |
| --- | --- | --- |
| Investment type | Direct equity (100% owned, apart from Celvi which is 90% |  |
|  | owned with 10% owned by the offtaker) | Oliva Spanish Cogeneration, located in southern Spain, comprises nine |

operating projects, of which five are efficient, natural gas cogeneration
Acquisition date November 2019
(CHP) plants with a combined capacity of 100MW, two are olive waste
Asset location Andalucía, Spain
biomass plants with a combined capacity of 25MW, and two are olive
No. of projects 9 pomace processing plants.
Project equity value c. EUR 129 million (c. GBP 114 million)
Oliva Spanish Cogeneration brings geographical diversification to SEEIT,
and as a percentage Consisting of:
through a series of efficient cogeneration plants that deliver on-site
of SEEIT’s GAV - Oliva - Celinares (c.2% of GAV)
- Oliva - Colinares (c.1%) energy generation.
- Oliva - Cepuente (c.2%)
- Oliva - Cepalo (c.1%) The investment has good yield metrics and inflation correlation, as
- Oliva - Sedebisa (c.2%) well as robust energy efficiency credentials as the assets bring heat
- Oliva - Bipuge (c.1%)
generation closer to the point of use. As a result, they generate process
- Oliva - La Roda (c.1%)
- Oliva - Celvi (c.1%) efficiencies compared with alternative heat sources. In addition, the

|  | - Oliva - Biolinares (c.1%) | assets process waste pomace to produce Orujo oil and electricity, an |
| --- | --- | --- |
| Project level debt | Nil | efficient energy solution that reduces greenhouse gas emissions. |
| Capacity | 125MW |  |
| Technology | On-site cogeneration, biomass, oil extraction |  |
| Forecast project life | Various, up to c.18 years |  |

remaining
Lifecycle stage Operational
Counterparties / Olive co-operatives, San Miguel Arcángel, Acesur, Spanish
offtakers government
O&M Sacyr
Fuel supply Natural gas, biomass, waste olive cake
Oliva Revenues and Cost Model
Cogen
Biomass
Olive Processing
Net Cash Flows
Onsite Heat
End User Natural Gas (cogen only):
Services
Olive Co-Operatives Price hedged by RoRi
Oliva
Market
Heat Revenues 3x
Revenue
O&M: Fixed price
and variable price –
Long term
Electricity
Sacyr Costs
to grid 2x
Services
Electricity
Revenues Price
Overheads: fi xed
hedged by RoRi
Revenue Oliva
Oliva’s revenues are split in the following way:
• RoRi: c.44% (on average) of revenues. The RoRi is a regulatory payment from the government paid to CHP and biomass assets and adjusted to
account for changes in revenues received by the assets (namely sale of electricity) and operating costs (namely natural gas and EUA emission
certificates for the cogeneration). This results in stabilised cashflows and EBITDA over the long term. The assets receive the RoRi for the
remainder of their asset life.
• Electricity sales: c.42% (on average) of revenue comes from electricity sales produced by the biomass and CHP plants, which is predominantly
sold to the grid, as the heat is used on site. While the revenues are linked to market pricing, this is effectively hedged through the RoRi.
• Oil Sales: c.14% (on average) of revenues come from the product of the pomace processing, namely the production of Orujo oil, which Oliva sells
through short-term contracts in the market. The price of the oil links to the cost of the biomass, providing some hedging against this fuel supply cost.
42 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## Investment Risks and Mitigants

|  Risk Type: | Description | Mitigation  |
| --- | --- | --- |
|  Regulatory | Increase of EU ETS costs | The cost of EU ETS certificates has been rising sharply, but the costs are reimbursed over the medium term through the RoRi mechanism.  |
|  Regulatory | Update of RoRi mechanism. timing delays by the Spanish government have created a short-term cash impact on the business as well as general uncertainty in the market. | The Investment Manager, alongside Oliva's management team, have made efforts to lobby the government (directly and through trade bodies) to try to accelerate decision-making. In addition, the assets have been optimised to sequence operational availability during peak periods of profitability, resulting in periods where the assets are not operating.  |
|  Climate | Extreme weather conditions (particularly drought) are impacting the olive harvest in Andalusia. This would not only impact the biomass assets within Oliva but also the operations of the offlakes. | The Investment Manager monitors the impacts of extreme weather events, such as drought on olive production, and works with Oliva's olive feedback providers to manage and mitigate any potential physical climate-related risks and pursue various mitigation tactics. These include diversifying feedback suppliers, using alternative waste feedback, forward purchasing of feedback, and collaborating with local government and olive producers in the region to minimise water usage.  |

## Project Key Performance Indicators (KPIs)

**(8,010)**

**827,966**

Adjusted EBITDA (€ '000's)

Year end 31 December 2022*

MWh produced**

Year end 31 December 2022

## Value Accretion Potential

The Investment Manager has been investigating several upside opportunities at Oliva that have not been reflected in SEEIT's valuation, but could provide additional value over the short, medium and long term, including:

Optimising use of owned land to generate additional revenues e.g. for solar production.

|  Estimated potential value uplift: | £1 million - £3 million  |
| --- | --- |
|  Time period: | 3-4 years  |
|  Extension/Improvement of an existing contract. |   |
|  Estimated potential value uplift: | £5 million - £10 million  |
|  Time period: | 0-1 year  |

## Investment Updates in the Year

Global energy markets were dominated in 2022 by unpredictability, which significantly impacted the Spanish energy regime. As a result of Russia's invasion of Ukraine, European gas and electricity markets were highly volatile and operated at elevated price levels throughout 2022.

Normal market dynamics are managed in the Oliva projects through adjustment of the RoRi payment over the medium to long-term. The short-term impact of higher gas costs is normally managed through the execution of the established Oliva hedging strategy. However, price volatility was so extreme in 2022 that hedging alone was insufficient to control rising input costs. In its efforts to control escalating consumer electricity prices, the Spanish government introduced energy price controls that capped electricity prices (a revenue to Oliva) but did not cap gas prices (an expense to Oliva), resulting in an abnormal and material disconnect between the two. In turn, this severely impacted the ability to hedge and, combined with Government induced delay and uncertainty around the RoRi updating, resulted in cashflows at five of the nine Oliva projects being negatively impacted.

In order to prioritise cashflow management and minimise losses whilst waiting for the RoRi updates, the Investment Manager paused operations during certain periods where losses were highest. As a result, energy generation (Mwh produced) and EBITDA were well below budget for 2022 of c. €29m and c. 1.2m MWh, respectively.

The Investment Manager led lobbying efforts to the Spanish government to issue RoRi updates and favourable energy market controls and policies.

A positive update for the RoRi was announced at the end of 2022, allowing operations to return in line with expectations in 2023.

In addition to the above, the Investment Manager has proactively collaborated with the management team at Oliva to ensure full compliance with wastewater treatment requirements and lower incident rates for equipment incidents and employee injuries.

17 Unaudited figures

18 Combination of electrical and thermal energy

EDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 45

DIAPHRAGM

KOMUNIKO REPORT

COURTMINST

FINANCIAL OPPORTUNITIES

ADDITIONAL INFORMATION
## UU Solar
### Portfolio of 70 operational on-site renewable projects across the UK
Investment Highlights Investment
Investment type Direct equity (100%)
UU Solar’s portfolio provides renewable energy generated on-site
Acquisition date September 2022
directly to the end user, United Utilities Water Limited (“UUW”). UUW is
Asset location North West England, UK the regulated water and wastewater business of United Utilities Group
PLC, the largest listed water and wastewater company in the UK.
No. of projects 1 (across several locations)
Project equity value c. GBP 96 million (c.9%) The portfolio is 90% solar PV, 9% wind and 1% hydro in terms of
and as a percentage total generation. The assets are all connected to UUW on-site water
of SEEIT’s GAV and wastewater utility infrastructure via private wire, and provide
Project level debt Nil green electricity under long-term, fixed-price PPAs with UUW. UU
Solar provides SEEIT with a yielding, fully operational project with an
Capacity 69MWdc
investment grade counterparty, underpinned by predominantly long-
Technology Predominantly solar, with some wind and hydropower term contracted cashflows.
– all onsite
Forecast project life c. 29 years The project increases the supply of renewable energy generated on site
remaining and helps to reduce greenhouse gas emissions arising from the supply,
Lifecycle stage Operational distribution and consumption of energy. In particular, these assets
supply clean energy to critical water infrastructure sites.
Counterparties / United Utilities
offtakers
O&M PSH
Fuel supply Not applicable – solar, wind and hydro energy
UU Solar Revenues and Cost Model
Net Cash Flows
Onsite Power
End User
Services
United Utilities
O&M: Fixed and variable
price – medium term
contract
Long-term PPA
PSH
Costs
AM: fi xed price –
Revenue medium term contract
Solar Project Green Nation
Long-term FIT
UK Gov
The majority of UU Solar’s project revenues are generated from long-term contracts, and can be broken down into:
• PPAs: 77% of revenues are through PPAs with UU for a fixed price on a take-or-pay basis, with a fixed escalation of 2%.
Weighted average life of the PPAs is 25 years.
• Feed-in tariff with RPI-linked payment: c.14% of revenues are on an NPV basis. Weighted average life is 17.5 years.
• Merchant revenues: 9% for electricity not consumed on site.
44 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Investment Risks and Mitigants
Risk Type: Description Mitigation
Operational Underperformance of assets resulting in lower Projects are built using tier 1 equipment; some applicable warranties
generation and therefore, revenues. remain. O&M is carried out by an experienced contractor, PSH, with
oversight by an asset manager, Green Nation. STRATEGIC REPORT
Value Accretion Potential Investment Updates in the Year
An example of an upside opportunity at UU Solar that has not been Following a competitive tender process the Investment Manager
reflected in SEEIT’s valuation, but could provide additional value appointed a third-party asset manager to manage and optimise
over the short to medium term is: performance of the portfolio. The Investment Manager has
also negotiated with the existing third-party operations and
Expanding the use of existing sites for additional revenues e.g.
maintenance contractor to revise and execute a four-year contract
batteries.
with enhanced availability and performance guarantees.
Estimated potential value uplift: £2 million - £5 million The Investment Manager anticipates improved performance
after negotiation of a long-term O&M agreement that includes
Time period: 1-3 years
performance guarantees, implementation of a more rigorous
preventive maintenance programme and heightened focus
on performance metrics to identify and eliminate operational
deficiencies.
Given SEEIT’s ownership of UU Solar commenced only in the last
half of FY 2023, there are no Project KPIs to report in this period
but they will be reported in FY 2024.
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 45
## Värtan Gas
### Green gas distribution and supply for the city of Stockholm
Investment Highlights Investment
Investment type Direct equity
Värtan Gas owns and operates the regulated gas grid in Stockholm,
Acquisition date October 2020
Sweden, c.78% of the gas is locally produced renewable biogas,
Asset location Stockholm, Sweden sourced primarily from the city’s wastewater facilities. The investment
was fully operational from the point of acquisition, with strong long-
No. of projects 1
term yield metrics and inflation correlation.
Project equity value c.SEK 831 million (c. GBP 65 million) (c.6%)
and as a percentage Värtan Gas provides essential infrastructure services, reducing
of SEEIT’s GAV pollution and greenhouse gas emissions by reusing waste gases
Project level debt c.SEK782 million both at the point of production, (for example, at municipal wastewater
treatment plants) and, at the point of use, through the displacement of
Capacity Distributing approximately 250GWh/year of gas
natural gas in buildings and diesel in transport. These characteristics
Technology Green gas distribution are aligned to Swedish national and EU regional strategies to attain
Forecast project life c. 22 years and terminal value carbon neutrality by 2040.
remaining
This investment brings geographical diversification to SEEIT, together
Lifecycle stage Operational
with a substantial customer base and opportunity to unlock further

| Counterparties / | Various, including c.50,000 residential customers and | growth in volumes – including through the transport segment. |
| --- | --- | --- |
| offtakers | c.800 commercial and industrial customers |  |
| O&M | Värtan Gas |  |
| Fuel supply | Gasum, Scandinavian Biogas, Others |  |

Värtan Gas Revenues and Cost Model
Net Cash Flows
End User
Services
Residential and Biogas supply and
commercial distribution Värtan Gas
customers O&M: Fixed costs –
annual rolling contract
Regulated Tariff Distributed gas Various
Fixed Price – network
adjusted annually
Bio/Natural gas costs: Costs
Short-medium term
Revenue
Unregulated Tariff – fi xed contracts
Adjusted to refl ect Various
change in gas costs
The investment’s revenues consist of:
• Fixed Tariff (c.51% of revenues): annual fixed fee to the regulated grid from end users, which is not related to consumption.
Contracts are typically rolling yearly contracts with residential customers (c.50,000).
• Variable fee (c.49% of revenues): tariff paid for the supply of gas. Tariffs are reviewed annually (or more frequently if required) and
are based on gas costs and a margin. This also includes transport and restaurants as customers.
46 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
# Investment Risks and Mitigants

|  Risk Type: | Description | Mitigation  |
| --- | --- | --- |
|  Operational | Churn rate (reduction) of customers higher than expected resulting in lower customers and revenues. | The Investment Manager is engaging with the Vartan Gas management team to deliver more targeted marketing to gain new customers and retain existing ones. Electrification typically requires building refits.  |
|  Operational | Transport and restaurant revenues lower than targeted resulting in lower revenues. | Electrification of Stockholm buses has occurred faster than expected and therefore the Vartan Gas management team is focusing on expanding into new transport segments such as ferries/maine transport.  |
|  Regulatory | Periodic regulatory updates causing revenues to be less than expected. | Regulatory updates may be appealed, such as the current appeal for the most recent update. Business plans may be adjusted for future years where it impacts revenues.  |
|  Commodity | Volatility in biogas costs resulting in higher gas procurement costs. | The Investment Manager has implemented a hedging strategy to ensure majority of short-term volatility of biogas costs can be mitigated. In addition, the Investment Manager and local management team implement price changes for the end customers to reflect actual gas costs.  |

# Project Key Performance Indicators (KPIs)

40.2

78%

EBITDA (SEK'm)

Year end 31 December 2022 ¹⁸

% of Green Gas

Year end 31 December 2022

# Value Accretion Potential

There are several examples of upside opportunities at Vartan Gas that have not been reflected in SEEST's valuation, but could provide additional value over the short to medium term, including:

Improved customer retentions (6% above forecast for 3 years) as a result of initiatives implemented by management.

|  Estimated potential value uplift: | £3 million - £5 million  |
| --- | --- |
|  Time period: | 2-3 years  |

Development of new business/customer offerings in order to grow consumption volume and new lines of business, e.g. green energy as a service.

|  Estimated potential value uplift: | £10 million - £15 million  |
| --- | --- |
|  Time period: | 3-5 years  |

Successful appeal of latest regulatory period updates.

|  Estimated potential value uplift: | £5 million - £10 million  |
| --- | --- |
|  Time period: | 1-2 years  |

# Investment Updates in the Year

Customer retention remains a priority, with a new retention strategy developed and implemented in 2023. Reduced future transport costs are projected and an assumption around additional costs for refining sections of the distribution piping network in future periods have impacted the valuation as at 31 March 2023, although this has been partly offset by higher restaurant volumes.

A key focus for Vartan Gas is to increase the share of biogas as a proportion of total gas sold from the current average of 78% to 100% in the medium to long term. During the second half of the year, the Investment Manager completed an organizational restructuring to position Vartan Gas for future growth, with the appointment of a new CEO who started in January 2023. The Investment Manager consolidated operations and management of business segments Gaerdiet and Stockholm Gas to improve efficiency and revised the board structure to eliminate non-executive board membership and provide unified oversight of the restructured business.

Towards the end of 2022, the Swedish regulator, the Energy markets Inspectorates ("E/I") updated their assumptions on calculating the revenue cap for the period 2023-2026. The regulatory cost of capital, the WACC, has come down significantly, from 8.65% to 8.87%. In addition, there has been a change to the calculation of the Regulated Asset Base ("RAB"), which has resulted in a devaluation of the RAB (and therefore, the allowed revenue). The reduction in WACC and RAB does not impact the short-medium term revenues as these revenues are still below the regulatory cap. The impact is seen in future years for WACC and the change in RAB primarily impacts the terminal value assumed for Vartan as it has been calculated as a multiple of RAB.

E/I's decision is being appealed by Vartan Gas and other gas network operators in the market and we expect a decision in GB/GA 2023. Given the nature of the changes and the precedents in other countries, we anticipate a positive outcome. We have however taken a cautious approach to the valuation in the period and not assumed the appeal will be successful.

The 2022 EBITDA was c.6% below budget as a result of additional gas costs due to the timing of implementing tariff price increases in reaction to increasing gas costs, mitigated by putting gas cost hedging in place.

The Investment Manager has worked closely with the Vartan Gas management team to secure stable gas supplies through the reporting period's energy market volatility. The Company increased its hedging through the purchasing of biogas and natural gas, and by reviewing retail pricing to bring customers cost certainty for Vartan Gas products.

18 Unaudited figures

EDCL Energy Efficiency Income Trust plc | SEEST ANNUAL REPORT 2023 | 47

DASHION

RIVERSIDE REPORT

GOVERNMENT

FINANCIAL INFORMATION

ADDITIONAL INFORMATION
2.4 Portfolio Summary
continued
### Additional Portfolio Project Updates
### EVN FES
SEEIT’s dedicated Electric Vehicle (“EV”) charging Due to the lingering effects of post-Covid-19
infrastructure platform has progressed well through economics within FES’s target market, as well
the year. The first six sites (totalling 26 ultra-speed as FES business development staffing turnover,
chargers) are operational and have been handed revenue and EBITDA dropped well below projected
over to the Charge Point Operator, with another 15 levels during the second half of 2022. The
in construction as at 31 March 2023. This includes a Investment Manager is engaging with the business
project in the West Midlands, where EVN has signed to manage cash constraints and the unanticipated
a 30-year exclusive contract with NEC Group to difficulties with project deployment and employee
develop and build the EV charging infrastructure at hiring. In addition, rising interest rates and the
the NEC campus. Once completed, the NEC campus consequent cost of capital led to additional follow-
will be a first-of-its-kind charging hub for EVs at this on investment in FES and a debt restructuring,
scale, with over 180 charging points, becoming the which is ongoing.
largest fast charging hub in the UK and one of the
The issues above have impacted FES’s ability to
largest in Europe.
be profitable in the short term and the Investment

| The assets owned by SEEIT are acquired at |  | Manager is carrying out a review of FES’ business |
| --- | --- | --- |
| attractive pre-agreed returns and there is an |  | development strategy, shifting focus to target larger |
| opportunity for SEEIT to benefit from yield |  | commercial businesses, channel partner business |
| compression once the assets are fully operational. |  | development and MUSH (municipal, university, |
| This upside has not been considered in the current |  | schools, and hospitals) entities, all of which have |
| valuation but is currently | estimated at £10 million to | longer sales cycles but potentially higher revenue |
| £15 million. |  | profitability. |

The valuation has taken a provision against FES of
c. £13 million as a result of the issues experienced
during the period. There may be an upside
opportunity to recover the provision if there is a
successful implementation of actions coming out of
the review.
48 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
STRATEGIC REPORT

| Tallaght Hospital | Lycra | Huntsman Energy Centre |
| --- | --- | --- |
| Construction of the energy efficiency | Construction of the energy efficient | The Huntsman project progressed |
| retrofit at Tallaght Hospital in Dublin, | chiller system at Lycra’s Singapore | through the year and started the |
| Ireland was completed on budget | facility was completed one month | commissioning process. However, the |
| and on schedule, with operational | ahead of contracted schedule | failure of a steam system compressor |
| handover achieved in early January | and on budget, with full operation | resulted in an approximately six- |
| 2023. | commencing on 1 February 2023. | month delay at the beginning of the |

calendar year, as detailed testing and
a root cause analysis were completed
before manufacturing replacement
components. The rectification
programme for this setback has
progressed well, with the plant
becoming operational in June 2023.
### Moy Park Biomass GET Solutions
The underlying performance of the A period of record high fuel costs
site’s biomass boilers has been created problems for the contractor
strong throughout the year. The associated with SEEIT’s GET Solutions
minority shareholder, which is also the project, in covering contract gas
feedstock provider, has submitted two procurement costs. This has resulted
force majeure claims towards the end in SEEIT covering these costs,
of the financial year, both in relation which has negatively impacted the
to the provision of their obligations asset’s financial performance. The
under the feedstock contract. The Manager is seeking to recover these
Investment Manager is in ongoing costs from the contractor, while also
discussions to resolve this matter and exploring opportunities to hedge the
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
ensure service of supply to the end gas procurement position to preserve
customer is maintained. performance on top of the existing
contractual protections.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 49
2.4 Portfolio Summary
continued
## Portfolio
## Diversification
Cleaner & More Efficient Supply
### US
Point of Use / Demand Reduction
Diverse project portfolios spanning 43 states:
Tecogen
Onyx
Green Energy Distribution Primary Energy
RED-Rochester
Spark US Energy Efficiency I & II
Sustainable Living Innovations (SLI)
Future Energy Solutions (FES)
### Overview
Turntide Technologies
Baseload Capital
During the year, the Company achieved further On.Energy
scale and diversification for SEEIT by geography, Bloc Power
CPP Biomass
technology, industry and counterparty.
Geographically, SEEIT added to its US portfolio and
gained exposure to a new country, Japan, through its
investment in Baseload Capital’s debt facility. SEEIT
also expanded its portfolio in the UK through the
acquisition of UU Solar, the 69MW portfolio of on-site
renewable generation projects.
By technology, SEEIT added exposure to new markets
by funding geothermal district energy, liquid cooling
for data centres and energy-efficient motors free of
rare-earth minerals.
50 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### UK
Over 650 locations nationwide
Huntsman Energy Centre
STRATEGIC REPORT
Santander UK Lighting
Moy Park Biomass
Moy Park Lighting
Citi Riverdale CCHP
St. Barts CHP
Smart Energy
Kingspan Holywell Solutions
Supermarket Solar
EV Network (EVN)
GET Solutions
Iceotope
UU Solar
### Iceland
Baseload Capital
### Sweden
Värtan Gas
### Ireland
Tallaght Hospital
### Portugal
### Japan
Capshare
Baseload Capital
### Spain Vietnam
Oliva Spanish Cogeneration SOGA
### Singapore
Singapore Energy Efficiency
Lycra
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 51
2.4 Portfolio Summary
continued
The information presented below summarises the portfolio of the Company across different metrics, using the
(APM)
Company’s Gross Asset Value as at 31 March 2023 (and using 31 March 2022 for comparison).
Portfolio by Geography

|  |  | Europe 20% |  |  | Europe 22% |
| --- | --- | --- | --- | --- | --- |
|  |  | UK 17% |  |  | UK 6% |
|  |  | Asia Pacific <1% |  |  | Asia Pacific <1% |
|  |  | Cash 3% |  |  | Cash 16% |
|  | As at |  |  | As at |  |
| March 2023 |  |  | March 2022 |  |  |

Portfolio by Project

|  |  | Red Rochester 22% |  |  | Red Rochester 18% |
| --- | --- | --- | --- | --- | --- |
|  |  | Primary - Cokenergy 9% |  |  | Primary - Cokenergy 10% |
|  |  | UU Solar 9% |  |  | Onyx Obsidian Portfolio 8% |
|  |  | Onyx - Obsidian 8% |  |  | Värtan Gas 8% |
|  |  | Värtan Gas 6% |  |  | Primary - Northlake 4% |
|  | As at | Primary - North Lake 4% |  | As at | Capshare 3% |
| March 2023 |  | Capshare 3% | March 2022 |  | Oliva - Celinares 3% |
|  |  | Primary - Portside 2% |  |  | Primary - Portside 3% |
|  |  | EVN - Construction 2% |  |  | Primary - PCI 2% |
|  |  | Oliva - Cepuente 2% |  |  | Oliva - Cepuente 2% |
|  |  | Remainder of portfolio 29% |  |  | Remainder of portfolio 22% |
|  |  | Cash 3% |  |  | Cash 16% |

### Project geography
US 59% US 55%
Pictured: Baseload Capital site
52 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
STRATEGIC REPORT
Portfolio by Technology

|  |  | Solar & Storage 23% |  |  | District Energy 18% |
| --- | --- | --- | --- | --- | --- |
|  |  | District Energy 22% |  |  | CHP (Waste gases/other) 17% |
|  |  | CHP (Waste gases / other) 13% |  |  | Solar & Storage 12% |
|  |  | CHP (Natural Gas) 9% |  |  | CHP (Natural Gas) 11% |
|  |  | Biomass 6% |  |  | Gas Distribution Networks 8% |
|  |  | Gas Distribution Networks 6% |  |  | Biomass 6% |
|  | As at |  |  | As at |  |
| March 2023 |  | Industrial process | March 2022 |  | Industrial process |
|  |  | efficiency solutions 4% |  |  | efficiency solutions 4% |
|  |  | EV charging 4% |  |  | Lighting 3% |
|  |  | Bundled Energy efficiency |  |  | Remainder of portfolio 5% |
|  |  | solutions 3% |  |  | Cash 16% |

Lighting 2%
Remainder of portfolio 5%
Cash 3%
Portfolio by Investment Stage

| Operating 74% | Operating 73% |
| --- | --- |
| Construction 17% | Construction |
| Development 6% | Development 1% |
| Cash 3% | Cash 16% |

As at As at
March 2023 March 2022
### Tech
## investment stage
10%
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 53
## 2.5 Company Key Performance Indicators
In the section below, the Company sets out its financial and operational key performance indicators (KPIs) used to track
the performance of the Company over time against its objectives. The Board believes that the KPIs detailed below provide
shareholders with sufficient information to assess how effectively the Company is meeting its objectives.
Financial KPIs

| KPI Definition 31 March |  |  | 31 March | Commentary |
| --- | --- | --- | --- | --- |
|  |  | 2023 | 2022 |  |
| Net Asset Value | NAV divided by number of | 101.5p 108.4p NAV has decreased compared with the prior |  |  |
| (”NAV”) per share | shares outstanding as at 31 |  |  | year due to global increases in risk-free |
| (pence) | March |  |  | rates pushing discount rates up materially |

from March 2022 –see Section 2.3, Financial
Review and Valuation Update.
Share price (pence) Closing share price as at 31 84.0p 117.5p The share price has decreased predominantly
March due to market volatility. Since 31 March 2023,
the Company launched a buyback programme
(see Note 12)

| Dividends per share | Aggregate dividends declared | 6.0p 5.62p The dividend increased year on year due to |  |
| --- | --- | --- | --- |
| (pence) | per share in respect of the |  | predictability of near-term cash generation |
|  | financial year |  | from portfolio, plus new investments made |

previously. The Company met its stated
dividend targets for the years ended 31 March
2022 and 31 March 2023.

| Dividend cash cover (x) Operational cashflow |  | 1.2x 1.2x The target was for net operational cash inflow |  |
| --- | --- | --- | --- |
|  | divided by dividends paid to |  | to fully cover dividends paid. The Company |
|  | shareholders during the year |  | met its target for the years ended 31 March |

2022 and 31 March 2023.
Total return on NAV NAV growth and dividends (0.9)% 11.2% The payment of interim dividends contributed
basis in the year (%) paid per share in the year to NAV return in the year, although offset by
significantly higher discount rates, resulting
in a material decrease in return compared to
prior year.

| Ongoing charges ratio | Annualised ongoing charges | 1.02% 1.00% Remained consistent although marginal |  |
| --- | --- | --- | --- |
| (%) | (i.e. excluding investment |  | increase year on year caused by increased |
|  | costs and other irregular |  | discount rates affecting the March 2023 |
|  | costs) divided by the average |  | NAV. See Section 2.3, Financial Review and |
|  | published undiluted NAV |  | Valuation Update. |

in the period, calculated
in accordance with AIC
guidelines
Operational KPIs

| KPI Definition 31 March |  |  | 31 March | Commentary |
| --- | --- | --- | --- | --- |
|  |  | 2023 | 2022 |  |
| Weighted average | Weighted average number of | 15.9 14.8 In line with expectations – one material |  |  |
| contracted investment | years of contracted revenue |  |  | contract requires recontracting in the year |
| life (years) | remaining in investment |  |  | ahead but offset by new investments made |
|  | contracts (excludes all |  |  | during the year. |

recontracting assumptions)

| Largest five | Total value of five largest | 54% 49% Target is to maintain good portfolio |  |
| --- | --- | --- | --- |
| investments as a % of | individual investments divided |  | diversification, achieved in both financial |
| GAV (%) | by the sum of all investments |  | years. |

held in the portfolio plus cash,
calculated at year end
54 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## 2.6 Stakeholders and Section 172
STRATEGIC REPORT
### Section 172: Promoting the Success of the Company
The Directors consider, both individually and together, that they have fulfilled 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 and
stakeholders as a whole, having regard to the stakeholders and matters set out in Section 172 of the UK Companies Act
2006 (“Companies Act”) in the decisions taken during the year, as set out below:
Section 172(1) Description
(a) the likely consequences of any The aim of the Board is always to ensure the long-term sustainable success of the Company and,
decision in the long term therefore, the likely long-term consequences of any decisions are a key consideration. During the year
under review, the Board believes it acted in good faith, with a view to promoting the Company’s long-
term sustainable success and to achieving its wider objectives for the benefit of its shareholders as a
whole, having had regard to our wider stakeholders and the other matters set out in Section 172 of the
Companies Act. See the rest of this Section 2.6 for the Board’s decisions on capital raising, approving
dividends and the oversight and monitoring of the Investment Manager’s activities in relation to risk and
portfolio management for the Company.
(b) the interests of the company’s As a closed-ended investment company, the Company does not have any direct employees. However, the
employees interests of employees in project companies are considered when making decisions for the Company’s
benefit, such as promoting positive health and safety cultures.
(c) the need to foster the company’s The Company’s approach is described under “Stakeholders” below.
business relationships with suppliers,
customers and others
(d) the impact of the company’s The Board places a high value on the monitoring of Environmental, Social and Governance (“ESG”)
operations on the community and the issues and sets the overall strategy for ESG matters related to the Company. The Board provides
environment oversight for the managing of climate-related risks for the group by the Investment Manager, including
transparent disclosure of these risks, and reviews mitigating actions taken by the Investment Manager
to reduce or eliminate them where possible. A description of the Company’s Responsible Investment
Policy is available on the Company’s website and further detail on climate-related risks is set out in
Section 3.1, ESG and Section 3.2, Risk Management Framework. Additionally, the Company’s 2022
Environmental, Social and Governance Report was published in November 2022 and is available on
the Company’s website.
(e) the desirability of the company The Board’s approach is described under “Culture and Values” below. For further information please
maintaining a reputation for high also see Section 3.1, ESG.
standards of business conduct
(f) the need to act fairly between The Board’s approach is described under “Stakeholders” below. For further information please also
members of the company see Section 4.4, Corporate Governance Statement.

|  | The issues, factors and stakeholders | Further, the Companies | positive stakeholder engagement. |
| --- | --- | --- | --- |
|  | the Directors consider relevant in | (Miscellaneous Reporting) Regulations | The Company is committed to |
|  | complying with Section 172(1) (a) to | 2018 require Directors to explain | maintaining good communications |
|  | (f) are described in detail below. The | how they have discharged their | and building positive relationships |
|  | Investment Manager provides updates | duties under Section 172(1) of the | with all stakeholders. To achieve this, |
|  | to the Board at quarterly meetings | Companies Act 2006 in promoting the | the Company, either directly or via the |
|  | on the above items, including the | success of their companies for the | Investment Manager, interacts with |
|  | rationale behind investment decisions, | benefit of “members as a whole”. The | a variety of stakeholders relevant to |
|  | its relationships with the Company’s | Board’s approach is described under | its success. The Company seeks to |
|  | shareholders and key stakeholders | “Stakeholders” below. | achieve the correct balance between |
|  | and the Company’s reputation in |  | engagement and communication, |
|  | the broader market. This is further | Stakeholders | whilst working within the limitations |
| GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW | supported by reports from a number of |  | of what can be disclosed to the |

The Board challenges the Investment
advisers such as the Company’s broker various stakeholders with regards
Manager to balance the interests
and financial PR consultant. to maintaining confidentiality of
and concerns of all stakeholders
market and/or commercially sensitive
effectively to ensure continuing
information.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 55
2.6 Stakeholders & Section 172
continued
The Company has identified the following key stakeholders:
■ shareholders;
■ the Investment Manager;
■ the Company’s key service providers;
■ the Company’s investment business partners (including host counterparties); and
■ lenders at project level and corporate level.
Why they are important Engagement
Shareholders
As the Company is an investment trust The Company currently has over 350 shareholders.
listed on the London Stock Exchange
Through the Company’s engagement activities, it strives to obtain investor endorsement for the
and a constituent of the FTSE 250
Company’s strategic objectives and how they are executed.
index, its shareholders are also its main
During the year, the Board reviewed and challenged the Investment Manager’s pipeline of opportunities.
stakeholders. Continued shareholder
Following engagement with shareholders, the Company completed a successful capital raise in
support and engagement are critical to
September 2022, which enlarged the shareholder base and increased liquidity in the Company’s shares.
the existence of the Company and to the
delivery of the long-term strategy. The Company also engaged, directly or via the Investment Manager, with shareholders in the year
through meetings, market announcements and various written materials, including the Company
Factsheet available on the Company’s website.
The Manager hosted a Capital Markets Day in March 2023 for institutional investors and analysts
in order to increase shareholder knowledge of the Company’s activities and the industry in which it
operates. The Investment Manager highlighted key market drivers for energy efficiency and provided
greater insights into some of the Company’s larger portfolio projects.
Following year end, and after a period of the Company’s shares trading at a discount to NAV, the Board
authorised a share repurchase scheme as part of the Company’s discount control strategy in order to
increase liquidity in the Company’s shares.
At every Board meeting, the Directors receive updates on share trading activity, share price performance,
shareholder feedback and any mention of the Company in the press.
Through a combination of the above engagement activities, clear reporting and shareholder support,
the Board has been able to ensure the Company’s investment pipeline and fundraising programme have
been aligned with the investment strategy and that funds have been available to secure the current asset
portfolio. The Company will continue to engage actively with shareholders in future.
The Investment Manager
The Investment Manager’s performance Constructive and ongoing engagement with the Investment Manager is important to ensure that the
is critical for the Company to deliver expectations of shareholders are being met and that the Board is aware of any challenges to the
its investment strategy and meet its investment strategy or management of the Company’s portfolio of investments.
objectives.
The Board conducts both ongoing and an annual review of the Investment Manager’s performance
and terms of engagement, and provides feedback after such reviews. The most recent annual review
took place in March 2023 and written feedback was given to the Investment Manager.
The Board and the Investment Manager maintain an open and ongoing dialogue on key issues facing
the Company with a view to ensuring that key decisions relating to, inter alia, potential investments,
portfolio performance and the Company’s investment strategy are aligned with achieving long-term
value for shareholders. This open dialogue takes the form of at least quarterly scheduled Board
meetings and frequent informal contact, as appropriate to the subject matter.
Key service providers
The Company has a number of other During the year, the Company conducted a review of the terms of all key service provider engagements
key service providers, each of which along with their fee levels to ensure an appropriate level of support was being provided to the
provides a vital service to the Company Company. The Directors provided specific feedback to key service providers with the aim of ensuring
and ultimately to its shareholders. The the Company receives an appropriate service. The Company seeks to ensure a two-way engagement
Company’s key service providers are the between the Board and key service providers on service delivery expectations and feedback on
Administrator and Company Secretary, important issues experienced by service providers.
Auditor, Corporate Broker, Depositary
and Registrar.
56 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
STRATEGIC REPORT
Why they are important Engagement
Investment business partners (including host counterparties)
The Company has various business As the Company acquires new portfolio investments, the Investment Manager undertakes a review
partners including, crucially, the of the contracting terms of all counterparties to ensure they are fair and appropriate. The Directors
counterparty hosts to whom the received an update on plans for the Investment Manager to seek to maintain long-term collaborative
Company’s investments are providing partnerships with these counterparties to ensure relationship stability and that the Company’s
critical energy services, as well as investment return targets are achieved. Since there were several new investments made during this
sub-contractors who provide key year, the Investment Manager enhanced its onboarding methods to ensure the foundations are laid
services to individual or groups of for long-term partnerships. This included the use of initial 100-day plans and proactive communication
portfolio companies. Such services to employees at investment level to introduce the Investment Manager’s asset management function
include operations and maintenance, and position the Company as a long-term business partner.
technical asset management and EPC
The Directors conducted a site visit to Oliva assets in Spain, where they had the opportunity to interact
construction that are considered vital to
with the project’s management team.
the success of the investments.
Lenders at project level and corporate level
The availability of funding and liquidity Considering how important the availability of funding is, the Company aims to demonstrate to its
are crucial elements in ensuring the lenders through regular reporting and dialogue that it is a well-managed business and, in particular,
Company’s ability to execute against that the Investment Manager is focused on providing regular and careful management of risk within
attractive investment opportunities as the investment portfolio and the Company as a whole. During the year, the Directors received and
they arise. reviewed the Investment Manager’s recommendation for exercising an accordion increase of the
revolving credit facility held by the Company’s single subsidiary, SEEIT Holdco, thereby ensuring that
the Company had access to liquidity to make further investments.
### Culture and Values
The Directors’ overarching duty is to as required to other key stakeholders. The Company has a number of policies
promote the success of the Company Both the Board and the Investment and procedures in place to assist
for the benefit of shareholders, with due Manager support equal opportunities with maintaining a culture of good
consideration of other stakeholders’ for recruitment and when managing governance including those relating
interests. The Company seeks to existing employees – regardless of age, to diversity, anti-bribery (including the
maintain high standards of business race, gender, or personal beliefs and acceptance of gifts and hospitality),
conduct and corporate governance, and preferences. tax evasion, conflicts of interest,
to ensure via the Investment Manager whistleblowing and directors’ dealings
Although the Company has no
that appropriate oversight, control in the Company’s shares. The Board
employees, it is committed to respecting
and suitable policies are in place to assesses and monitors compliance with
human rights in its broader relationships.
guarantee stakeholders are treated fairly. these policies regularly through Board
The Company does not tolerate
meetings and the annual evaluation
The Board seeks to ensure the alignment corruption, fraud, bribes or human
process. The Board seeks to appoint
of its purpose, values and strategy with rights breaches. The Company aims to
the most appropriate service providers
this culture of openness, debate and maintain standards of business integrity,
for the Company’s needs and evaluates
integrity through ongoing dialogue and a commitment to truth and fair dealing,
their services on a regular basis. The
engagement with its key stakeholders. and a commitment to complying with all
Board considers the culture of the
The Board, made up of 40% male and applicable laws and regulations.
Investment Manager and other service
60% female members, aims to achieve
providers through regular reporting and
a supportive business culture combined
by receiving regular presentations, as
with constructive challenge, and to
well as through ad hoc interactions.
provide a regular flow of information to
shareholders and relevant information
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 57
## 3. STRATEGIC
## REPORT: ESG AND
## RISK
20
### Carbon Saved equivalent to removing
## 1,202,528 tCO e 1,004,619
### 2
### cars off the road
21
### Energy saved equivalent to powering
## 387,868 MWh 26,031
### homes in the UK
### 3.1 Environmental, Social and
### Governance (“ESG”)
### Introduction
SEEIT invests in energy-efficiency projects
to reduce energy demand and consequently
greenhouse gas emissions. In addition to the
inherently beneficial environmental impacts of
the Company’s investments, the Investment
Manager has a range of material social and
governance impacts that help enhance long-
term value creation for both investors and other
stakeholders. The Company’s Responsible
Investment Policy (“RIP”) sets out the Company’s
four ESG focus areas, which are then expanded
upon in the ESG Principles to form its
22
ESG policies.
The following section sets out the Company’s
## The Company has
ESG policies and the overall process for
monitoring its ESG considerations across
## adopted four ESG
the portfolio. It also highlights the Company’s
support for voluntary ESG guidelines, such as
## focus areas to inform its
the UN Principles for Responsible Investment
(“UN PRI”) and the UN Sustainable Development
## operations and values."
Goals (“UN SDGs”), and compliance with
mandatory ESG regulations, such as the EU’s
Sustainable Financial Disclosure Regulation
20 For the year ending 31 March 2023 and based on an analysis of c.95% portfolio
(“SFDR”). by value.
2 1 For the year ending 31 March 2023 and based on an analysis of c.95% portfolio
by value.
2 2 The RIP and ESG Principles documents can be found on SEEIT’s website
(https://www.seeitplc.com/esg/) and are described in summary in the
following section
58 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Pictured: UU Solar site
STRATEGIC REPORT
ESG has become an increasing priority for investors, regulators and customers and, consequently,
the Company’s focus on ESG has grown. The Investment Manager and the Board have been
discussing improvements to the Company’s ESG practices, including a refresh of its strategy and the
implementation of both portfolio and asset-level targets, to ensure the Company remains a leader in
sustainability. Therefore, the following section represents the ESG-related work undertaken during the
year and further updates will be provided in due course.
### SEEIT’s Responsible Investment Policy (“RIP”)
The Company’s RIP sets out the material ESG considerations The Investment Manager has developed a set of ESG
that are integrated into SEEIT’s investment decision-making Principles that expand on these four focus areas and
and monitoring processes. This policy applies to all of SEEIT’s complement the Company’s RIP. These ESG Principles are
investments and is overseen on a day-to-day basis by the used during the screening and diligence process to assess
Investment Manager. The policy details the Company’s the credentials of potential new investments, and then as
commitment to the six UN Principles for Responsible a framework for engaging with third-party operations and
Investment (“UN PRI”) and organises ESG issues around four management (“O&M”) service providers responsible for the
key focus areas, which are described below. day-to-day operations of each project.
SEEIT’s ESG Focus Areas
### Pro-actively minimising the
### 2
### environmental footprint
### of operations through managing negative Securing robust
### 3
impacts, such as waste, biodiversity loss and
### governance and
emissions
### business integrity
including assessing resilience to
physical climate risk and engaging
### Aiding the transition as an active participant on ESG with
### 1
### to a low-carbon its delivery partners
### economy
by maximising energy efficiency
through its investment strategy
and operations
### Providing a safe
### 4
### and healthy
### environment
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
for all workers, contractors
and members of the
community who use or
encounter its projects
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 59
3.1 SEEIT Environmental,
Social and Governance (“ESG”)
continued
### SEEIT’s ESG Principles SEEIT’s ESG Management Process
SEEIT’s ESG Principles expand upon the four focus areas The Company’s ESG Management Process refers to the
in its RIP to set out ESG minimum standards and policies internal procedures that ensure the standards defined in
applicable to all SEEIT’s projects. SEEIT’s ESG Principles and RIP are integrated into the
core operations of the Company. The Investment Manager
As described in the ESG Principles, to aid the transition
oversees this process, which begins with the assessment
to a low-carbon economy, SEEIT’s investments will
of a potential investment opportunity.
deploy best available technologies, utilise waste gases
and reduce resource usage. In order to minimise the The ESG investment review process is conducted in two
environmental footprint of SEEIT’s investments, the main stages, beginning with early identification of any
Investment Manager will ensure the projects comply ESGred flags and followed by a second phase of detailed
with applicable local laws, and will monitor, measure and due diligence to resolve any concerns and confirm that
manage any potential adverse environmental impacts climate-related targets can be met during each project’s
resulting from any project. contracted life. The detailed due diligence is conducted
through an ESG questionnaire, which includes questions
SEEIT will continue to adhere to the highest standards
on SEEIT’s ESG standards and is organised around the
of corporate governance practice in its investments
four ESG focus areas.
through engagement with the Investment Manager, O&M
providers and other service providers to ensure they have Once an investment has been made, the Investment
acceptable business conduct policies. Finally, to provide Manager engages on ESG matters with the appropriate
a safe and healthy environment, the Company will ensure management teams through regular reporting. This allows
that its investments provide safe working conditions the Investment Manager to monitor the performance of
and have established appropriate health and safety the Company’s asset companies, engage in any necessary
policies and processes to monitor incidents and prevent interventions and inform the Board accordingly. The ESG
recurrences. performance of SEEIT’s portfolio companies, monitored and
recorded through these questionnaires, are reported as key
Additionally, the ESG Principles specify an expectation
performance indicators (“KPIs”) in the SEEIT ESG Report.
for O&M providers, as well as other service providers, to
adhere to the Company’s ESG Principles, integrate the The annual ESG due diligence and quarterly
Company’s ESG standards into their operations, and report environmental performance questionnaires are both
on ESG outcomes. Where applicable, service providers based around SEEIT’s four ESG focus areas, best-practice
and their supply chains must also adhere to the human minimum standards, and voluntary and mandatory
rights considerations set out in the ESG Principles. requirements, such as the six UN PRI principles.
Additionally, the questionnaires cover all the Sustainable
Finance Disclosure Regulation’s (“SFDR”) principle
adverse indicators.
The Investment Manager continues to engage closely
with each asset company throughout its lifetime to search
for innovative projects that can improve its efficiency,
lower associated emissions and enhance overall value
for investors and the local community. Further details of
these follow-on investments can be found in Section 2.4,
Portfolio Summary.
60 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Pictured: Onyx Renewable Partner's site
STRATEGIC REPORT
IC Meeting: Review ESG
Due Diligence and decide
whether or not to invest
Focus Areas Due Diligence Asset Management

| Aiding the | Initial | Red flag | Detailed due | Onboarding / | ESG engagement |
| --- | --- | --- | --- | --- | --- |
| transition to a | gateway | review | diligence | 100-day plan |  |
| net-zero carbon | questions |  |  |  |  |

economy
Minimising the
Assess compliance with SEEIT’s sustainable Monitor and manage investments in line with
environmental
investment objective and ESG focus areas SEEIT’s sustainable investment objective and
footprint
ESG focus areas
Securing robust Quarterly environmental
Identify material ESG issues
governance and performance
that may stop/influence the
business integrity questionnaire
investment
Annual social
and governance
questionnaire
Providing Early Identify Determine Review ESG Oversee ESG
safe, diverse identification where whether due diligence performance of
and inclusive of possible additional to invest questionnaire to investments according
environments deal breakers technical due and fulfil assess and fill gaps to SEEIT’s ESG
diligence may disclosure standards
be required obligations
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 61
3.1 SEEIT Environmental,
Social and Governance (“ESG”)
continued
### United Nations’ Sustainable Development Goals
In 2015, 197 countries addressed global social, As such, the Investment Manager has been tracking SEEIT’s
environmental and economic challenges through the alignment with the SDGs and the below table sets out its key
17 UN Sustainable Development Goals (“SDGs”). Many goals and targets based on the impact of its assets.
private-sector organisations have now adopted these goals to
communicate a commitment to sustainable development.
Headline Description Key target
Affordable and clean Ensure access to 7.2 By 2030, increase substantially the share of renewable energy
energy affordable, reliable, in the global energy mix
sustainable and modern
energy 7.3 By 2030, double the global rate of improvement in energy
efficiency

| Decent work and | Promote inclusive and | 8.4 Reduce consumption of global resources and improve |
| --- | --- | --- |
| economic growth | sustainable economic | efficiency of production. Endeavour to decouple economic growth |
|  | growth, employment and | from environmental degradation, in accordance with the ten- |
|  | decent work for all | year framework of programmes on sustainable consumption and |

production, with developed countries taking the lead

| Industries, infrastructure | Build resilient | 9.1 Develop quality, reliable, sustainable and resilient |
| --- | --- | --- |
| and innovation | infrastructure, | infrastructure, including regional and trans-border infrastructure, |
|  | promote sustainable | to support economic development and human wellbeing, with a |
|  | industrialisation and | focus on affordable and equitable access for all |

foster innovation
9.4 By 2030, upgrade infrastructure and retrofit industries to
make them sustainable, with more efficient use of resources
and increased adoption of clean and environmentally sound
technologies and industrial processes, with all countries taking
action in accordance with their respective capabilities
Sustainable cities and Make cities inclusive, 11.6 By 2030, reduce the adverse per capita environmental impact
communities safe, resilient and of cities, including by paying special attention to air quality and
sustainable waste management
Responsible consumption Ensure sustainable 12.5 By 2030, substantially reduce waste generation through
and production consumption and prevention, reduction, recycling and reuse
production patterns
Climate action Take urgent action to 13.1 Strengthen resilience and adaptive capacity to climate-
combat climate change related hazards and natural disasters in all countries
and its impact
62 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Pictured: Primary Energy site
STRATEGIC REPORT
### Task Force on Climate-Related Financial Disclosures (“TCFD”) Update
The Investment Manager and the Company are both While the UK’s Financial Conduct Authority (“FCA”)
supporters of the Task Force on Climate-Related Financial made publishing a TCFD report mandatory for many
Disclosures (“TCFD”), recognising that climate change companies in the UK in January 2023, the Company is
scenarios represent significant risks and opportunities not in scope of this requirement. As a supporter of the
for the Company in the short, medium and long term. The TCFD recommendations, the Investment Manager has
Investment Manager believes that TCFD’s recommendations determined to use the framework to voluntarily disclose the
on governance, strategy, risk management and metrics Company’s considerations around climate-related risks and
provide a useful framework for monitoring, managing and opportunities.
increasing transparency around climate-related risks and
The Company has provided summaries of its progress to
opportunities.
date against TCFD’s eleven recommended disclosures and
acknowledges that its TCFD reporting will continue to be
developed and enhanced in the future.
Recommendation Disclosure
Governance
Describe the Board’s The Board oversees the Company’s operations and remains informed of relevant climate-related risks and opportunities
oversight of through the Investment Manager during quarterly Board and committee meetings.
climate-related risks
The Investment Manager informs the Board of all new and follow-on investments through regular reporting on the
and opportunities.
Company’s pipeline. If relevant, the Investment Manager will include climate-related risks and opportunities.
Once the Company has invested in a project, the Board receives a portfolio update and a risk matrix quarterly. These regular
updates reflect emerging climate-related risks and opportunities, allowing the Audit and Risk Committee and Board to
oversee and manage them alongside the Investment Manager. The Investment Manager will notify the Board of urgent
matters arising outside of the regular reporting cycle.
Describe Under direction from the Board, the Investment Manager is responsible for day-to-day management of the climate-related
management’s role risks and opportunities impacting the portfolio. The Investment Manager does this in part through its ESG Management
in assessing and process, more details of which are located in Section 3.1, ESG. The ESG Management process considers climate-related
managing climate- risks and opportunities when assessing and monitoring an investment.
related risks and
When assessing a potential investment, the Investment Manager completes the ESG due diligence questionnaire and
opportunities.
identifies climate-related risks and opportunities related to the investment.
Once a project has been acquired, the Investment Manager regularly monitors its operations through questionnaires. If
there is a climate-related risk or opportunity that could significantly impact the operation of a project, it will be raised to the
Investment Committee and, if necessary, the Board.
Strategy
Describe the climate-
Due to the length of the Company’s project contracts, the Company’s investment into and management of its projects
related risks and
take account of both short and long-term climate-related risks and opportunities. This includes consideration of climate-
opportunities the
related opportunities and transition risks to the assets.
organisation has
In the shorter term, the Company focuses on immediate risks and opportunities, such as the potential of that investment
identified over the
to reduce emissions compared with its alternative, or to satisfy requirements for legislative energy transition policies,
short, medium and
such as low-carbon energy credits. These shorter-term considerations occur over a period of one to two years.
long term.
In the longer term, these considerations can include both the positive and negative impacts of technological changes,
accelerated net-zero targets and physical climate impacts. The Company recognises its assets may be impacted
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW through technological changes and accelerated net-zero timeframes. The Board and Investment Manager monitor the
diversification of portfolio technologies and evaluate environmental-related risks, including assessing the suitability of
natural gas cogeneration assets as a target technology within a specific timeframe. Furthermore, as a company focusing
on investments that improve sustainability through reduced use of energy, risks and opportunities are assessed in terms
of the long-term capability of those investments to deliver sustainable energy solutions.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 63
3.1 SEEIT Environmental,
Social and Governance (“ESG”)
continued
Recommendation Disclosure
Describe the The policy trends as a result of the energy transition stand to benefit SEEIT’s investments through additional opportunities
impact of climate- and stronger regulatory support. The Company believes that the overall impact of the climate-related issues affecting the
related risks and Company is positive for the following reasons:
opportunities on
• The Company’s investments are designed to provide solutions to climate-related issues.
the organisation’s
• The Company’s supply chains provide solutions to climate-related problems, helping ensure both short and medium-term
businesses, strategy
reliability of suppliers who are prioritising similar solutions and innovation.
and financial
planning. • The complexity and capital requirements of effective longer-term climate-related solutions favour the Company, which
believes it has the necessary resources to identify investment and development opportunities where it is well placed to
add value.
Notwithstanding these competitive advantages, the Company considers how climate-related risks could affect its portfolio
and seeks to minimise its exposure. The Investment Manager considers a range of climate-related risks associated with the
Company’s portfolio, which impact the type of investments the Company makes, the location of the assets and how those
assets are managed in terms of upgrades and capex projects.
Describe the SEEIT considers the resilience of its strategy in terms of the impact of climate-related risks on its portfolio, and on the
resilience of the prospects for new investment opportunities in the future.
organisation’s
The Investment Manager considers how climate change and specifically the energy transition would impact the portfolio.
strategy, taking
This includes consideration of climate-related opportunities and transition risks, which are all considered during investment
into consideration
appraisal and on an ongoing basis as part of asset management.
different climate-
For new acquisition and development opportunities, the Investment Manager considers the impact of climate change in
related scenarios,
making decisions about the technologies and markets to focus on. The Investment Manager will continue to enhance its
including a 2°c or
reporting around the potential impacts of climate-related risks and will assess those risks under different climate scenarios
lower scenario.
in due course.
Risk management
Describe the The Company’s risks are managed as part of its overall risk management framework, which covers all aspects of the
organisation’s Company’s activities. Climate-related risks are incorporated into the overall risk management framework and thus follow the
processes for same monitoring, managing and governance structure of other types of risk.
identifying and
The risk management framework and risk appetite are overseen by the Company’s Audit and Risk Committee, which meets
assessing climate-
on a quarterly basis. The Audit and Risk Committee receives regular risk management reports from the Investment Manager
related risks.
to support its assessment, in addition to updates to the risk register, whereby each risk is rated, risk-mitigating factors are
detailed and applicable controls are highlighted. Climate-related risks including best-available technology or regulatory
changes are assessed as part of the risk register.
On a project level, the Investment Manager identifies and assesses climate-related risks through due diligence and asset
management. The Investment Manager does this in the first instance through due diligence questionnaires and checklists –
one of which is the ESG questionnaire with climate-related questions around high physical climate risks and high exposure
to technologies not consistent with net zero. These questions on climate change risk and adaptation are expanded upon in
the next stage of ESG due diligence, as part of the broader questionnaire.
The Investment Manager regularly monitors those risks through questionnaires and discussions with project management
teams.
For more information, please refer to Section 3.2, Risk Management.
Describe the As described above, the Audit and Risk Committee oversee the risk management framework to ensure that emerging and
organisation’s existing risks are managed. This includes climate-related risks as they are incorporated into the overall framework.
processes for
On a day-to-day basis, risks are managed by the Investment Manager at the portfolio and project level. The Investment
managing climate-
Manager works closely with project management teams to mitigate emerging risks through collaboration with
related risks.
counterparties and advisors.
For more information, please refer to Section 3.2, Risk Management.
Describe how The risks are identified during the assessment of a potential investment and can be enhanced throughout the life of a
processes for project, depending on technology or legislative changes relating to climate change. Ongoing monitoring of each asset
identifying, assessing, occurs through regular questionnaires, and all reported risks are validated and quantified by the Investment Manager.
and managing Furthermore, the Company discloses the portfolio’s environmental performance data, including its greenhouse gas
climate-related risks emissions, to inform ongoing risk management.
are integrated into the
Risk-mitigating controls are implemented on a case-by-case basis to ensure that the Company’s exposure to ESG risk is
organisation’s overall
managed. The controls are reviewed for effectiveness by the Investment Manager on a regular basis as ESG risks evolve
risk management
and the Company adapts.
64 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
STRATEGIC REPORT
Recommendation Disclosure
Metrics and targets
Disclose the The Company reports on a variety of metrics related to carbon and energy savings, energy generation and GHG emissions,
metrics used by which are calculated by monitoring environmental performance data of all investments quarterly. The climate-related
the organisation metrics are calculated using guidance from the Greenhouse Gas Protocol and UK Streamlined Energy and Carbon
to assess climate- Reporting legislation. The data is collected and collated by an external consultant and then reviewed internally.
related risks and
The Company monitors its environmental performance data to track progress against its sustainability indicators, namely
opportunities in line
the carbon and energy savings. Furthermore, the Company tracks the relevant GHG emissions of its assets to monitor its
with its strategy and
environmental impact and will inform its net zero strategy.
risk-management
Details on the relevant metrics are laid out in Section 3.1, ESG.
process.
Disclose Scope1, The Company reports on its Scope 1, 2 and 3 GHG emissions in accordance with the methodology set out in the
Scope 2 and, if Greenhouse Gas Protocol. The Company’s GHG emissions inform the degree of risk associated with an accelerated
appropriate, Scope 3 net-zero transition on a project-by-project basis.
GHG emissions, and
Details on the Company’s emissions are provided in Section 3.1, ESG.
the related risks.
Describe the The Company seeks to measure, monitor and report climate-related KPIs that are consistent with relevant international
targets used by standards, both statutory and voluntary, for assessing the sustainability of the Company’s activities. As mentioned above,
the organisation to in line with the EU Sustainable Finance Disclosure Regulation, the Company tracks the performance of its identified
manage climate- sustainability indicators.
related risks and
Further, in line with the Investment Manager’s commitment to the Glasgow Financial Alliance for Net Zero (“GFANZ”), the
opportunities and
Investment Manager is assessing its strategy for reaching net zero across the group and will provide an update on SEEIT’s
performance against
net zero plan in due course.
targets.
### EU Sustainable Finance Disclosure Regulation (“SFDR”)
As stated above and in the Company’s investment policy, In the appendix of the report is the Company’s first periodic
SEEIT seeks to make sustainable investments by investing disclosure under Article 9 of SFDR, following its most
in energy-efficiency projects that reduce energy usage and recently published Annex III pre-contractual disclosure in the
greenhouse gas emissions. On the basis that the Company August 2022 investor disclosure document. The Investment
has sustainable investment as its objective, based on the Manager consistently monitors SFDR developments
current laws and related guidance, the Investment Manager and emphasises that the evolution of the regulation and
considers that the Company qualifies as an Article 9 fund understanding of its requirements have impacted the
under the EU Sustainable Finance Disclosure Regulation responses provided in its disclosures. The Investment
(“SFDR”). Since its IPO, the Investment Manager has Manager recognises that the Company’s reporting under
considered making sustainable investments to be a key SFDR will develop with future disclosures.
aspect of the Company’s investment approach and believes
that the incorporation of sustainability into its investment
process, asset management and reporting procedures is
crucial for continuing to deliver sustainable growth and
returns for shareholders.
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 65
3.1 SEEIT Environmental,
Social and Governance (“ESG”)
continued
### Climate-Related Environmental Performance Data – year to 31 March 2023
The principal environmental performance data of SEEIT’s portfolio is set out in the tables below which cover, respectively: carbon
and energy savings, portfolio energy generation, scope 1,2 and 3 GHG emissions, and carbon intensity indicators. The Investment
23
Manager collects environmental performance data individually from the majority of its assets based on actual energy usage and
generation to inform its below analysis in-line with relevant requirements and recommendations.

|  | 24 | 25 |  |  |
| --- | --- | --- | --- | --- |
| Portfolio Energy | and Carbon | Savings |  |  |
|  |  |  | Carbon | Energy |
|  |  |  | Savings | Savings |

tCO2e MWh
2022/23 2021/22 2022/23 2021/22
EU 153,474 167,191 1,518 -
USA 1,021,939 872,106 337,889 188,076
UK 18,980 16,596 37,849 42,523
ASIA 8,136 4,723 10,613 11,562
TOTAL PORTFOLIO 1,202,528 1,060,616 387,868 242,161
Portfolio Energy Generation
## 4,373,103 MWh
Total Energy Generated at 31 March 2023;
3,747,622 31 March 2022
Renewable Electricity Renewable Heat Non-Renewable Electricity Non-Renewable Heat
Generated Generated Generated Generated
MWh MWh MWh MWh
2022/23 2021/22 2022/23 2021/22 2022/23 2021/22 2022/23 2021/22
EU 227,449 195,723 214,394 - 353,882 721,754 239,165 487,511
USA 89,301 75,294 - - 1,701,990 1,417,920 1,381,514 718,082
UK 34,069 745 34,838 36,031 42,002 43,867 48,728 51,079
ASIA 5,772 - - - - - - -
TOTAL PORTFOLIO 356,591 271,763 249,232 36,031 2,097,873 2,183,541 1,669,406 1,256,672
23 The environmental performance data disclosed in the report covers the majority of the projects in SEEIT’s portfolio for the year ending 31 March 2023, making up c.95% of portfolio by value,
but select investments have been excluded from this analysis due to relevance.
2 4 Energy savings refers to the electrical and thermal energy not consumed at the point of use by the customer due to a SEEIT investment.
25 Carbon savings refer to the reduction in GHG emissions achieved by a project compared to a relevant counterfactual, i.e. how the customer would receive the energy services in the absence of
said project.
66 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Portfolio GHG Emissions²⁶

# 558,821 tCO2e

Total Carbon Emissions (S1 + 2) at 31 March 2023;

745,041 tCO2e 31 March 2022

|   | SCOPE 1 |   |   |   | SCOPE 2 |   |   |   | SCOPE 3  |   |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|   |  tCO2e |   | MWA |   | tCO2e |   | MWA |   | tCO2e  |   |
|   |  2022/23 | 2021/22 | 2022/23 | 2021/22 | 2022/23 | 2021/22 | 2022/23 | 2021/22 | 2022/23 | 2021/22  |
|  EV | 195,778 | 368,021 | 2,105,266 | 2,763,578 | 2,679 | 2,686 | 14,378 | 14,849 | 2,592 | 9,210  |
|  USA | 361,550 | 265,223 | 1,073,044 | 1,593,948 | 7,372 | 5,149 | 68,228 | 48,408 | 255,283 | 259,920  |
|  UK | 9,645 | 8,742 | 78,878 | 76,593 | - | - | - | - | 18,829 | 15,802  |
|  AS-6 | - | - | - | - | - | - | - | - | - | -  |
|  TOTAL FORTISUM | 558,821 | 707,499 | 4,107,116 | 5,583,611 | 5,881 | 7,038 | 90,606 | 93,893 | 372,656 | 350,900  |

Carbon Intensity Indicators

|   | Required Average Carbon Intensity |   | Carbon Nonfactor |   | Carbon Intensity |   | Exposure to Carbon Enclosed Assets  |   |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|   |  tCO2e / 6M Value |   | tCO2e / 6M Value |   | tCO2e / 6M Value |   | %  |   |
|   |  2022/23 | 2021/22 | 2022/23 | 2021/22 | 2022/23 | 2021/22 | 2022/23 | 2021/22  |
|  EV | 1,680 | 3,010 | 173 | 404 | 1,518 | 508 | 20.8% | 23.1%  |
|  USA | 1,688 | 1,859 | 340 | 496 | 2,731 | 2,050 | 42.6% | 46.1%  |
|  UK | 1,519 | 734 | 6 | 7 | 472 | 732 | 3% | 5%  |
|  AS-6 | - | - | - | - | - | - | 0% | 0%  |
|  TOTAL FORTISUM | 4,688 | 9,664 | 559 | 611 | 3,065 | 1,580 | 36.0% | 38.5%  |

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

- where possible to capture fundamental data regarding project performance. Examples of this data include energy generated (kWh) and fuel consumed (kWh);
- use publicly available emissions factors from government sources specific to the project location;
- where a project was commissioned or purchased by SEEIT mid-way through the reporting period, only the portion of the period after commissioning or purchase date should be recognised; and
- where SEEIT owns less than 100% of a project, the total project savings should be reduced pro-rata with the ownership percentage.

The data gathering process is predominantly manual and therefore dependent on accurate reporting from the management teams and other sources at the asset level. Market practice and processes keep improving and the Investment Manager is actively engaged in seeking the most up to date and accurate data for each of the investments. There have been instances in which evolving calculation methodologies or new information provided slightly alters previously reported data, but as those changes have been immaterial, the data reported in 2021/2022 for that year remains consistent in these tables.

26 The Portfolio Scope 1, 2 and 3 GHG emissions predominately represent that we used to generate energy in SEEIT's energy-generating assets, in addition to limited Scope 2 and 3 emissions relating to business operations and supply chain emissions.
27 The kWh in the table refers to the energy consumed associated with the disclosed emissions.
28 Definitions of carbon intensity indicators:

- Weight average carbon intensity. The portfolio's exposure to carbon-intensive companies, expressed in tons CO2e/6M value.

- Total carbon footprint. The total carbon emissions for a portfolio normalized by the ownership of the asset, expressed in tons CO2e / 6M invested.

- Total carbon intensity by revenue. The volume of carbon emissions per million dollars in revenue (carbon efficiency of a portfolio), expressed in tons CO2e/6M revenue. Last year, the carbon

intensity by revenue was calculated at the asset level, but this year it has been calculated at the regional level. Therefore, the 2021/2022 carbon intensity is shown on an equivalent basis.

- Total exposure to carbon-related assets. The percentage of carbon-related assets in the portfolio, expressed in kWh in percentage of the current portfolio value.

EDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 67

03/03/2024

WPA/EE/EE REPORT

03/14/2024

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION
## 3.2 Risk Management
## Framework
Pictured: Onyx Renewable Partner site
Risk Management The Audit and Risk Committee receives Principal Risks
regular risk management reports from
Framework The principal risks faced by the
the Investment Manager to support its
The Company has a risk management Company and the investment portfolio
assessment, in addition to updates to
framework that covers all aspects of the have been summarised in the table
the risk register, whereby each risk is
Company’s activities, including systems below. These risks are monitored by
rated, risk mitigating factors detailed
and procedures designed to ensure the Investment Manager and have
and applicable controls highlighted.
that all applicable risks pertaining to the been reviewed by the Board and by
The Audit and Risk Committee and
Company, its portfolio of investments the Audit and Risk Committee. The
the Investment Manager discuss and
and any stakeholders can be identified, key risks faced by the Company and its
consider emerging risks and possible
monitored and managed. investment portfolio are materially the
mitigants on a regular basis. When
same as in the prior year, although the
The Investment Manager is a key required, the Company’s external
likelihood of certain risks crystallising
service provider to the Company and is advisers will be consulted.
may have moved over time.
tasked with operating the key controls
Part of the Company’s wider risk
within the Company’s risk management The majority of the risks are faced
management framework captures
framework. directly by the investment portfolio
the activities of key service providers
and only indirectly by the Company.
The risk management framework – including the Investment Manager,
Risks are typically not expected to
and risk appetite are overseen by the which has its own risk management
change materially through the year, as
Company’s Audit and Risk Committee, function, with appropriate systems and
operational and financial performance
which meets on a quarterly basis at controls, and on which the Company
of underlying projects are measured
minimum. The remit of the Audit and relies.
over the medium to long term and are
Risk Committee includes a requirement
therefore typically consistent between
to monitor the risks against pre-agreed
periods.
risk tolerances, and to keep under
review the adequacy and effectiveness
of the internal financial controls,
internal controls and risk management
systems relied upon by the Company.
68 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
STRATEGIC REPORT
Risk
Risk Type Risk Description Mitigation
Movement
Credit Increase Counterparty risks relating to • Thorough counterparty due diligence is undertaken on prospective
potential default and failure investments, which includes credit rating assessments to determine
to pay. whether credit counterparties are of sufficient quality.
Default risks relating to • Ongoing counterparty risks are monitored, with the potential to be
counterparties for energy mitigated via credit risk management relating to counterparties
services contracts and relating (including through credit risk assessments, diversification across
to key service providers are the such counterparties or selling investments).
Company’s largest inherent risks.
• Additional protections such as parent company guarantees may
also be sought.
• Investment due diligence processes include assessments of
the likely rate of recoverability of project capital in the event of
any counterparty default. For example, an assessment would
be undertaken regarding alternative offtaker arrangements or
expectations for continuing plant operations due to the underlying
profitability of such plants.
Market Same Market regulation changes • The Company mitigates these risks by ensuring any impact is
Regulatory that could result in negative primarily borne by the beneficiary of the asset rather than the
financial impact or volatility of Company as owner.
revenues.
• In the longer term, the pipeline development strategy can take
Short to medium-term risk to account of policy and regulatory changes, as the Company retains
revenues or costs through flexibility to pursue opportunities in different technologies or regions
changes in carbon-related which are identified as priorities.
charges, emissions standards or
energy prices.
Investment Increase Re-contracting • The majority of projects in the portfolio are contracted for the
medium to long term. The key risk is that the value of the Company’s
The risk that assets within the
investment in specific projects can be materially impacted by the
portfolio are unable to renew
ability of the asset to recontract. This risk is mitigated as all asset
their contracts on favourable
projects, where relevant, have a good recontracting record – given
terms.
that projects are focused on providing a combination of emissions
control and renewable energy, providing essential services to clients
at a competitive price.
Operations • Experienced and skilled contractors are employed for projects,
and appropriate contractual performance assurances may further
The risk that asset operations
mitigate such risks.
are not performing in line with
expectations. • However, there may be situations where contractual protection will
not provide complete protection against underperformance. This is
likely to occur where revenues are capacity rather than availability
based.
• Due diligence undertaken on prospective investments seeks
to identify risks relating to decommissioning and ongoing
maintenance. Leading equipment manufacturers are selected, and
the Company seeks to only adopt tried-and-tested technology, in
mitigation of operational risks.
• The range of established technologies in which SEEIT has invested
is sufficiently broad that systemic issues are limited.
• Operational KPIs are shared on a regular basis and the asset team
oversees operations to mitigate these risks.
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 69
3.2 Risk Management Framework
continued
Risk
Risk Type Risk Description Mitigation
Movement
Investment Construction • Technical due diligence at project design stage, the use of
(continued) conservative construction time-period assumptions, the
Delayed construction/cost
appointment of leading construction engineers and the use of tried-
overruns resulting in financial
and-tested technology should all contribute towards mitigation of
underperformance.
this risk.
• Contractual protection negotiated with developers may also be used
to ensure the Company is not itself directly at risk for the costs of
construction delays.
• The Company’s investment policy limit on the level of exposure
to development and construction projects also helps mitigate the
effect of this risk, by ensuring it remains a relatively small proportion
of the total invested portfolio.
Feedstock and commodity • At the stage of prospective investment due diligence, careful
prices consideration is given to any potential exposures relating to future
feedstock availability or prices, alternative sources, and any reliance
Risks relating to fluctuations
on energy pricing or subsidies.
in pricing of commodity and
feedstock, unhedged energy • The Company has the capacity to purchase entities to integrate the
price exposures or regulated supply chain and deliver cost savings on feedstock supplies to key
revenues. assets.
1. The Company may face • The Investment Manager reviews market prices, where residual
feedstock shortages, leading market-related exposures may remain unhedged, with a view to
to higher production costs or reducing such pricing exposures and volatility. In general, the
the inability to produce the Company seeks to pass material price risk on to Counterparty so
required amount of energy there is no direct impact on the Company.
using desired inputs.
2. Prices for energy inputs
may also rise with changing
market conditions, which
could affect economic
returns.
Demand Risk • The Company targets contracted revenues with protection
against demand risk. Where there is exposure to demand risk, the
Risk that lower demand from
Manager seeks to manage this through various measures such as
offtaker reduces revenues.
diversification across multiple offtakers (e.g. RED-Rochester), right of
first dispatch (e.g. Primary Energy) and/or ensuring that demand of
the offtaker significantly exceeds capacity.
Regulatory, Same ESG compliance of • The Investment Manager undertakes ESG onboarding and uses
Reputational counterparties checklists for all new investments to ensure compliance with its
and ESG framework and standards.
Risk that assets or partners are
Compliance
not adhering to relevant ESG • For all greenfield opportunities, or where contracts can be
policies and requirements (e.g. amended, appropriate compliance and monitoring requirements will
labour laws). be included.
• Where existing contracts cannot be amended, the Investment
Manager will use best endeavours to ensure compliance and
regular monitoring of counterparties.
• The Investment Manager works with direct counterparties to
understand and target compliance with best practices.
70 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Risk STRATEGIC REPORT
Risk Type Risk Description Mitigation
Movement
Operations Increase Cyber Risk • Cyber security controls are operated by service providers and other
contractors in respect of portfolio assets. The controls of service
The Company’s range of
providers are monitored /reviewed by the Investment Manager
different assets may be exposed
periodically and the Audit and Risk Committee.
to a number of cyber and/
or fraud-related risks, which • Appropriate security access controls are put in place at host sites,
require a tailored mitigation plan reflecting the essential nature of energy services provided to such
according to the specifics of hosts.
each portfolio asset.
• The Investment Manager has undertaken a third-party review of
Increased risk due to Russian cyber risk across key projects. While no red flags were identified,
hostility towards Western recommendations are being actioned by the Investment Manager’s
corporations. asset management team.
Macro- Increase Corporation tax • Comprehensive tax and structuring advice are taken prior to making
economic new investments, with the aim of structuring these appropriately,
Changes to corporate rules
within the overall low-risk approach to taxation of the Company.
could increase tax payments.
• The Company can use intragroup profits and losses efficiently,
allowing it to materially negate the rise in UK corporation tax rates.
• Significant new investment in the USA provides an opportunity for
optimising structuring and undertaking various consolidations that
may reduce the impact of rising corporation tax rates.
• The Company, by virtue of being a HMRC-approved investment
trust, can potentially utilise interest streaming to reduce the overall
impact of rising corporation tax rates across the portfolio.
Interest Rates Rises • Risks are mitigated by the Company having a globally diversified
portfolio.
Risk of pricing impact to current
assets and future deals. • A credit facility reduces the risk of the Company having to exit an
asset at an unfavourable price to meet potential funding demands.
Inflation • The Investment Manager continues to monitor the effect of inflation
on a regular basis through detailed stress testing and sensitivity
Inflation may be higher or lower
analysis.
than base case expectations.
• The Investment Manager is building the portfolio to mitigate against
material changes to inflation and it is currently positive correlated to
inflation. Further mitigation is inherent in the recontracting feature
within some of the assets, which should allow for incorporation of
inflationary impacts at the time of recontracting.
Liquidity Same Risk that the Company is unable • The Investment manager manages the cash portion of the portfolio
to meet short-term liability and to ensure there is sufficient cash to meet short-term demand.
financial demands.
• Additional liquidity is available via a credit facility.
• Investment Manager may also consider strategic disposals when it
can maximise value for shareholders.
Financial/ Increase Risk of share price continuing to • Enhanced disclosure to investors through a Capital Markets Day
Market trade at a discount to NAV. in March 2023 and providing additional level of disclosure in this
Annual Report
• Company has implemented a buyback plan in Q2 2023 and will
continue to review this against the wider market movements.
• Regular interaction with shareholders via the Investment Manager
and meetings with the Chair.
Emerging Risks
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
The Company’s Board, along with the Investment Manager, utilises the Risk Management Framework to assess and identify new
risks that are pertinent to the Company. The Company monitors not just existing risks but also these emerging risks, which may or
may not crystallise over the medium-to-long term.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 71
3.2 Risk Management Framework
continued
Risk
Risk Type Risk Description Mitigation
Movement
Operations Increase The Company plans to hold • The Board and Investment Manager monitor portfolio technology
energy-efficiency assets diversification and any environmental-related risks, including
generating cashflows over the consideration of the timeframe within which natural gas
long term. However, its assets cogeneration assets will remain acceptable as a target technology.
may be impacted through
• Such investments achieve a high degree of combined thermal
technological changes, or
and electrical efficiency, making important and demonstrable
otherwise impacted through
contributions to the transition towards net-zero status.
accelerated international
• Due diligence on prospective investments includes, as applicable,
timeframes to reach net-zero
consideration of the adaptability and flexibility of prospective assets
carbon emission targets.
to achieve progressive environmental impact targets – with a view to
a potential longer-term transition to alternative fuel sources such as
biogas and hydrogen.
Investment Increase Increased investor activity and • While the sectors that the Investment Manager invests in are
competition could impact ability relatively niche, compared to utility-scale renewables, more players
to acquire projects at desired are starting to invest in these sectors, resulting in increased
returns. competition. This may result in a downward pressure on returns on
new investment opportunities. Conversely, this would have a positive
impact on discount rates for the existing portfolio.
• Risk can be managed through focusing on our own network of
developers, partners and offtakers, and ensuring a strategic angle to
our investment.
Specific Event Risks

| COVID-19 | Ukraine War | Climate-Related Risks |
| --- | --- | --- |
| Overall, Covid-19 did not have a material | The impact of the conflict is evolving. | Climate-related and other ESG |
| impact on the majority of the portfolio | While the Company does notanticipate | considerations are reviewed, analysed |
| during the previous twelve months, as | currently direct operational disruption | and managed as an integral part of the |
| it had in the preceding period. With | to the portfolio (primarily gas supply), | Company’s overall risk management |
| the majority of offtakers operating as | this situation remains closely | procedures for investment appraisal, |
| essential industries, the operation of | monitored. The Company and its | due diligence and asset management. |
| portfolio projects has broadly adapted | portfolio are exposed indirectly |  |
| well to the pandemic environment. | through macroeconomic volatility, |  |

impacting interest rates, inflation and
Brexit
commodity prices, all of which has
While the Company has not impacted the financial performance of
experienced any material impact from the Company, as described elsewhere.
Brexit, the Investment Manager will The Company notes the heightened
continue to monitor any developments risk to businesses regarding
in the relationship between the EU cybersecurity, and has reflected that
and the UK, both in the near term as through the increase in the cyber risk
businesses adjust, and over the longer status.
term, as UK and EU regulation may
The Investment Manager continues
diverge over time.
to assess the impact of sanctions,
which are themselves evolving,on
the portfolio supply chain and
stakeholders, and will continue to
work with the project companies to
ensure compliance with all applicable
regulations.
72 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## 3.3 Viability Statement

|  | Investment Manager’s expectations | loss in revenues and approximately |  |  |  |
| --- | --- | --- | --- | --- | --- |
| Viability Assessment Period |  |  |  |  | STRATEGIC REPORT |
|  | of future asset performance, income | a 15-20% reduction in the Portfolio |  |  |  |
| The Directors have assessed the |  |  | (APM) |  |  |
|  |  | Valuation |  | and therefore NAV of |  |

and costs, and are consistent with the
prospects of the Company over a
the Company;
methodology applied to provide the
five-year period to 31 March 2028.
■ a scenario that reviewed a sharp
valuation of the investments during
Consistent with prior years, the
one-off rise of c.10% in US federal
the year.
Directors have determined that tax rates, although due to mitigants
five years is an appropriate period The Investment Manager provided
available the impact on the

|  | analysis on these projections at |  | (APM) |  |
| --- | --- | --- | --- | --- |
| over which to provide this viability |  | Portfolio Valuation |  | was |
| statement, as this period accords with | various points through the year, | c. 1%; and |  |  |
| the Company’s business planning | considering the potential impact of | ■ a scenario that determined the |  |  |
| exercises and is appropriate for the | the Company’s principal risks actually | extent of a rise in EU-ETS costs of |  |  |
| investments owned by the Company | occurring in severe but plausible | over 60% in the near terms, which |  |  |
|  | downside scenarios. | would cause sufficient impact to |  |  |

and the nature of the Company.
put at risk the Company’s ability to
The Audit and Risk Committee had the
Assessment Process cash cover its dividends in full
opportunity to review and challenge
In making this statement, the Directors The Audit and Risk Committee
the scenario analysis, which included
have considered the resilience of reviewed and challenged the
the potential adverse impact of the
the Company, taking account of its Investment Manager on each of the
scenarios detailed below on the
current position, the principal risks scenarios presented. This included
Company’s projected near-term,
facing the business in severe but reviewing the likelihood of the risks
medium and long-term cashflows,
plausible downside scenarios, and the of the scenarios materialising and
and the associated effect on ability to
effectiveness of any mitigating actions. considering the potential mitigants
pay dividends, ability to settle ordinary
that the Investment Manager
The Company benefits from a liabilities, and on earnings and the
could apply to reduce any potential
majority of investments that have a NAV.
downside risk. The Audit and Risk
high degree of contracted long-term
Scenarios Reviewed and Committee concluded that the
cashflows, and a set of risks that
their Impact scenarios, each prepared individually,
can be identified and assessed and
The Investment Manager selected demonstrated good resilience of the
would not be expected to change
these scenarios on the basis that each Company against adverse factors
materially from one period to the next.
could reasonably be assumed to be a impacting its portfolio. The Investment
The investments are each supported
plausible but severe impact caused by Manager also provided the Audit and
by detailed financial models, and
market factors, including the knock- Risk Committee with a severe scenario
investments that have financing in
on effect of the Covid-19 pandemic that calculated the extent of the loss
place have done so on a non-recourse
and global recession, affecting the in revenue required to threaten the
basis to the Company. The Directors
Company directly or indirectly: Company’s solvency. The outcome of
believe that the diversification within
this scenario provided comfort that the
the portfolio, of predominantly
■ inability to refinance third-party
Company should remain viable over
operational investments, helps to
debt, resulting in a reduction of
the period assessed.
withstand and mitigate the identified
distributions from investments
risks the Company may face.
– which in turn places the Confirmation of viability
(APM)
The Investment Manager prepared, Company’s ability to cash cover
Based on the reviews conducted
its dividends under pressure in
and the Directors reviewed, five-
throughout the year, the Directors
specifically identified future years;
year cashflow projections as part
confirm that they have a reasonable
■ a scenario that combined,
of business planning – including as
expectation that the Company will be
during the same period, major
part of the approval process of the
able to continue in operation and meet
challenges at project level,
Company’s budget and business
including slower than projected its liabilities as they fall due over the
plan – and undertook to approve
deployment of solar and storage period to 31 March 2028.
dividends on a quarterly basis after
projects at Onyx, removal of an
reviewing medium-term cashflow On behalf of the Board
accretive cogeneration project at
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
projections. The projections consider RED-Rochester, and lower than
Tony Roper,
cashflows, dividend cover, investment expected revenues resulting from
Chair
policy compliance and other key recontracting at Cokenergy. The
combined effect resulted in a
financial indicators over the period.
significant assumed permanent
These projections are based on the
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 73
## 4.
## BOARD AND
## GOVERNANCE
Pictured: RED-Rochester site
74 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 4.1 Investment Policy and Approach
### 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.
(APM)
### Summary of the • Though the Company initially Structural gearing and acquisition
GOVERNANCE
focused its attention on investing finance are employed either at the
### Investment Policy
in the UK, over time the Company level of the Company, at the level of
• The Company seeks to achieve its
has expanded to invest in projects the relevant investment, or at the level
investment objective by investing
in Europe, North America, and the of any intermediate wholly owned
principally in a diversified portfolio of
Asia-Pacific region. subsidiary of the Company. Structural
investments with high quality, private
(APM)
gearing and acquisition finance
and public sector counterparties. • In pursuing its investment policy,
primarily comprise bank borrowings,
The contracts governing these the Company will seek to target
though small overdraft facilities may
investments typically entitle the sustainable investments, for
be used for flexibility in corporate
Company, on the whole, to receive example, by making investments
transactions.
stable and predictable cashflows. that contribute to GHG emission
The Company’s returns are derived reductions.
### Use of Derivatives
from contractual payments by
The full investment policy can be found The Company may use derivatives
counterparties in respect of each
on the Company’s website. for efficient portfolio management
relevant investment.
but not for investment purposes. In
### • Whilst the Company invests Gearing particular, the Company may engage
predominantly in operational in full or partial interest rate hedging
The Company maintains a
investments, the Company may or otherwise seek to mitigate the risk
conservative level of aggregate
under certain circumstances invest (APM) of interest rate increases and full or
gearing in the interests of capital
while such investments are in a partial foreign exchange hedging to
efficiency, to enhance income returns,
construction or development phase. mitigate the risk of currency inflation.
long-term capital growth and capital
In addition, the Company may, to a
flexibility. The Company’s target
The Company does not typically
limited extent, invest in developers, (APM)
medium-term gearing is 35% of
enter into hedging contracts and
operators or managers of energy (APM)
Net Asset Value (NAV) , calculated
other derivative contracts directly
efficiency infrastructure investments.
at the time of borrowing (“structural
but may do so via its subsidiaries
gearing”).
• In respect of the investment when they are available in a timely
portfolio, the Company seeks to manner and on terms acceptable to
The Company may also enter
diversify its subcontracting exposure it. The Company reserves the right to
borrowing facilities on a short-term
by contracting, where commercially terminate any hedging arrangement in
basis to finance acquisitions
practicable, with a range of different its absolute discretion.
(“acquisition finance”), provided that
engineers, manufacturers or other
the aggregate consolidated borrowing
### service providers. Cash Management
of the Company and the investment
portfolio, including any structural Whilst it is the intention of the
• Investments may be acquired
(APM) Company to be fully or near
gearing , shall not exceed 65%
individually or as a portfolio.
of NAV, calculated at the time of fully invested in normal market
TheCompany may also invest jointly
borrowing. The Company intends to conditions, the Company may
with a co-investor. The Company aims
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW repay any acquisition finance with the hold cash on deposit and invest in
to achieve diversification by investing
proceeds from capital raisings in the cash-equivalent investments, which
in a range of different energy efficiency
short –to medium term. could include short-term investments
technologies and contracting with a
in money-market type funds and
wide range of counterparties.
tradeable debt securities.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 75
### 4.2 Board of Directors
Anthony (Tony) Roper Helen Clarkson OBE
### As at the date of this
Independent Non-Executive Chair, Independent Non-Executive Director,
### Annual Report, the

|  | Nomination Committee Chair | Management Engagement Committee |
| --- | --- | --- |
| Board consists of five |  | Chair |
| Directors who have | Appointed: 12 October 2018 | Appointed: 12 October 2018 |
| complementary and | Tony started his career as a structural | Helen joined Climate Group in March 2017 |
|  | engineer with Ove Arup and Partners in | as Chief Executive Officer. Climate Group |

### relevant skills and

|  | 1983. In 1994 he joined John Laing plc | is an international non-profit organisation |
| --- | --- | --- |
| backgrounds. | to review and make equity investments | with a mission to drive climate action, fast. |
|  | in infrastructure projects both in the | Climate Group builds networks of leading |
|  | UKand abroad and then in 2006 he joined | governments and businesses working on |

The Directors are of the opinion
HSBC Specialist Investments to be the issues such as renewable electricity and
that the Board as a whole has
fund manager for HSBC Infrastructure zero carbon steel, to shape markets and
an appropriate balance of skills,
Company Limited (now HICL Infrastructure policy. Helen also sits on the board of the
experience and diversity.
plc). In 2011, Tony was part of the senior We Mean Business Coalition.
management team that bought HSBC
Prior to joining the Climate Group, Helen
Specialist Investments from HSBC,
worked at Forum for the Future where
renaming it InfraRed Capital Partners.
she founded the organisation’s US office.

| Tony was a managing partner and a senior | At Forum, Helen led work with large US |
| --- | --- |
| member of the infrastructure management | corporations such as Target, Walmart, |
| team at InfraRed Capital Partners until | Nike, Gap and Levi Strauss & Co. to |
| June 2018, during which time he oversaw | solve complex sustainability challenges. |
| the successful launch of The Renewables | Helen joined Forum from Médecins |
| Infrastructure Group on the London Stock | Sans Frontières where she worked on |
| Exchange. | humanitarian missions across a number of |

conflict zones.
Tony is the chair of abrdn European
Logistics Income plc. Helen qualified as a Chartered Accountant
with Deloitte and has an undergraduate
Tony has a master’s degree in engineering
degree from the University of Cambridge,
from the University of Cambridge and is
and a master’s degree from the University
an Associate Chartered Management
of London. In 2022 Helen was awarded an
Accountant (“ACMA”).
OBE for services to the climate.
76 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
GOVERNANCE
Emma Griffin Christopher (Chris) Knowles Sarika Patel
Independent Non-Executive Director, Senior Independent Non-Executive Independent Non-Executive Director,
Remuneration Committee Chair Director Audit and Risk Committee Chair

| Appointed: 21 October 2020 | Appointed: 12 October 2018 | Appointed: 1 January 2022 |
| --- | --- | --- |
| Emma is an experienced director, | Chris has over 40 years’ experience in | Sarika is an experienced business |
| having worked in both the UK and North | projects, infrastructure and environmental | leader in amixture of public and private |
| America. She has broad capital markets | finance and economics. He spent the | organisations, and has worked as a |
| and significant international investment | majority of his career to date at the European | senior corporate finance professional at |
| expertise, gained as both an executive | Investment Bank (EIB), heading the | ZeusCaps (aprincipal investment and |
| and non-executive director. From 2002 | infrastructure and environmental investment | advisory platform focused on infrastructure |
| to 2013 Emma was a founding partner | funds business from 2005 to 2017. In this | and related sectors operating in India, |
| of Oriel Securities, which was sold to | capacity, he had pan-European responsibility | Europe and the Middle East) and Grant |
| Stifel Corporation, and in her early career | for a diverse portfolio of activities, including | Thornton. |
| she worked for HSBC James Capel and | equity funds for infrastructure and clean |  |

Sarika is the Chair of abrdn Equity
Schroders. energy, energy efficiency, carbon finance,
Investment Trust plc, and is a non-executive
natural capital and structured finance.

| Emma currently serves as a non-executive |  | director of and chairs the audit committees |
| --- | --- | --- |
| director of St James’s Place plc and of | From 2000 to 2005 he led the lending | at Foresight Forestry Fund plc and Sequoia |
| IA Financial Group (listed on the TSX in | operations team responsible for EIB’s | Economic Infrastructure Income Fund |
| Canada). She is also a director of privately | financing in the transport and infrastructure | Limited. Sarika is the Chair of Action for |
| owned ED&F Man Holdings and serves | sectors in Spain, closing €4-5bn of financing | Children and is a board member of the |
| on the board of Claridge Inc., a private | annually for Europe’s largest national | Office for Nuclear Regulation where she |
| investment firm, and on the board of one | infrastructure programme, much of it in | chairs the Audit, Risk and Assurance |
| of its largest individual investments. Emma | public-private partnership form. He spent | Committee. |
| has recently joined the board of NM | the 1990s in similar jobs throughout central |  |

Sarika is a Chartered Accountant and
Rothschild and Sons Limited. Europe, Finland and Greece, and the 1980s
a Chartered Marketer and is a double
in Africa and the Caribbean. Prior to his time
Emma has a master’s degree in Latin and graduate in Law and Commerce.
at EIB he worked for the Lesotho National
Greek from the University of Oxford.
Development Corporation, the European
Commission and Lazard Brothers.
Chris also serves as a non-executive director
on a number of private equity and debt
funds pursuing ESG and impact strategies in
Europe, Latin America, Africa and Asia. Heis
a member of various advisory committees
including that for the Climate Bond Initiative
and the Organisation for Economic
Co-operation and Development (“OECD”)
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
Centre for Green Finance & Investment.
Chris holds degrees in Economics and
Management from the University of Durham.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 77
## 4.3 Report of the Directors

The Directors are pleased to present the Annual Report for the year ended 31 March 2023. In accordance with the Companies Act 2006 (as amended), the Listing Rules and the Disclosure Guidance and Transparency Rules, the Corporate Governance Statement, the Directors' Remuneration Report, the Audit and Risk Committee Report, the Nomination Committee Report and the Statement of Directors' Responsibilities should be read in conjunction with one another and the Strategic Report. As permitted by legislation, some of the matters normally included in the Directors' Report have instead been included in the Strategic Report, as the Board considers them to be of strategic importance. Therefore, a review of the business of the Company, recent events and outlook can be found in Section 2, Strategic Report: The Company, along with information regarding environmental, social and governance issues.

### Corporate Governance

The Company's Corporate Governance Statement is set out in Section 4.4, Corporate Governance Statement and forms part of this report.

Details regarding independent professional advice and insurance are set out in Section 4.4, Corporate Governance Statement.

### Principal Activity

The Company is a closed-ended UK investment trust that invests in energy efficiency infrastructure projects. Further details can be found in Section 2, Strategic Report: The Company and Section 3, Strategic Report: Portfolio Review. The Directors do not anticipate any change in the principal activity of the Company in the foreseeable future.

### Investment Trust Company Status

The Company has been approved as an investment trust under Sections 1168/1159 of the Corporation Tax Act 2010. The Company has continued to meet relevant eligibility conditions and ongoing requirements as an investment trust, in particular that the Company must not retain more than 15% of its eligible investment income. The Directors are of the opinion, following advice from the Company Secretary and Administrator, that the Company continues to conduct its affairs as an Approved Investment Trust under the Investment Trust (Approved Company) (Tax) Regulations 2011.

### Non-Mainstream Pooled Investments

As a UK investment trust, the Company's shares are excluded from the restrictions in the FCA Rules on the marketing of non-mainstream pooled investments ("NMPIs") to ordinary retail clients' and the Company is accordingly not considered to be an NMPI. The Company currently conducts its affairs, and intends to continue to do so for the foreseeable future, in order that its shares can be recommended by a financial adviser to ordinary retail investors in accordance with the FCA Rules on NMPIs. As an equity security admitted to listing on the premium listing segment of the Official List of the FCA and to trading on the Main Market of the London Stock Exchange, the ordinary shares of the Company are expected to qualify as a readily realisable security. Accordingly, it will not be either a (i) speculative illiquid security; (ii) a non-mass market investment; or (iii) a restricted mass market investment.

### Directors

The Directors in office at the date of this report and their biographical details are shown in Section 4.2, Board of Directors.

Details of the Directors' terms of appointment can be found in Section 4.4, Corporate Governance Statement. The beneficial interest of the Directors and their connected persons in the ordinary shares of the Company are set out in Section 4.7, Directors' Remuneration Report.

### The Investment Manager

The Company and the Investment Manager 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 portfolio in accordance with the Company's investment objective and policy.

The Investment Manager is authorised and regulated as an 'alternative investment fund manager ("AIFM") by the FCA and, as such, is subject to the FCA rules in the conduct of its investment business.

As the entity appointed and 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. This discretion is, however, subject to:

78 | SESIT ANNUAL REPORT 2023 | ISOCL Orange Efficiency Income Trust plc
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 investments and monitoring the Company's funding requirements.

The Board keeps the performance of the Investment Manager under continual review. The Directors believe that the continuing appointment of the Investment Manager, on the agreed terms, is in the best interest of the Company and its shareholders as a whole.

Further information on the SDCL group can be found on the website: https://www.sdclgroup.com/

### Articles of Association

The Company's Articles of Association set out its internal regulations and cover the rights of the shareholders, the appointment of Directors and the conduct of the Board and general meetings. Copies of the Articles of Association are available upon request from the Company Secretary.

The Articles of Association may be amended by the shareholders of the Company by special resolution (requiring a majority of at least 75% of the persons voting on the relevant resolution).

### AIFM Requirements

AIFM requirements have continued to apply since 1 January 2021, through existing transposed rules replicating EU AIFM Directive (2011/811/EU), within the rules of the UK's FCA. AIFM requirements impose detailed and prescriptive obligations on fund managers, including prescriptive rules on measuring and capping leverage, the treatment of investors, liquidity management, the use of depositaries and cover for professional liability risks. The AIFM requirements further impose conditions on the marketing of entities such as the Company to investors in the UK.

### Independent Auditor and Disclosure of Information

PricewaterhouseCoopers LLP has expressed its willingness to continue in office as independent auditor of the Company, and resolutions for its re-appointment and to authorise the Audit and Risk Committee to determine its remuneration will be proposed at the forthcoming AGM.

Further information about the Company's independent auditor, including tenure, can be found in Section 4.6, Audit and Risk Committee Report.

### Financial Risk Management

The principal risks and uncertainties facing the Company are set out in Section 3.2, Risk Management Framework. Information about the Company's financial risks and policies for managing these risks are set out in Note 13 to the financial statements.

### Foreign Account Tax Compliance Act ("FATCA") and the OECD Common Reporting Standards ("CRS")

The Board, in conjunction with the Company's service providers and advisers, will ensure the Company's compliance with FATCA and CRS requirements to the extent relevant to the Company.

### Share Capital

The issued share capital of the Company as at 31 March 2023 was 1,108,709,053 ordinary shares of £0.01 each and the total voting rights of the Company were 1,108,709,053.

As at 21 June 2023, being the last practicable date prior to the publication of this Annual Report, the issued share capital of the Company was 1,108,709,053, with 15,503,104 shares held in treasury and thereby leaving a total voting rights figure of 1,093,206,949. A share repurchase programme was initiated following year end, which has resulted in the lower total voting rights figure as at 21 June 2023.

Details of movements in share capital during the year are shown in Note 12 to the financial statements.

The Company has one class of ordinary shares which carry no rights to fixed income and have no restrictions attached to them. Shareholders are entitled to all dividends paid by the Company and, on a winding up, provided the Company has satisfied all of its liabilities, the shareholders are entitled to all of the surplus assets of the Company.

DANBANK

STARCOUTS GROUP

GOVERNMENT

FINANCIAL INFORMATION

AUSTRALIAN INFORMATION

SDCL Change Efficiency Income Trust plc | SEDIT ANNUAL REPORT 2023 | 79
4.3 Report of the Directors
continued
Shareholders are entitled to attend and vote at all general Ordinary shares will be repurchased only at prices below
meetings of the Company and, on a poll, to one vote for the prevailing NAV per ordinary share, which should have
each ordinary share held. the effect of increasing the NAV per ordinary share for
remaining shareholders.
### Treasury Shares
It is intended that a renewal of the authority to make market
The Companies Act allows companies to hold shares
purchases will be sought from shareholders at each AGM
acquired by way of market purchase as treasury shares,
of the Company and authority for the Company to purchase
rather than having to cancel them. This gives the Company
up to 163,871,572 ordinary shares (subject to a maximum
the ability to re-issue ordinary shares quickly and cost
of 14.99% of the ordinary shares in issue, excluding those
effectively, thereby improving liquidity and providing the
shares held in treasury, at the date of the AGM) will be
Company with additional flexibility in the management of its
sought at the forthcoming AGM. Purchases of ordinary
capital base. Ordinary shares will not be sold from treasury
shares will be made within guidelines established from time
at a price less than the (cum income) NAV per existing
to time by the Board. Any purchase of ordinary shares would
ordinary share at the time of their sale. No ordinary shares
be made only out of the available cash resources of the
were bought back during the year ended 31 March 2023,
Company. Ordinary shares purchased by the Company may
however, following the year end and as at 21 June 2023,
be held in treasury or cancelled.
15,503,104 ordinary shares were bought back to be held in
treasury. Purchases of ordinary shares may be made only in
accordance with the Companies Act, the Listing Rules, and
### Share Repurchases and Discount the Disclosure Guidance and Transparency Rules.
### Management
Investors should note that the repurchase of ordinary
The Company may seek to address any significant discount
shares is entirely at the discretion of the Board and no
to NAV at which its ordinary shares may be trading by
expectation or reliance should be placed on such discretion
purchasing its own ordinary shares in the market on an ad
being exercised on any one or more occasions or as to the
hoc basis. As outlined above, no ordinary shares were bought
proportion of ordinary shares that may be repurchased.
back by the Company during the year to 31 March 2023.
### Significant Voting Rights
As announced on 3 April 2023, the Company commenced
a share repurchase programme following the year end. As at 31 March 2023, the Company is aware or had been
As at 21 June 2023, being the last practicable date prior informed of the following notifiable interests in the voting
to the publication of this Annual Report, the Company rights of the Company, in accordance with Disclosure
has repurchased 15,503,104 ordinary shares to be held in Guidance and Transparency Rule 5.1.2:
treasury.
Number of
At the AGM held on 12 September 2022, the Company ordinary % of voting
shares held rights
was granted the authority to purchase up to 14.99% of the
Company’s ordinary share capital in issue at the date that M&G plc 135,037,247 12.18
the AGM notice was published, amounting to 148,444,171 Investec Wealth & Investment 133,128,884 12.01
Limited
ordinary shares.
BlackRock, Inc. 99,410,025 10.03
The maximum price (exclusive of expenses) which may
Liontrust Investment Partners LLP 55,271,080 4.99
be paid for an ordinary share must not be more than the
higherof: The Company has been informed of the following changes
to notifiable interests between 31 March 2023 and 21 June
(i) 5% above the average of the mid-market values of the
2023, being the last practicable date prior to the publication
ordinary shares for the five business days before the
of this Annual Report:
purchase is made; or
Number of

| (ii) the higher of the price of the last independent trade and |  |  | Ordinary | % of voting |  |
| --- | --- | --- | --- | --- | --- |
|  | the highest current independent bid for the ordinary | shares held |  |  | rights |
|  | shares. | 135,123,811 12.36% |  |  |  |

80 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
M&G plc
## Dividends to Shareholders

The Company's policy is to pay interim dividends on a quarterly basis so typically there is no final dividend payable.

The total aggregate interim dividends attributable to shareholders for the year amounted to £62.0 million (2022: £44.2 million).

Details of the interim dividends paid during the year under review are noted in the table below:

|  Dividend | Year ended | Dividend per share  |
| --- | --- | --- |
|  Fourth interim dividend | 31 March 2022 | 1.405p  |
|  First interim dividend | 31 March 2023 | 1.5p  |
|  Second interim dividend | 31 March 2023 | 1.5p  |
|  Third interim dividend | 31 March 2023 | 1.5p  |

On 7 June 2023, the Board declared a fourth interim dividend of 1.5p per share with respect to the year ended 31 March 2023, payable on 30 June 2023.

## Going Concern

The Directors have considered the following current matters alongside the regular cashflow and business activities in assessing that it is appropriate to prepare the financial statements on a going concern basis:

The Articles of the Company provide that a continuation vote be put to shareholders at the upcoming AGM to be held in September 2023.

The Directors recognise the importance of the continuation vote mechanism for shareholders and believe that there is no fundamental concern with the Company's prospects and its ability to deliver value for shareholders and therefore recommend the shareholders vote in favour.

The resolution requires a simple majority to pass, and Directors and Investment Manager are confident the vote will be achieved. This is based on positive feedback from recent meetings held by the Chair or the Investment Manager with several major shareholders alongside discussions with the Company's Broker who has indicated their confidence the shareholders will vote in favour of continuation. The Company also has a strong track record of shareholder support through consistently oversubscribed capital raises since IPO and achieving overwhelming majority (over 90%) support for all resolutions at all its general meetings to date. The Directors believe the Company is well positioned, with substantial scale and a diversified portfolio able to deliver attractive returns. Should the resolution not pass, the Directors note

that this would not automatically result in the Company not continuing as a going concern. The requirement from the Articles of the Company would be for the Directors to put forward proposals within six months of the vote. In practice, the Directors would consider that this would be for a reconstruction, reorganisation or winding up.

Although the shareholder vote on continuation is outside of the control of the Company, the Directors remain confident that the Company's continuation vote will be passed and accordingly, having considered this carefully believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

In light of the events in Ukraine, the Board and the Investment Manager have been monitoring its continual development and performed an assessment of the current exposure to Ukraine, Russia and Belarus (the "Region") and the potential impact to the Company's and the portfolio companies' operations. The Company is a UK registered public company. Currently neither the Company nor the Investment Manager conducts business and operations in the Region; therefore the Company is not subject to any direct impact by this event.

With regards to the Company's investments, none of the portfolio companies have business operations or client / supplier relationships in the Region. Through this assessment, the Board and the Investment Manager duly considered any restriction imposed by the relevant sanctions, and its impact on the portfolio companies and have concluded there are no direct material implications.

The global impact of the Russian invasion of Ukraine on the oil and gas prices is a significant contributor to inflation and cost of living rises globally at present. The Company has carried out an assessment of the impact of the global rise in inflation on its portfolio and has concluded that, overall, there is a positive correlation to inflation and there is no adverse impact. The Directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of approval of the financial statements. The Directors have reviewed the Company's financial projections and cashflow forecasts, including the potential impact from this and believe, based upon those projections and forecasts and various risk mitigation measures in place, that it is appropriate to prepare the financial statements on a going concern basis.

The Company, through its investment in Holdco, benefits from a portfolio of investments that have a range of long-term contracts with a diversified set of counterparties

CASHFLOW

COMPUTER NOTICE

GOVERNMENT

FINANCIAL STATEMENTS

AUSTRALIAN INFORMATION

EDCL Energy Efficiency Income Trust plc | GEIST ANNUAL REPORT 2023 | 81
## 4.3 Report of the Directors continued

across multiple sectors and jurisdictions. A key risk facing the Company is that counterparties to the investments may not be able to make their contractual payments. The Directors have reviewed a cashflow forecast to June 2024, taking into consideration potential changes in investment and trading performance and applying a 10% reduction in income to test the resilience of cashflows in the near term. The forecast results in positive cashflows for the foreseeable future that meets the liabilities as they fall due.

They also reviewed a severe downside scenario where the Company receives no income from its investment for the next 12 months but continue with existing committed payments for running the Company. Even under this stress scenario, the Company would have sufficient cash reserves to continue as a going concern. As at 31 March 2023, the Company's net assets were £1,125 million, including cash balances of £0.3 million.

Further amounts of cash are held by the Company's direct and indirect subsidiaries (including Holdco which has c.£62 million at the year-end), which are sufficient to meet current obligations as they fall due. The major cash outflows of the Company are the payment of dividends and payments relating to the investment in new assets, both of which are discretionary.

The Company's single subsidiary, Holdco, has a RCF that has adequate headroom in its covenants that have been tested for historic and forward interest cover and loan to value limits. As at 31 March 2023, the facility was undrawn. The Company is a guarantor to the RCF but has no other guarantees or commitments.

The Directors have considered the upcoming continuation vote, impact from the Ukraine conflict and the cost of living crisis, and relevant financial projections and cashflow forecasts.

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 interim financial statements, and that it is appropriate to prepare the financial statements on a going concern basis.

### Directors' Responsibilities Pursuant to Section 172 of the Companies Act 2006

The Directors fulfilled 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. See Section 2.6, Stakeholders and Section 172 for further details.

### Employees and Officers of the Company

The Company does not have any employees and therefore employee policies are not required. The Directors of the Company who were in office during the year and up to the date of signing the financial statements are listed in Section 4.2, Board of Directors.

### Greenhouse Gas Emissions

Information about the Company's greenhouse gas emissions are set out in Section 3.1, ESG.

### Political Donations

The Company made no political donations during the year or the preceding year.

### Anti-bribery and Tax Evasion

The Company is committed to ensuring that the Company, its subsidiaries, partners, agents and anyone contracted to it, including by the Company's Investment Manager and key service providers, complies with the requirements of the UK Bribery Act 2010 or equivalent legislation in other jurisdictions.

The Criminal Finances Act ("CFA") (Commencement No. 1) Regulations 2017 (SI 2017/739) brought Part 3 of the CFA, the corporate offences of failure to prevent facilitation of tax evasion, into force on 30 September 2017. The Company does not tolerate tax evasion in any of its forms in its Group or the project companies in which it invests. The Company complies with the relevant UK law and regulation in relation to the prevention of facilitation of tax evasion and supports efforts to eliminate the facilitation of tax evasion worldwide. It also works to make sure its business partners share this commitment.

The Company's Anti-Bribery and Criminal Finances policy is published on the Company's website. These statements are reviewed annually by the Board.

### Requirements of the Listing Rules

Listing Rule 9.8.4 requires the Company to include certain information in a single identifiable section of the Annual Report or a cross-reference table indicating where the information is set out. The Directors confirm that there are no matters requiring disclosure in relation to Listing Rule 9.8.4.

**The Report was approved by the Board on 28 June 2023 and signed on its behalf by:**

**Tony Roper** Chair

60 | SEIT ANNUAL REPORT 2023 | ISOC | Change Of Money Income Trust plc
### 4.4 Corporate Governance Statement
### This Corporate Governance statement Provisions of the AIC Code, which has been endorsed by
the Financial Reporting Council (“FRC”), provides more
### forms part of the Directors’ Report.
relevant information to shareholders. The AIC code can be
The Board of Directors has considered the Principles and
found at www.theaic.co.uk and the UK Code can be found at
Provisions of the Association of Investment Companies
www.frc.org.uk.
(“AIC”) Code published in February 2019. The AIC Code
addresses the Principles and Provisions set out in the The Company has complied with the Principles and
UK Corporate Governance Code 2018 (the “UK Code”) Provisions of the AIC Code. In respect of the UK Code, the
published in July 2018, as well as setting out additional following items are not considered to be relevant (and so
GOVERNANCE
Provisions on issues that are of specific relevance to the are not reported on further) due to the Company being an
Company. externally managed investment company with no executive
directors or employees:
### Statement of Compliance with the AIC Code
■ The role of the chief executive;
The Board recognises the importance of sound corporate
■ Executive Directors’ remuneration; and
governance culture that meets the requirements of the UK
Listing Authority and the AIC Code.
■ The need for an internal audit function.
As an AIC member, the Company has considered the
The AIC Code includes an explanation of how the AIC Code
Principles and Provisions of the AIC Code, which addresses
adapts the Principles and Provisions set out in the UK Code
the Principles and Provisions set out in the UK Code. The
to make them relevant for investment companies.
Board considers that reporting against the Principles and
Set out below are the full details of how the Company has applied the Principles of the AIC Code:
AIC
Principle Compliance Statement
Code
A A successful company is led by an effective In managing the Company, the aim of the Board and
board, whose role is to promote the long- of the Investment Manager is always to ensure the
term sustainable success of the company, long-term sustainable success of the Company and,
generating value for shareholders and therefore, the likely long-term consequences of any
contributing to wider society. decision are a key consideration. The Board is subject to
an annual evaluation, the results of which indicate that
the Board performs effectively as a whole. As part of the
evaluation process, the Board identifies areas in which
they could further improve and performance in these
areas is monitored throughout the year and at the point
of the next annual evaluation. Further information on the
Board evaluation process can be found in Section 4.5,
Nomination Committee Report.
B The Board should establish the company’s The Company’s investment objective is to generate an
purpose, values and strategy, and satisfy attractive total return for investors comprising stable
itself that these and its culture are aligned. dividend income and capital preservation, with the
All directors must act with integrity, lead by opportunity for capital growth.
example and promote the desired culture.
The Board seeks to ensure the alignment of its purpose,
values and strategy with a culture of openness, debate
and integrity through ongoing dialogue and engagement
with its stakeholders. The Directors aim to achieve a
supportive business culture combined with constructive
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW challenge and to provide a regular flow of information to
shareholders and other stakeholders.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 83
4.4 Corporate Governance Statement
continued
AIC
Principle Compliance Statement
Code
C The Board should ensure that the necessary The Directors regularly consider the Company’s financial
resources are in place for the company to position in the context of its business model, the balance
meet its objectives and measure performance sheet, cashflow projections, availability of funding and
against them. The Board should also establish the Company’s contractual commitments.
a framework of prudent and effective controls,
The Company is subject to various risks in pursuing its
which enable risk to be assessed and managed.
objectives and, in order to effectively assess and manage
risk, appropriate controls and policies are in place, which
are regularly reviewed and assessed by the Audit and
Risk Committee. These are detailed in Section 3.2, Risk
Management Framework, in Section 4.6, Audit and
Risk Committee Report, and in Note 13 to the financial
statements.
The Directors confirm they have carried out a robust
assessment of the emerging and principal risks facing
the Company, including those that would threaten its
business model, future performance, solvency or liquidity.
See Section 3.2, Risk Management Framework for further
details.
The Directors have assessed the prospects of the
Company over a five-year period to 31 March 2028. The
Directors have determined that a viability statement for
a five-year period is appropriate 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.
See Section 3.3, Viability Statement for further details on
the Viability Statement.
D In order for the company to meet its The Company describes its key stakeholders, the
responsibilities to shareholders and reason they are important, how it seeks to gain an
stakeholders, the Board should ensure effective understanding of their interests, and how the Board
engagement with, and encourage participation engages with them, whether directly or via the
from, these parties. Investment Manager, in Section 2.6, Stakeholders and
Section 172.
F The Chair leads the Board and is responsible The role and responsibilities of the Chair are described
for its overall effectiveness in directing the in Section 4.4, Corporate Governance Statement. The
company. They should demonstrate objective Company recognises that the Chair leads the Board and
judgement throughout their tenure and promote is responsible for its overall effectiveness in directing the
a culture of openness and debate. In addition, affairs of the Company.
the Chair facilitates constructive board relations
The annual evaluation of the Board’s effectiveness
and the effective contribution of all non-
always considers the performance of the Chair, and
executive directors, and ensures that directors
whether they have performed their role effectively. The
receive accurate, timely and clear information.
Directors have concluded that the Chair has fulfilled
their role and performed well to support effective
functioning of the Board as evidenced in the internal
Board evaluation that took place during the latter part of
the financial year.
84 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
AIC
Principle Compliance Statement
Code
G The Board should consist of an appropriate During the year under review, the Board consisted only
combination of directors (and, in particular, of non-executive Directors and all of the Directors are
independent non-executive directors) such that deemed to be independent of the Investment Manager.
no one individual or small group of individuals In the Board’s opinion, each Director continues to
dominates the Board’s decision making. provide constructive challenge and robust scrutiny of
matters that come before the Board.
The Board also considers the composition of the Board GOVERNANCE
as well as longer-term succession plans. The Board is
satisfied the Board’s current composition is adequate to
appropriately discharge its duties and currently has no
intentions to alter its composition.
H Non-executive directors should have sufficient The Board considers the required time commitment
time to meet their board responsibilities. They annually and, during the year under review, the Board
should provide constructive challenge, strategic concluded that all Directors continued to devote
guidance, offer specialist advice and hold third- sufficient time to the business of the Company. Through
party service providers to account. their contributions in meetings as well as outside of the
usual meeting cycle, the Directors share their experience
and guidance with, as well as constructively challenge,
the Investment Manager.
The Management Engagement Committee annually
assesses the performance of all material third-party
service providers.
I The Board, supported by the company The Board’s responsibilities are set out in the Schedule
secretary, should ensure that it has the policies, of Matters Reserved for the Board and certain
processes, information, time and resources responsibilities are delegated to its Committees, so that
it needs in order to function effectively and it can operate effectively and efficiently.
efficiently.
All Board policies were reviewed and, where appropriate,
updated during the year. They continue to be reviewed
on a regular basis. Directors are also provided with any
relevant information and have access to the Company
Secretary and independent advisers, if required.
J Appointments to the Board should be subject to The Company is committed to ensuring that any vacancies
a formal, rigorous and transparent procedure, arising are filled by suitably qualified candidates.
and an effective succession plan should be
The Board has adopted a Diversity Policy, which
maintained. Both appointments and succession
acknowledges the benefits of greater diversity, and
plans should be based on merit and objective
remains committed to ensuring that the Company’s
criteria and, within this context, should
Directors bring a wide range of skills, knowledge,
promote diversity of gender, social and ethnic
experience, backgrounds and perspectives to the Board.
backgrounds, cognitive and personal strengths.
Appointments of new Directors to the Board follow a
structured and transparent process as described further
below. The Company’s policy on the tenure of Directors also
helps guide long-term succession plans and recognises the
need and value of progressive refreshing of the Board. Both
policies are described in more detail below.
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 85
4.4 Corporate Governance Statement
continued
AIC
Principle Compliance Statement
Code
K The Board and its Committees should have The Nomination Committee, which comprises the whole
a combination of skills, experience and Board, is responsible for identifying and recommending
knowledge. Consideration should be given to to the Board the appointment of new Directors.
the length of service of the Board as a whole
The Nomination Committee reviews, at least annually,
and membership regularly refreshed.
the key skills and experience of each Director and the
skills matrix is reviewed at least once per year to ensure
that the Board has an appropriate mix of skills and
experience, particularly when considering longer-term
succession plans.
L Annual evaluation of the Board should consider The Directors are aware that they need to monitor
its composition, diversity and how effectively and improve Board performance continuously and
members work together to achieve objectives. recognise that this can be achieved through regular
Individual evaluation should demonstrate Board evaluation, which provides a valuable feedback
whether each director continues to contribute mechanism for improving Board effectiveness.
effectively.
In line with the AIC Code, the Board has agreed that an
external Board evaluation will be carried out every three
years and, in the intervening years, evaluations will be
carried out by means of questionnaires and interviews.
An internal evaluation of the performance of the Board,
its Committees and individual Directors took place
during the year, and was led by the Chair with the
support of the Senior Independent Director and the
Company Secretary. The next external evaluation is due
to take place in 2025.
Further details of the results of the Board evaluation
process can be found in Section 4.5, Nomination
Committee Report.
M The Board should establish formal and The Audit and Risk Committee supports the Board in
transparent policies and procedures to ensure fulfilling its oversight responsibilities by reviewing the
the independence and effectiveness of external performance of the independent auditor, audit quality,
audit functions and satisfy itself on the integrity and the auditor’s objectivity and independence. The
of financial and narrative statements. Audit and Risk Committee also reviews the integrity
and content of the financial statements, including the
ongoing viability of the Company.
More details can be found in Section 4.6, Audit and Risk
Committee Report.
N The Board should present a fair, balanced and The Audit and Risk Committee supports the Board in
understandable assessment of the company’s assessing that the Company’s Annual Report presents
position and prospects. a fair, balanced and understandable assessment of the
Company’s position and prospects.
Please refer to Section 4.6, Audit and Risk Committee
Report for further information.
86 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
AIC
Principle Compliance Statement
Code
O The Board should establish procedures to The work of the Audit and Risk Committee, that
manage risk, oversee the internal control supports the Board through its independent oversight
framework, and determine the nature and of the financial reporting process – including the
extent of the principal risks the company is financial statements, the system of internal control and
willing to take in order to achieve its long-term management of risk, the appointment and ongoing
strategic objectives. review of the quality of the work and independence
of the Company’s external auditor – is described
GOVERNANCE
Section4.6, Audit and Risk Committee Report.
P Remuneration policies and practices should be The Directors are all non-executive and independent
designed to support strategy and promote long- of the Investment Manager. They receive fees and no
term sustainable success. component of any Director’s remuneration is subject
to performance factors. Whilst there is no requirement
under the Company’s Articles of Association or letters of
appointment for Directors to hold shares in the Company,
all Directors do hold shares in the Company and the details
of their shareholdings are set out in Section 4.7, Directors’
Remuneration Report.
Q A formal and transparent procedure for As the Company has no employees and the Board
developing a policy for remuneration should be is comprised wholly of non-executive Directors, the
established. No director should be involved in Board has established a separate Remuneration
deciding their own remuneration outcome. Committee, which is comprised of all Directors.
Directors’ remuneration is determined by the Committee,
at its discretion within an aggregate ceiling as set
out in the Company’s Articles of Association. Each
Director abstains from voting on their own individual
remuneration. The details of the Remuneration Policy
and Directors fees can be found in Section 4.7, Directors’
Remuneration Report. The terms and conditions of
the Directors’ appointments are set out in their letters
of appointment, which are available for inspection on
request at the registered office of the Company.

| R | Directors should exercise independent | The process of reviewing the Directors’ fees is described |
| --- | --- | --- |
|  | judgement and discretion when authorising | in Section 4.7, Directors’ Remuneration Report, although |
|  | remuneration outcomes, taking account of | because there are no performance-related elements of the |
|  | company and individual performance, and | remuneration, there is very little scope for the exercise of |
|  | wider circumstances. | discretion or judgement. |

Principle E of the UK Code relates to the treatment of employees and so is generally not applicable to companies under the AIC Code if, as in the case of the
Company, there are no employees.
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 87
4.4 Corporate Governance Statement
continued
### The Board of Directors note, and adapted to the requirements of the Company, and
is designed to:
The Directors of the Company who were in office during the

| year and up to the date of signing the financial statements | i.  build an understanding of the nature of the company, its |  |
| --- | --- | --- |
| are listed in Section 4.2, Board of Directors. |  | business and its markets; |
|  | ii.  build a link with the company’s people; and |  |

### Board Independence
The Board consists of five independent non-executive iii.  build an understanding of the company’s main
Directors, who were considered independent of the relationships.
Investment Manager at the time of their appointment. The
independence of the Directors is reviewed as part of the The programme covers the Company’s investment strategy,
annual evaluation process and, in line with the guidelines policies and practices. The Directors are also given key
of the AIC Code, continue to be considered independent in information on the Company’s regulatory and statutory
character and judgement and entirely independent from the requirements as they arise, including information on the role
Investment Manager. of the Board, matters reserved for its decision, the terms
of reference for the Board Committees, the Company’s
### Appointment of New Directors corporate governance practices and procedures and the
latest financial information.
Any appointments to the Board are subject to a formal,
rigorous and transparent procedure. The Nomination
The Directors are also afforded the opportunity to meet
Committee is responsible for satisfying itself that there
with other non-executive Directors, key personnel from
is succession planning in place for Directors to ensure
the Investment Manager and other key service providers,
continued refreshment of the Board; for identifying and
including the independent auditor, the Company Secretary
nominating appointments to the Board for their approval
and Administrator, and the Corporate Broker.
and is also responsible for identifying and nominating
candidates to fill Board vacancies, as and when they arise.
### Terms of Appointment
As part of the appointment process, the Nomination The terms of appointment of the Directors are formalised
Committee: in letters of appointment, copies of which are available for
inspection at the Company’s registered office. None of the
■ evaluates the balance of skills, knowledge and
Directors has a contract of service with the Company nor
experience on the Board;
has there been any other contract or arrangement between
the Company and any Director at any time during the year.
■ will draw up a description of the role including the
capabilities required and use an external search
### Re-Election
consultancy in the search for candidates; and
The Articles of Incorporation provide that each of the
■ will ensure that appointments are made based on merit
Directors shall retire at each AGM. All Directors intend to
and after assessing candidates by means of objective
retire at the forthcoming AGM and offer themselves for
criteria, ensuring that appointees have enough time
re-election.
available to devote to the position, and also determine the
terms and conditions of the appointment of non-executive
As set out further below, the Board carries out an annual
Directors, setting out clearly what is expected of them
review of each Director and the Board as a whole. The
in terms of time, commitment, committee service and
Board believes that the balance of skills, gender, experience
involvement outside Board meetings.
and knowledge of the current Board provides for a sound
base from which the interests of investors will be served to
### Induction Process
a high standard.
New appointees to the Board are provided with a full
The Board recommends the re-election of all other
induction programme.
Directors at the forthcoming AGM.
The programme is based on the Corporate Governance
Institute UK & Ireland’s ‘Induction of directors’ guidance
88 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### Board Responsibilities The complete responsibilities of the Chair and Senior
Independent Director are available on the Company’s
Under the leadership of the Chair, the Board is responsible
website.
for the effective stewardship of the Company’s affairs,
including strategy, corporate governance, risk assessment
### Delegation of Responsibilities
and overall investment policy.
The Board has delegated the following areas of
### Role and Responsibilities of the Chair responsibility to a number of service providers, each
engaged under separate contracts:
The Chair leads the Board and is responsible for its overall GOVERNANCE
effectiveness in directing the affairs of the Company. Key
The day-to-day administration of the Company has been
aspects of the Chair’s role and responsibilities are to:
delegated to Apex Group Secretaries (UK) Limited in its
capacity as Company Secretary and Apex Group Fiduciary
■ act with objective judgement;
Services (UK) Limited as Administrator.
■ promote a culture of openness and debate;
The Board has access to the Company Secretary to advise
■ facilitate constructive Board relations and the effective on all governance and day-to-day administrative matters.
contribution of all Directors; The Company Secretary is also responsible to the Board for
guaranteeing that statutory obligations are met.
■ work with the Company Secretary to ensure that all
Directors receive accurate and timely information so
The management of the Company’s portfolio is delegated
that they can discharge their duties;
to the Investment Manager, Sustainable Development
Capital LLP.
■ seek regular engagement with the Company’s
shareholders; and
The Investment Manager has full discretion (within agreed
parameters) to make investments in accordance with the
■ act on the results of the annual evaluation of the
Company’s investment policy and has responsibility for
performance of the Board, its Committees and
financial administration and investor relations, in addition to
individual Directors.
advising the Board in relation to further capital raisings and
The Chair, Tony Roper, met the independence criteria upon the payment of dividends amongst other matters, subject to
appointment and has continued to meet this condition the overall supervision and oversight of the Board.
throughout his term of service.
Among the specific tasks of the Investment Manager are
the overall financial management of the Company and
### Role and Responsibilities of the Senior
existing portfolio as a whole, including the deployment of
### Independent Director
capital, management of the SEEIT group’s debt facilities,
The key elements of the Senior Independent Director’s role
hedging arrangements, the sourcing of new investments,
are to:
operating the risk management framework, preparing
the semi-annual valuations, the statutory accounts, the
■ act as a sounding board for the Chair;
management accounts, business plans, presenting results
■ lead the annual evaluation of the Chair as part of the and information to shareholders, coordinating all corporate
annual evaluation process; service providers to the Company and giving the Board
general advice.
■ in the event of any major difference of opinion on
the direction of the Company, act as an intermediary
Members of the Investment Manager are also appointed as
between the Chair, other Directors and the Investment
directors of the SEEIT Group’s project companies and/or
Manager; and
intermediate holding companies and as part of their role
in managing the portfolio, they attend board meetings
■ provide a conduit for views of shareholders in the event
of these companies and make appropriate decisions.
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW that the usual channels are not available or not suitable
Material decisions are referred back to the Investment
in the circumstances.
Manager’s Investment Committee for consideration, and
Chris Knowles was appointed as Senior Independent the Company’s Board is consulted on key matters relevant
Director at IPO. to the Company’s strategy, policies or overall performance,
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 89
4.4 Corporate Governance Statement
continued
both on an ad hoc basis where required and during formal provides for a sound base from which the interests of
reporting sessions, including all matters outside the shareholders will be served to a high standard.
Investment Manager’s delegated authority.
The Board of Directors comprised five independent non-
executive Directors; two male and three female (being 60%
### Board Tenure Policy
female representation), as at 31 March 2023.
The Board’s policy regarding tenure of service of the
Directors including its Chair, is that any decisions regarding The Company supports the Hampton-Alexander review
tenure should balance the benefits of continuity and and the more recent FTSE Women Leaders review and
knowledge and the orderly transition of responsibilities their respective targets for a minimum of 33% and 40% of
through succession plans for the retirement and women on boards and the opportunity for companies to
appointment of Directors against the need to periodically continue to increase on this representation. The Company
refresh the Board composition to maintain an appropriate also supports the Parker review’s recommendations to
mix of the required skills, experience, diversity and length increase ethnic and cultural diversity on boards, including
of service. The Board considers each of the Directors’ its target for FTSE 250 boards to have at least one
independence carefully on an annual basis as part of the director from an ethnic minority background by 2024, the
Board self-evaluation and succession planning process. development of a pipeline of candidates, the planning
for succession through mentoring and sponsoring, and
It is not envisaged that any Board members will continue
enhancing transparency and disclosure to record and track
on the Board past nine years, except where required by
progress against the objectives. The Company meets the
Company circumstances at that time (and then only for
recommendations and targets of these three reviews as at
a limited period), to be agreed by the Board as a whole,
31 March 2023.
taking into account their independence and the need to
balance this against the benefits of maintaining continuity, According to new requirements of the Listing Rules LR9.8.6
knowledge and experience. R(9) and (11) (applicable for periods from 1 April 2022), the
Company is required to include a statement in the annual
### Culture financial report setting out whether it has met the following
The culture of the Board is considered as part of the targets on board diversity as at 31 March 2023:
annual performance evaluation process that is undertaken
a) at least 40% of individuals on the board are women;
by each Director. The culture of the Company’s service
providers, including their policies, practices and behaviour,
b) at least one of the senior board positions (defined by
is considered by the Board as a whole during the annual
the FCA as either the Chair, SID, CEO or CFO) is held by
review of the performance and continuing appointment of
a woman; and
all service providers. Further information on the Company’s
culture and values and engagement with its service c) at least one individual on the board is from a minority
providers and other stakeholders is set out in Section 2.6, ethnic background.
Stakeholders and Section 172.
The following tables set out the prescribed format for
information in accordance with the requirements of
### Diversity
LR9Annex 2.
Diversity, including, but not limited to, gender, ethnicity,
professional and industry-specific knowledge, is an Table for reporting on gender identity or sex
important consideration in ensuring that the Board and its
Number
Committees have the right balance of skills, experience,
of senior
independence and knowledge necessary to discharge their
Number of Percentage Positions on
responsibilities. The right blend of perspectives is critical to
board of the the board
ensuring an effective Board and a successful Company. members board (SID and Chair)
Men 2 40% 2
The Board has adopted a Diversity Policy and considers
that its composition with respect to the balance of skills, Women 3 60% –
ethnicity and cultural diversity, gender, experience and
Not specified – – –
knowledge, coupled with a mixed length of service,
90 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### Table for reporting on ethnic background Matters Reserved for the Board
The Directors have adopted a formal schedule of matters
Number of
Number of senior Positions specifically reserved for their approval. The Directors have
board Percentage on the board
overall responsibility for the Company’s business activities
members of the board (SID and Chair)
in accordance with the Company’s Articles and investment
White British or other
policy. The Board has delegated certain functions as
White (including
minority-white groups) 4 80% 2 described further below and retains the right to vary the
delegation from time to time.
Mixed Multiple Ethnic GOVERNANCE
Groups – – –
Reserved matters for the Board’s approval include:
Asian/ Asian British 1 20% –
■ capital raising activities;
Black/ African/
Caribbean/ Black
■ declaring dividends;
British – – –
Other ethnic group, ■ reviewing the performance and appointments of key
including Arab – – – service providers;
Not specified – – –
■ setting terms of reference for the Board and relevant
As at 31 March 2023, the Board meets the criteria of target Board Committees; and
a) as 60% of the Board are women, and target c) as one
■ monitoring the constitution and efficiency of the Board
Board member is from a minority ethnic background.
and its Committees and key governance aspects such
as general meetings and shareholder circulars.
With regards to target b) none of the senior board positions,
as defined by the FCA, are held by a woman. However, the
### Board considers the role of the Audit and Risk Committee Committees of the Board
Chair to be a senior board position given the nature of The Board has four Committees to assist with its operations;
the Company as an investment trust. The Company has the Audit and Risk Committee, the Remuneration
no executive directors, so has neither a CEO or a CFO. Committee, the Nomination Committee and the
Additionally, the role of the Audit and Risk Committee Chair Management Engagement Committee. The delegated
is the second highest remunerated position on the Board, responsibilities of each Board Committee are clearly
reflecting the importance of the position and the time defined in formal terms of reference, which are available on
commitments it commands. The Audit and Risk Committee the Company’s website.
Chair position is held by a woman and, therefore, the Board
The Company Secretary acts as secretary to each
considers that at least one of the senior board positions is
Committee. No persons other than the Committee
held by a woman under this interpretation.
members are entitled to attend Committee meetings unless
formally invited by the respective Committee.
Membership of the Board Committees as at 31 March 2023 are as follows:
Management
Audit and Risk Remuneration Nomination Engagement
Committee Committee Committee Committee
Chair Sarika Patel Emma Griffin Tony Roper Helen Clarkson
Members Helen Clarkson Helen Clarkson Helen Clarkson Emma Griffin
Emma Griffin Chris Knowles Emma Griffin Chris Knowles
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW Chris Knowles Sarika Patel Chris Knowles Sarika Patel
Tony Roper Tony Roper Sarika Patel Tony Roper
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 91
4.4 Corporate Governance Statement
continued
Audit and Risk Committee As at 31 March 2023, the Management Engagement
Committee was comprised of all Directors of the Company.
The Board considers that the members of the Audit and
The Committee meets at least once per year.
Risk Committee have the requisite skills and experience
to fulfil the responsibilities of the Committee. The
The Committee met formally once during the year to
Chair of the Audit and Risk Committee has significant
assess the performance of the Investment Manager and
recent and relevant financial experience. The Audit and
the Company’s other key third-party service providers. This
Risk Committee has direct access to the Company’s
annual review process includes two-way feedback, which
independent auditor and provides a forum through
provides the Board with an opportunity to understand the
which the independent auditor reports to the Board.
views, experiences and any issues encountered by service
Representatives of the independent auditor attend meetings
providers during the year. In addition, the Management
of the Audit and Risk Committee at least twice per year.
Engagement Committee is actively involved in reviewing
the contractual relationships of the Investment Manager
Further details about the Audit and Risk Committee and
and the Company’s other key third-party service providers
its activities during the year under review are set out in
and ensuring the contractual terms remain aligned
Section4.6, Audit and Risk Committee Report.
with the objectives of the Company and the interests of
Remuneration Committee Shareholders.
The Remuneration Committee meets at least once per
Following the Committee’s assessment of the Investment
year and deals with matters of Directors’ remuneration. In
Manager, and based on its performance, the continued
particular, the Remuneration Committee reviews and makes
appointment of the Investment Manager is considered
recommendations to the Board regarding the ongoing
to be in the interests of shareholders as a whole, and it
appropriateness and relevance of the Remuneration Policy,
was recommended that SDCL continue as Investment
Directors’ annual fee levels and also considers the need to
Manager.
appoint independent professional external remuneration
consultants.
### Meetings
Further details about the Remuneration Committee and The Board is scheduled to meet at least five times per
remuneration matters are set out in Section 4.7, Directors’ year and between these formal meetings there is regular
Remuneration Report. contact with the Investment Manager, the Administrator,
the Company Secretary and the Corporate Broker. The
Nomination Committee
Directors are kept fully informed of investment and financial
The Nomination Committee meets at least once per year to
controls, and other matters that are relevant to the business
consider Board succession planning and recruitment and to
of the Company that should be brought to the attention of
conduct the annual Board evaluation exercise.
the Directors.
Further details about the Nomination Committee and
The Board considers agenda items laid out in the notice and
its activities during the year under review are set out in
agenda of any meeting, which are circulated to the Board
Section4.5, Nomination Committee Report.
in advance of the meeting as part of the Board papers.
Directors may request any agenda items to be added that
Management Engagement Committee
they consider appropriate for Board discussion. Each
The Company has established a Management
Director is required to inform the Board of any potential or
Engagement Committee. The Board has formally
actual conflicts of interest prior to Board discussion. Board
delegated duties and responsibilities within agreed written
meetings include a review of investment performance and
terms of reference for the Committee, which are available
associated matters such as health and safety, marketing,
on the Company’s website. (APM)
investor relations, risk management, gearing , general
administration and compliance, peer group information and
industry issues.
92 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
The number of scheduled Board and Board Committee meetings held during the year and the attendance of the Individual
Directors is shown below:
Management
Scheduled Board Audit and Risk Remuneration Nomination Engagement
meetings Committee Committee Committee Committee
No. of meetings held 5 4 1 1 1
Tony Roper 5 4 1 1 1
GOVERNANCE
Helen Clarkson 4 4 1 1 1
Chris Knowles 5 4 1 1 1
Emma Griffin 5 4 1 1 1
Sarika Patel 5 4 1 1 1
During the year ended 31 March 2023, there were A register of conflicts is maintained by the Company Secretary
11 additional ad hoc Board meetings, five ad hoc and regularly reviewed by the Board to ensure that any
Audit and Risk Committee meetings, two ad hoc authorised conflicts remain appropriate. The Directors are
Remuneration Committee meetings, and one ad hoc required to confirm at Board meetings whether there has been
Nomination Committee meeting held in order to deal with any change to their position.
administrative matters. These were attended by those
The Board has adopted a policy that records all gifts and
Directors available and/or delegated by the Board to one
hospitality in excess of £50 accepted by the Directors from the
or more members to action.
Company’s service providers and other relevant third parties.
### Insurance and Indemnity Provisions
### Reporting on Stakeholder Engagement
Directors’ and Officers’ liability insurance cover is in
The Company sets out how it interacts and engages with its
place in respect of the Directors. The Company’s Articles
stakeholders in Section 2.6, Stakeholders and Section172.
of Association provide, subject to the provisions of UK
The stakeholder relationships identified provide the
legislation, an indemnity for Directors in respect of costs
foundation for the Company’s sustainability, which in return
which they may incur relating to the defence of any
provides benefits to all parties. Both the Board and the
proceedings brought against them arising out of their
Investment Manager value the importance of maintaining
positions as Directors, in which they are acquitted, or
a high standard of business conduct and stakeholder
judgement is given in their favour by the Court.
engagement in order to ensure a positive impact on the
Except for such indemnity provisions in the Company’s environment in which the Company operates.
Articles of Association and in the Directors’ letters of
### appointment, there are no qualifying third-party indemnity Relations with Shareholders
provisions in force.
The Company welcomes the views of its shareholders,
placing great importance on communication with
The Board has agreed arrangements whereby Directors
them. Senior members of the Investment Manager
may take independent professional advice in the
make themselves available, as practicable, to meet with
furtherance of their duties.
shareholders and key sector analysts and feedback from
these meetings is provided to the Board. The Directors also
### Conflicts of Interests
make themselves available to engage with shareholders
It is the responsibility of each individual Director to avoid an
and offer meetings annually as part of good governance to
unauthorised conflict of interest situation arising. All Directors
those shareholders who wish to meet them.
must inform the Board as soon as they become aware of
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
the possibility of an interest that conflicts, or might possibly
conflict, with the interests of the Company.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 93
4.4 Corporate Governance Statement
continued
### The Board is kept fully informed of all relevant market 2022 AGM
commentary on the Company by the Company’s Financial
The 2022 AGM of the Company was held on 12 September
PR consultant, as well as receiving relevant updates from
2022. Resolutions 1 to 13 related to ordinary business and
the Investment Manager and the Corporate Broker.
resolutions 14 to 16 related to special business as follows:
The Company reports formally to shareholders twice
■ to approve the purchase of the Company’s own shares;
peryear.
■ to authorise the disapplication of Statutory Pre-emption
The results of the AGM are announced by the Company
Rights; and
promptly after the relevant meeting and are also published
on the Company’s website. Additionally, other notices and ■ to approve that a general meeting may be convened on
not less than 14 clear days’ notice.
information are provided to shareholders on an ongoing
basis through the Company’s website in order to assist in
All votes cast were in favour and as a result each of the
keeping shareholders informed.
resolutions proposed at the AGM were passed.
The Company Secretary and Registrar monitor the
### voting of the shareholders and proxy voting is taken into 2023 AGM
consideration when votes are cast at the AGM. The next AGM of the Company is currently scheduled to be
held on 11 September 2023.
The Company is committed to ongoing shareholder
dialogue and takes an active interest in voting outcomes. A separate notice convening the AGM will be sent to
Where there are substantial votes against any resolution at shareholders and published on the Company’s website in
an AGM, the Company will consider what, if any, actions it July 2023 and will include an explanation of the items of
intends to take going forward. business to be considered at the meeting.
94 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 4.5 Nomination Committee Report
### Nomination Committee which is less than the nine years considered by the AIC code
for a director to continue to be considered independent.
The Nomination Committee is chaired by Tony Roper and the
Nevertheless, in March 2023, the Committee reviewed and
membership of the Committee comprises all Directors of the
updated its emergency succession plan.
Company, all of whom are independent and non-executive.
Board performance evaluation
During the year, the Nomination Committee held two
The Board recognises the importance of the AIC Code’s
meetings. The Nomination Committee operates within
recommendation in respect of evaluating the performance
clearly defined terms of reference, which are available on the
of the Board as a whole, the Committees of the Board and GOVERNANCE
Company’s website.
individual Directors. The Chair, with the assistance of the
Senior Independent Director and the Company Secretary,
### Function of the Nomination Committee
oversaw an internal Board evaluation process with respect
The principal duties of the Nomination Committee are to:
to the year ended 31 March 2023.
■ regularly review the structure, size and composition
The evaluation followed a number of stages as outlined
required of the Board and make recommendations
below:
to the Board with regard to any changes (including
skills, knowledge and experience in accordance with
■ an update was given against the performance of the
PrincipleK of the AIC Code);
recommendations and actions from the prior year;
■ give full consideration to succession planning for
■ all Directors responded to questionnaires about the
Directors taking into account the challenges and
Chair, the Board and its Committees;
opportunities facing the Company, and to oversee the
development of a diverse pipeline for succession; ■ the Chair held individual meetings with each Director to
understand their views on the performance of the Board;
■ be responsible for identifying and nominating, for the
approval of the Board, candidates to fill Board vacancies ■ the Senior Independent Director collated feedback
as and when they arise; and from the non-executive Directors, excluding the Chair,
and the Investment Manager on the performance of
■ oversee a formal and rigorous annual evaluation of the
theChair;
performance of the Board, its Committees, the Chair
and individual Directors. ■ a summary of results, together with anonymised
comments, was collated into a comprehensive report
### Matters Reviewed in the Year and presented to the Nomination Committee; and
Succession planning
■ an action plan for the Board and its Committees with
The Committee annually reviews its effectiveness, recommendations of areas to improve was prepared
composition and long-term succession planning. This and approved by the Committee.
process takes into consideration the balance of skills,
The evaluation addressed all areas relating to the Board,
knowledge, experience, independence and diversity of the
its Committees, the Chair, the individual Directors, and
Board, to ensure any new appointments complement or
their performance. The scope of the evaluation was in line
address any gaps in these areas.
with other internal evaluations conducted in previous years
The Committee has reviewed the Composition of the Board in order to track progress in each assessed area, which
and, following the appointment of Sarika Patel, as a non- included, but was not limited to: Board and Committee
executive Director on 1 January 2022, is satisfied the Board’s relationships, composition, effectiveness, leadership, roles,
current composition is appropriate to adequately discharge activities, development, and engagement with and impact
its duties. Additionally, the Committee has no immediate on various stakeholder groups. The evaluation also explored
concerns regarding the independence or tenure of the Board other items including culture, technology, and the Board

| STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW |  |  |
| --- | --- | --- |
|  | as the longest serving Directors have been in office for less | processes for developing strategy, dealing with investments, |
|  | than five years, having been appointed in October 2018, | and managing risk. |

SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 95
4.5 Nomination Committee Report
continued
Overall, the evaluation was positive and indicated a high
level of satisfaction with the operation of the Board. It also
demonstrated that the Board and Investment Manager
were operating effectively and showed the necessary
commitment to the effective fulfilment of their duties.
Anumber of areas were highlighted as strengths, including:
■ calibre of depth and experience;
■ leadership of the Board and of each Committee;
■ Board dynamics and communication;
■ sufficient opportunity to challenge and support the
Investment Manager;
■ clear consensus around strategy; and
■ good oversight of the Company’s performance.
The evaluation also highlighted a number of opportunities
for improvement, including: identifying further training
and development opportunities to assist the Board and
each individual Director to continue their professional
development, and continuing to improve the risk-
management key performance indicators presented to the
Directors.
Terms of Reference
The Committee reviewed its terms of reference in March
2023 to ensure that it is still operating effectively and in line
with its delegated duties and responsibilities.
Tony Roper
Chair of the Nomination Committee
96 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 4.6 Audit and Risk Committee Report
The Audit and Risk Committee is chaired by Sarika Patel ■ reviewing the scope, results, cost-effectiveness,
and the membership of the Committee comprises all independence and objectivity of the independent auditor
Directors of the Company, all of whom are independent and as well as reviewing the effectiveness of the external
audit process and making any recommendations to the
non-executive.
Board for improvement of the audit process;
The Board is satisfied that the Committee is properly
■ reviewing and recommending to the Board for approval
constituted. The Company’s Chair is a member of the Audit
the audit, audit-related and non-audit fees payable to
and Risk Committee given his independence at the time
the independent auditor or their affiliated firms overseas
of his appointment and throughout his service. The Board GOVERNANCE
and the terms of their engagement;
believe that his extensive experience in dealing with matters
such as valuation and risk management is relevant to the
■ reviewing the appropriateness of the Company’s
Committee.
accounting policies;
The Audit and Risk Committee operates within clearly ■ ensuring the adequacy and effectiveness of the internal
defined terms of reference, which are available on the control and risk management systems;
Company’s website. It is also the formal forum through
■ considering and recommending to the Board for
which the independent auditor reports to the Board of
30 approval the Investment Manager’s recommendations
Directors and met nine times during the year.
to changes in the Company’s Risk Management Policy
The terms of reference are reviewed annually. The and Treasury Policy;
Committee last reviewed its terms of reference in March
■ reviewing the Company’s risk appetite and overall risk
2023 and is satisfied that it is still operating effectively.
management approach;
The main functions of the Audit and Risk Committee are:
■ monitoring the current and emerging risk exposures on
■ assessing, and recommending to the Board for approval, behalf of the Board and challenge the actions taken to
the contents of the half year and annual financial mitigate against such risks, taking into account scenario
statements and reviewing the independent auditor’s analysis;
report on these, including consideration as to whether
■ considering any reports or information received in
the financial statements are overall fair, balanced and
respect of whistleblowing;
understandable;
■ reviewing effectiveness of controls of sub-contractors
■ reviewing the valuation of the Company’s investments
and suppliers; and
prepared by the Investment Manager and making a
recommendation to the Board on the valuation;
■ reporting to the Board on how it has discharged its duties.
■ agreeing with the independent auditor the external audit
None of the members of the Audit and Risk Committee
plan including discussing with the independent auditor
have any involvement in the preparation of the financial
the key risk areas within the financial statements;
statements of the Company, as this has been contracted to
■ considering and understanding the key risks of the Investment Manager and the Company’s Administrator.
misstatement of the financial statements and
The Audit and Risk Committee meets the independent
formulating an appropriate plan to review these and
auditor regularly and as needed. It discusses the scope of
agreeing with the Investment Manager its processes to
annual audit work and audit findings with the independent
manage these risk areas;
auditor. The independent auditor attends the Audit and
■ reviewing and recommending for approval the Viability Risk Committee meetings at which the annual and interim
and Going Concern Statements and reviewing the work financial statements are considered. The Committee
prepared by the Investment Manager in support of also ensures that it meets with the independent auditors
these statements;
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW without representatives of the Investment Manager and
30 The Audit and Risk Committee had four scheduled meetings during the reporting period, held three ad hoc meetings outside of the quarterly meeting
cycle, and received two valuation updates from the Investment Manager.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 97
4.6 Audit and Risk Committee Report
continued
Administrator being present. The Committee has direct ■ conducting a review of the risk management systems of
access to the independent auditor and to key senior staff the Company and its third-party service providers, and
of the Investment Manager. It reports its findings and introducing further enhancement to the system;
recommendations to the Board, which retains the ultimate
■ commissioning a third party to conduct a review of the
responsibility for the financial statements of the Company.
Investment Manager’s investment process and inviting
the provider to present the findings of their audit to the
### Significant Activities in the Year
Committee;
During the year, the Audit and Risk Committee’s
discussions have been broad ranging and focused on but ■ discussing and reviewing the outcome of a cyber-risk
not limited to: review undertaken in the financial year;
■ agreeing the audit plan and fees with the independent ■ reviewing the Investment Manager’s ongoing
auditor in respect of the review of the half-yearly report programme of stress scenarios aimed at understanding
for the six months ended 30 September 2022 and the the impact on the Company of downside but plausible
statutory audit of the Annual Report for the year ended scenarios;
31 March 2023, including the principal areas of focus;
■ reviewing the Company’s Risk Management Policy and
■ receiving and discussing with the independent auditor Treasury Policy; and
their report on the results of the review of the half-yearly
■ reviewing reports of internal controls of key advisers and
financial statements and the year-end audit;
gaining assurance from the Investment Manager and
■ meeting independently with the external auditors; Administrator on these.
■ reviewing and challenging information received from In addition to formal Audit and Risk Committee meetings
the Investment Manager recommending the rationale during the year, the Committee has had regular contact and
for preparing the financial statements on a going meetings with the Investment Manager, the Administrator
concern basis, including a viability statement. This and the independent auditor.
was discussed with the independent auditor prior to
### concluding that the recommendation be made by the Key Issues Considered for Financial
Committee that the Board approve the adoption of the
### Statements
financial statements on a going concern basis and their
After discussion with the Investment Manager and the
approval of the viability statement;
independent auditor, the Audit and Risk Committee
determined that the key risks of misstatement of the
■ reviewing and challenging the valuation prepared by the
Company’s financial statements related to the valuation
Investment Manager and its valuation process, together
of the Company’s investment in SEEIT Holdco and in
with the independent auditor;
turn the valuation of the underlying investments held via
■ in light of the continued growth of the Company, SEEITHoldco.
reviewing and recommending to the Board the
### continued application of IFRS 10 Investment Entity Valuation of Investments
which is considered a key judgement for the Company’s
As outlined in Note 11 to the financial statements, the
accounting policies;
total carrying value of the investment portfolio at fair value
at 31March 2023 was £1,099.6 million (31 March 2022:
■ reviewing the Company’s annual and half-yearly
£912.7 million). Market quotations are not available for these
financial statements and recommending these to the
financial assets, and therefore their valuation is undertaken
Board for approval;
using predominantly a discounted cashflow methodology,
■ considering the FRC’s review of the Company’s annual ora similar method to determine the fair value of an
report and financial statements for the year ended investment. This requires a number of material estimates
31March 2022, which raised no substantive questions to be made as further explained in Note 3 to the financial
or queries, and discussing and agreeing the appropriate statements.
actions in response to suggestions on additional
disclosures by the FRC;
98 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
The valuation process and methodology was discussed by is experienced and active in the valuation of these
the Audit and Risk Committee with the Investment Manager investments and adopts discount rates which reflect their
at the time of the interim review, in March 2023 prior to understanding of the current market. It is noted, however,
the year-end valuation process, and again post year end in that the judgement required is subjective and there is
May 2023 and June 2023 as part of the year-end sign-off a range of discount rates which that could be applied.
process. The Investment Manager carries out a valuation The discount rate assumptions and the sensitivity of the
semi-annually and provides a detailed valuation report to valuation of the investments to this discount rate are set out
the Company. in Section 2.3, Financial Review and Valuation Update.
GOVERNANCE
The Audit and Risk Committee reported to the Board on The Audit and Risk Committee discussed with the
the challenges it made to the valuation and the outcome of Investment Manager the process adopted to arrive at
discussions with the Investment Manager and independent the selected valuation discount rates (which includes
auditor on the valuation, particularly in relation to key comparison with other market transactions and engaging
judgements. The Audit and Risk Committee met with the an independent review of valuation discount rates by the
independent auditor when it reviewed and agreed the independent valuation expert) and satisfied itself that the
independent auditor’s group audit plan, and also at the rates applied were appropriate. The independent auditor
conclusion of the audit of the financial statements, focusing explained to the Audit and Risk Committee the results of
much of its discussion on the valuation process and the its review of the valuation, including its consideration of the
outcome of the audit of the valuation. Company’s underlying cashflow projections, the economic
assumptions and discount rates.
The Company engaged an independent valuation expert
to provide a report on a fair and reasonable range of Macroeconomic assumptions
discount rates for the investments in the portfolio as at Macroeconomic assumptions include inflation, interest
31March 2023. The Audit and Risk Committee received rate, foreign exchange and tax rate assumptions. The
a presentation from the independent valuation expert and Investment Manager’s assumptions in this area are set
challenged the assumptions and conclusions as needed. out and explained in Section 2.3, Financial Review and
The Audit and Risk Committee was satisfied that this report Valuation Update. The Audit and Risk Committee reviewed
confirmed the reasonableness of the discount rates applied and discussed the methodology by which the Investment
by the Investment Manager in its valuation of the portfolio Manager derived the assumptions and agreed its
as at 31 March 2023. appropriateness.
Other key assumptions
Valuation of investments – key forecast assumptions
The Investment Manager has discussed and agreed the key
The Audit and Risk Committee considered in detail those
valuation assumptions with the Audit and Risk Committee.
assumptions that are subject to judgement and may have a
These included critical estimates and judgements
material impact on the valuation. The key assumptions are:
regarding future cashflow assumptions, predominantly
Valuation discount rates for investments in Primary Energy, Onyx, RED-Rochester,
The vast majority of the underlying investments are OlivaSpanish Cogeneration and Värtan Gas. In relation
valued using a discounted cashflow valuation. A small to the key judgements underpinning the valuation, the
selection of investments were valued using other forms Investment Manager has provided sensitivities showing the
of fair value calculations, such as earnings multiples, and impact of changing these assumptions, further described
certain investments were held at cost as the most accurate in Note 3. These have been reviewed by the Investment
reflection of their fair value. Manager and the Audit and Risk Committee to assist in
forming an opinion on the fairness and balance of the
The discount rates adopted to determine the valuation are
Annual Report, together with their conclusion on the
selected by the Investment Manager and recommended
overallvaluation.
to the Audit and Risk Committee. These discount rates
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW are applied to the expected future cashflows for each
investment’s financial forecasts to arrive at a discounted
cash-flow valuation which is, in turn, sensitive to the
discount rate selected. The Investment Manager
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 99
4.6 Audit and Risk Committee Report
continued
■ reviewing the impact of global rises in corporation
### Key Risks Considered
taxes, including the sensitivity of the valuations of the
The Company’s key risks are set out in more detail in
Company’s underlying investments to potential changes
Section 3.2, Risk Management Framework.
not yet enacted, discussing potential mitigants available
to the Company and agreeing reviews to be undertaken
The Audit and Risk Committee actively provides risk
by the Investment Manager; and
management oversight, and reviews and challenges on a
regular basis the risk updates provided by the Investment
■ reviewing the impact on the portfolio of a period of
Manager.
recessionary environment in the key jurisdictions in
which the Company operates.
These risks and reviews included:
### Counterparty and credit risk Financial Reporting Council review letter
■ reviewing the dynamic levels of risk associated with During the reporting period, the Company received a letter
the counterparties associated with the Company’s from the FRC’s Corporate Reporting Review team, who
investments; had reviewed the Company’s annual report and financial
statements for the year ended 31 March 2022, as part
■ reviewing stress tests assessing the impact of material
of their regular review and assessment of the quality of
credit counterparty defaults;
corporate reporting in the UK. This review is based solely
■ assessing the Investment Manager’s feedback on on the annual report and financial statements and the
limited mitigants available to the Company; and reviewers did not have detailed knowledge of the business
or an understanding of the underlying transactions entered
■ monitoring compliance with the Company’s Treasury
into. However, it was conducted by staff of the FRC who
Policy in relation to exposures to deposit takers.
have an understanding of the relevant legal and accounting
framework.
Operations and business interruption risk
■ receive updates from the Investment Manager on the
The FRC did not have any questions or queries they wished
risks specific to each asset and the potential impact of
to raise with regards to the Company’s annual report and
these risks on the valuation of the Company’s portfolio
financial statements, and they did not request a response
as a whole;
from the Company. The FRC did, however, include a
number of matters where they believe the users of the
■ receive and challenge regular formal and informal
financial statements would benefit from improvements
updates from the Investment Manager on the level
to existing disclosures, and these recommendations
of business interruption or potential for business
interruption at the operational level of the investments, have been incorporated into this Annual Report and
particularly focusing on event risks such as the Covid-19 Accounts, including: improving the presentation of the APM
pandemic, the Russian invasion of Ukraine and the reconciliations; defining all carbon-related indicators; and
resulting impact on supply chain; and providing clarification for the energy consumption metrics.
■ receive a detailed third-party review, arranged by the
### Internal Controls and Risk Management
Investment Manager, to assess the current levels of
The Audit and Risk Committee is responsible for reviewing
cyber-security risk, particularly in light of the growth of
and monitoring the effectiveness of the Company’s internal
the Company‘s investment portfolio and the nature of
control systems and risk-management systems on which it
the underlying investments.
is reliant.
Macro-economic and market risk
The Board has considered the need for an internal
■ reviewing the impact of global rises in inflation,
audit function, and it has decided that the systems and
including the sensitivity of the valuations of the
procedures employed by the Investment Manager and the
Company’s underlying investments to changes in
Administrator, including their own internal review processes
inflation in the near, medium and long term;
and processes in place in relation to the Company, provide
■ reviewing the impact of the Ukraine conflict and the sufficient assurance that a sound system of internal control,
emerging risk of larger-scale conflict as well as seeking which safeguards the Company’s assets, is maintained.
assurance on compliance with sanctions; An internal audit function specific to the Company is
100 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
therefore considered unnecessary at this time; however, the may undertake and the level of non-audit fees. In order to
Board is keeping this under regular review and focuses on safeguard auditor independence and objectivity, the Audit
identifying any areas where internal control improvements and Risk Committee ensures that any other advisory and/or
can be made. consulting services provided by the independent auditor
does not conflict with its statutory audit responsibilities.
The Audit and Risk Committee recognises that these
control systems can only be designed to manage rather Non-audit services generally only cover reviews of
than eliminate the risk of failure to achieve business interim financial statements and capital raising work.
objectives. It is understood that they provide reasonable, The independent auditor may not undertake any work GOVERNANCE
but not absolute, assurance against material misstatement for the Company in respect of the preparation of the
or loss, and rely on the operating controls established by the financial statements, preparation of valuations used in
Company’s Administrator and the Investment Manager. financial statements, provision of investment advice, taking
management decisions or advocacy work in adversarial
The Audit and Risk Committee assesses the effectiveness
situations.
of the internal controls, internal financial controls and risk
management systems on a continuing basis and receives The total proposed fees for audit services amounted to
regular reports on these systems. The Committee believes £0.8 million for the year ended 31 March 2023 of which
that the Company’s internal controls and processes are £0.6 million related to the Company and £0.2 million related
satisfactory, and that appropriate systems are in place. to audit of its direct subsidiary, SEEIT Holdco, and some of
the SEEIT Group’s intermediate and project subsidiaries.
Furthermore, the Audit and Risk Committee instructed an
Non-audit fees amounted to £0.1 million for the year ended
external provider to conduct a review of the Investment
31 March 2023 due for the interim review of the Company’s
Manager’s investment process during the year, which
half yearly financial statements.
evaluated the design adequacy and, where applicable,
performed substantive testing on the effectiveness Notwithstanding such non-audit services, the Audit and
of controls across the investment lifecycle. The audit Risk Committee considers PwC to be independent of the
report was rated ‘satisfactory’ and found documentation Company and that the provision of such non-audit services
evidencing the performance of key control activities is not a threat to the objectivity and independence of the
along the investment lifecycle, and noted good practices conduct of the audit.
including: comprehensive deal packs and documentation
To fulfil its responsibility regarding the independence of
supporting investment analysis; consistent performance
the independent auditor, the Audit and Risk Committee
of due-diligence across deals sampled; good budgetary
considered:
controls and transparency observed around deal costs;
and good controls over the authentication / validation
■ a report from the independent auditor describing
of accounts for payment. The provider made one
their arrangements to identify, report and manage any
recommendation to improve the investment process and potential independence threats; and
this has been incorporated into the existing framework.
■ the extent of non-audit services provided by the
Appointment of the Independent Auditor independent auditor.
PricewaterhouseCoopers LLP (“PwC”) was appointed as
To assess the effectiveness of the external audit process,
independent auditor for the SEEIT group at the IPO of the
the Audit and Risk Committee reviewed:
Company in December 2018.
■ the independent auditor’s fulfilment of the agreed audit
The objectivity of the independent auditor is reviewed
plan and variations from it;
by the Audit and Risk Committee, which also reviews
the terms under which the independent auditor may be ■ the evaluations from the Investment Manager and
appointed to perform non-audit services. The Audit and Administrator on the performance of the independent
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW Risk Committee reviews the scope and results of the auditor’s team; and
audit, its cost-effectiveness and the independence and
■ all reports highlighting any significant issues that arose
objectivity of the independent auditor, with particular
during the course of the audit.
regard to any non-audit work that the independent auditor
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 101
4.6 Audit and Risk Committee Report
continued
The Audit and Risk Committee is satisfied with PwC’s
effectiveness and independence as auditor having
considered the degree of diligence and professional
scepticism demonstrated by the firm. As such, the
Committee has not considered it necessary during this
period to conduct a tender process for the appointment of
its independent auditor for the year ending 31 March 2023.
As this is the fifth audit conducted by PwC and the fourth
full year of operation of the Company, it is not expected
that the Company will tender the external audit in the near
future.
The Audit and Risk Committee will conduct a formal review
of PwC following the issue of these financial statements
to ensure that the Audit and Risk Committee considers
all aspects of the independent auditor’s service and
performance.
### Whistleblowing
The Board has considered the UK Code recommendations
in respect of arrangements by which staff of the Company’s
key advisers and project companies may, in confidence,
raise concerns within their organisations and the Board,
and the Investment Manager has a Whistleblowing Policy
which supports these recommendations.
Sarika Patel
Chair of the Audit and Risk Committee
102 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## 4.7 Directors' Remuneration Report

The Remuneration Committee is chaired by Emma Griffin and the membership of the Committee comprises all Directors of the Company, all of whom are independent and non-executive.

The Board is satisfied that the Committee is properly constituted. The Company's Chair is a member of the Remuneration Committee given his independence at the time of his appointment and throughout his service.

The Board presents the Directors' Remuneration Report for the year ended 31 March 2023, which is made up of two sections; the Annual Report on Remuneration and the Directors' Remuneration Policy report.

### Annual Report on Remuneration

The Remuneration Committee's main functions include:

- ■ agreeing the policy for the remuneration of the Directors and reviewing and proposing changes to the Company's Remuneration Policy;
- ■ reviewing and considering ad hoc fees to the Directors in relation to duties undertaken over and above routine business; and
- ■ appointing independent professional external remuneration consultants, as may be required from time to time.

The Remuneration Committee met three31 times during the year and operates within clearly defined terms of reference, which are available on the Company's website. The Committee reviewed its terms of reference in March 2023 to ensure that it continues to operate effectively.

The key activities during the year included the review of the level of Directors' annual remuneration proposed for the next financial year, taking into account advice received in 2021 from an independent professional external remuneration consultant, and considering and recommending to the Board an appropriate level of Directors' remuneration for additional, specific corporate work undertaken during the year, and to review and propose to shareholders an increase on the cap on the aggregate Directors' base remuneration for the year ending 31 March 2023. These activities are described further below.

Regulation requires the Company's independent auditor to audit certain disclosures provided. Where disclosures

have been audited, they are indicated as such. The auditor's opinion is included in their report on pages 111 to 116.

### Statement of the Chair of the Remuneration Committee

The Committee assists the Board in developing a fair and transparent framework for setting the levels of Directors' remuneration while having regard to the Company's financial position and performance, remuneration in other companies of comparable scale and complexity and market statistics generally. It also reviews the ongoing appropriateness and relevance of the Directors' Remuneration Policy. No Director is involved in determining their own remuneration.

The Board may determine that additional remuneration may be paid, from time to time, to any one or more Directors in the event such Director or Directors are requested by the Board to perform extra or special services on behalf of the Company. Where the Company requires the Directors to work on specific corporate actions, such as the raising of further equity, an additional fee will be determined, on each occasion, by the Committee and recommended to the Board.

### Directors' Remuneration Review and review of Directors' fees for the year to 31 March 2024

During the year, the Committee undertook an analysis on Directors' remuneration of comparable companies, together with the advice received from Trust Associates, who had undertaken a review of the Directors' remuneration in 2021 and also further considered the expectations on the time of the Directors. Based on its analysis, the Committee's recommendation is set out below:

- ■ the base annual Director's fee be increased to £49,500 (2023: £47,000);
- ■ the annual fee paid to the Company's Chair be increased to £69,500 (2023: £67,000);
- ■ the annual supplement paid to the Audit and Risk Committee Chair remains at £5,000 (2023: £5,000);
- ■ the annual supplement for the roles of Senior Independent Director and the Remuneration Committee Chair to remain at £2,000 (2023: £2,000);
- ■ an annual supplement for the role of the Management Engagement Committee Chair of £2,000 be introduced (2023: N/A).

31 The Remuneration Committee had one scheduled meeting during the reporting period and met on two further occasions on an ad hoc basis to discuss remuneration matters.

SDCL Energy Efficiency Income Trust plc | SEDIT ANNUAL REPORT 2023 | 103

CHAPTER

DIRECTOR'S REPORT

GOVERNMENT

FINANCIAL STATEMENTS

AUSTRALIAN INFORMATION
4.7 Directors’ Remuneration Report
continued
■ additional fees, up to a limit of £10,000 per director, continue to be paid for specific corporate work that may be
undertaken during the year ending 31 March 2024 (2023: £10,000); and
■ the cap on the aggregate annual Directors’ base remuneration remains at £400,000 (2023: £400,000).
In the year ended 31 March 2023, an additional fee of £2,500 was paid to each of the Directors on the Board at the time in
respect of work undertaken in relation to the equity capital raising in September 2022. An additional fee of £2,500 was paid
to each of the Directors in June 2022, however, this was earned in respect of work undertaken during the prior financial year,
in relation to a capital raising completed in March 2022.
### Directors’ remuneration for the year ended 31 March 2023 (audited)
The table below sets out the Directors’ remuneration for the year ended 31 March 2023:

| Fees for the year |  | Fees for the year |  |
| --- | --- | --- | --- |
| ended 31 March |  | ended 31 March |  |
|  | 2023 |  | 2022 |
|  | Total |  | Total |
|  | £’000 |  | £’000 |

Tony Roper Chair 69.5 72.5
1
Helen Clarkson Management Engagement Committee Chair 49.5 57.5
Emma Griffin Remuneration Committee Chair 51.5 54.5
Chris Knowles Senior Independent Director 51.5 54.5
2
Sarika Patel Audit and Risk Committee Chair 54.5 15.0
Total 276.5 254.0
1 Helen Clarkson was the Audit and Risk Committee Chair for the period from 1 April 2021 to 1 January 2022, although received fees consistent with
remuneration of the Audit and Risk Committee Chair up to 31 March 2022 to ensure an orderly handover to Sarika Patel.
2 Sarika Patel was appointed as a non-executive Director and Audit and Risk Committee Chair on 1 January 2022 and was paid pro rata for the year ended
31March 2022 accordingly.
The Directors’ remuneration for the year ended 31 March 2023, detailed in the table above, is inclusive of the increases
in the Directors’ fees, approved by the shareholders at the AGM held on 12 September 2022 and the £2,500 additional
fee paid for specific corporate work in September 2022 to each Director. An explanation of the additional fee paid for the
specific corporate work is set out in this Remuneration Report. For the year ended 31 March 2022, additional fees of £7,500
in aggregate were paid to each Director in respect of specific corporate work undertaken in September 2021 and March
2022.
The Directors are also entitled to be paid all reasonable expenses properly incurred by them in connection with the
performance of their duties. These expenses include those associated with AGMs, Board or Committee meetings and legal
fees. In the year, such expenses were de minimis and were in line with the Directors’ Expenses Policy.
There are no other taxable benefits payable by the Company other than certain expenses which may be deemed to be
taxable. None of the above fees were paid to third parties.
### Annual Percentage Change in the Directors’ Remuneration
The annual percentage change in remuneration in respect of the financial years prior to the current year in respect of
each Director role is detailed in the table below. The annual percentage change is calculated based on the aggregate
annual base Director’s remuneration plus an additional fee for acting in the role as either Chair of the Company, Senior
Independent Director or as the Chair of a Board Committee. The percentage calculation excludes any additional fees
earned for corporate transaction work as described further above.
104 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc

|  | Financial |  | Financial |  | Financial |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | year to |  | year to |  | year to |
|  | 31 March |  | 31 March |  | 31 March |  |
| Director Role Date appointed |  | 2021 |  | 2022 |  | 2023 |

Tony Roper Chair 12 October 2018 11.1% 30.0% 3.1%
Management Engagement Committee
1
Helen Clarkson 12 October 2018 14.2% 25.0% (6.0)%
Chair
Emma Griffin Remuneration Committee Chair 21 October 2020 – 17.5% 4.3%
GOVERNANCE
Chris Knowles Senior Independent Director 12 October 2018 14.2% 17.5% 4.3%
2
Sarika Patel Audit and Risk Committee Chair 1 January 2022 – – –
1 Helen Clarkson was the Audit and Risk Committee Chair for the period from 1 April 2021 to 1 January 2022, although received fees consistent with
remuneration of the Audit and Risk Committee Chair up to 31 March 2022 to ensure an orderly handover to Sarika Patel.
2 Sarika Patel was appointed as a non-executive Director and Audit and Risk Committee Chair on 1 January 2022 and fees were paid pro rata for the year
ended 31 March 2022 accordingly. If Sarika had been a non-executive Director and the Audit and Risk Committee Chair for the full year to 31 March 2022,
the annual percentage change in her remuneration for the year to 31 March 2023 would be 4.0%.
### Relative Importance of Spend on Pay
The table below sets out the remuneration paid to the Directors in comparison to total aggregate amount of dividends paid
to the Company’s shareholders for the year ended 31 March 2023:

|  | Year to |  | Year to |
| --- | --- | --- | --- |
| 31 March |  | 31 March |  |
|  | 2023 |  | 2022 |
|  | £’000 |  | £’000 % change |

Directors’ remuneration 276.5 254.0 8.9
Dividends paid to shareholders 62,029 44,207 40.3
### Company Performance
Total Shareholder Return Since SEIT IPO
50.0%
40.0%
30.0%
20.0%
+11.6%
10.0%
+4.8%
0.0%
(2.2%)
(10.0%)
(20.0%)
(30.0%)
(40.0%)
Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23
SEEIT: (2.2%) FTSE 100: +11.6% FTSE 250: +4.8%
60.0%
The graph above highlights the comparative total shareholder return (“TSR”) for an investment in the Company from
inception to 31 March 2023 compared with an investment in the FTSE 250 index over the same period. The Company is a
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
member of the FTSE 250 and All Index hence they have been selected for this graph.
The Board is responsible for the Company’s investment strategy and performance, although day-to-day management of the
Company’s affairs, including the management of the Company’s portfolio, has been delegated to the Investment Manager.
An explanation of the performance of the Company is given in Section 2.3, Financial Review and Valuation Update.
Total Shareholder Return (Dividends Reinvested)
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 105
4.7 Directors’ Remuneration Report
continued
### Directors Interests in the Company (audited)
As at 31 March 2023, the interests of the Directors and any Persons Closely Associated (“PCAs”), as defined in Article 3(1)(26)
of the Market Abuse Regulation (“MAR”), in the ordinary shares of the Company are set out in the table below:

| Ordinary shares of |  | Ordinary shares of |  |
| --- | --- | --- | --- |
| £0.01 each held at |  | £0.01 each held at |  |
|  | 31 March 2023 |  | 31 March 2022 |

Tony Roper 148,500 128,500
Helen Clarkson 20,000 8,326
Emma Griffin 20,509 20,509
1
Christopher Knowles 94,000 37,000
Sarika Patel 25,000 –
Total 308,009 194,335
1 Christopher Knowles’ spouse, who is a PCA of Chris Knowles under MAR, holds 37,000 ordinary shares in the Company and these are included in the
figure shown in the above table. Other family members of Chris Knowles hold an additional 85,000 ordinary shares in the Company. These other family
members holding ordinary shares in the Company do not meet the definition of PCA under MAR.
There have been no changes to any of the above holdings between 31 March 2023 and the date of this report.
None of the Directors or any of their PCAs had a material interest in the Company’s transactions, arrangements or
agreements during the year.
As at the date of this report, Jonathan Maxwell, CEO and Founder of the Investment Manager, holds 240,000 ordinary
shares. Jonathan Maxwell is considered to be a Person Discharging Managerial Responsibilities (“PDMR”) by both the
Board of Directors and Investment Manager.
There have been no changes in the year in respect of each of the Directors as notifiable to the Company in accordance with
DTR 3.1.2.
### Statement of voting at AGM on the Annual Report
A binding Ordinary Resolution approving the Remuneration Policy, and an advisory vote adopting the Directors’ Remuneration
Report for the year ended 31 March 2022, were approved by shareholders at the AGM held on 12 September 2022.
The votes cast by proxy were as follows:
Directors’

| Remuneration |  | Remuneration |  |
| --- | --- | --- | --- |
|  | Report |  | Policy |
| (AGM 2022) |  | (AGM 2022) |  |

Votes for 838,768,176 838,755,779
% 99.68 99.68
Votes against 2,720,538 2,723,252
% 0.32 0.32
Total votes cast 841,488,714 841,479,031
Votes withheld 20,052 29,735
A resolution to approve this Directors’ Remuneration Report in respect of the year ending 31 March 2023 will be proposed
at the forthcoming AGM. The Directors’ Remuneration Policy is required to be presented to shareholders for approval every
three years and is due to be next presented at the AGM to be held in 2025.
106 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
# Remuneration Policy

This Remuneration Policy provides details of the Remuneration Policy for the Directors of the Company. All Directors are independent and non-executive, appointed under the terms of Letters of Appointment, and none of the Directors has a service contract. The Company has no employees.

This Remuneration Policy was approved by shareholders at the AGM of the Company held on 12 September 2022 and is also available on request at the Company's registered office.

The Company follows the recommendation of the AIC Code that non-executive Directors' remuneration should reflect the time commitment and responsibilities of the role.

The Board's policy is that the remuneration of non-executive Directors should reflect the experience of the Board as a whole and be determined with reference to comparable organisations and appointments.

The fees of the non-executive Directors are determined within the limits set out in the Company's Articles of Association and Directors' remuneration is determined by the Remuneration Committee, at its discretion within the current aggregate limit of £400,000, as set out in the Company's Articles of Association.

There are no performance conditions attached to the remuneration of the Directors as the Board does not consider such arrangements or benefits necessary or appropriate for non-executive Directors.

The Company is committed to ongoing shareholder dialogue and any views expressed by shareholders on the fees being paid to Directors would be taken into consideration by the Board when reviewing the Directors' Remuneration Policy and in the annual review of Directors' fees.

Under the Directors' letters of appointment, there is no notice period. All Directors of the Company receive an annual fee appropriate for their responsibilities and time commitment but no other incentive programme or performance-related emoluments. As such there are:

- no service contracts with the Company;
- no long-term incentive schemes;
- no options or similar performance incentives; and
- no payments for loss of office unless approved by shareholder resolution.

The Directors' remuneration shall:

- reflect the responsibility, experience, time commitment and position of each Director on the Board;
- allow the Chair, Senior Independent Director, Audit and Risk Committee Chair, and Remuneration Committee Chair to be remunerated in excess of any potential remaining Board members to reflect their increased roles of responsibility and accountability;
- be paid quarterly in arrears;
- include remuneration for additional, specific corporate work, which shall be carefully considered and only become due and payable on completion of that work; and
- be reviewed annually and, at least every three years, by an independent professional external remuneration consultant with experience of investment companies and their fee structures.

The Remuneration Committee met in June 2022 to approve an additional fee of £2,500, earned by each of the Directors in respect of work undertaken in relation to the capital raising in March 2022. This additional fee agreed by the Remuneration Committee forms part of the Directors' Remuneration for the year ended 31 March 2022, approved by shareholders at the Company's AGM held on 10 August 2021.

At the meeting of the Remuneration Committee in June 2022, the Committee also considered the cap on the aggregate Directors' base remuneration in light of proposed fee increases for the year ending 31 March 2023 and the appointment of a fifth Director in January 2022, and determined there was insufficient headroom in the fee cap should the Board look to recruit an additional Director in the future. Accordingly, the Committee proposed the fee cap be increased from £300,000 to £400,000 and this proposal was approved by shareholders at the 2022 AGM, with 99.99% of votes being cast in favour of the resolution.

The Remuneration Committee met in March 2023 to consider the current levels of annual base Directors' remuneration and the proposed level of base Directors' remuneration for the year ending 31 March 2024. The Committee concluded that the proposed changes to the Director's annual remuneration be recommended and were put to the Board for approval.

CHAPTER

CONTACT SHEET

GOVERNMENT

FINANCIAL STATEMENT

AUSTRALIA AMENDMENT

SDCL Energy Efficiency Income Trust plc | SEDIT ANNUAL REPORT 2023 | 107
4.7 Directors’ Remuneration Report
continued
The Remuneration Committee also met in September 2022 to approve an additional fee of £2,500, earned by each of the
Directors in respect of work undertaken in relation to the capital raising in September 2022. This additional fee, agreed by the
Remuneration Committee and recommended to the Board for approval, forms part of the Directors’ Remuneration for the year
ended 31 March 2023, approved by shareholders at the Company’s AGM held on 12 September 2022.
### Proposed Base Directors’ Fees to be Paid for the Year Ending 31 March 2024:
Proposed base fees

| to be paid for the |  |  | Base fees paid for |  |  |
| --- | --- | --- | --- | --- | --- |
|  | year ending |  |  | the year ended |  |
| 31 March 2024 |  |  |  | 31 March 2023 |  |
|  |  | Total |  |  | Total |
|  |  | £’000 |  |  | £’000 |

Tony Roper Chair 69.5 67.0
Helen Clarkson Management Engagement Committee Chair 51.5 47.0
Emma Griffin Remuneration Committee Chair 51.5 49.0
Chris Knowles Senior Independent Director 51.5 49.0
Sarika Patel Audit and Risk Committee Chair 54.5 52.0
Total 278.5 264.0
The above table does not show fees paid for specific corporate work undertaken by the Directors for the year ended 31 March 2023. At its discretion, the
Remuneration Committee has the authority to grant additional fees, up to a limit of £10,000 in aggregate per Director, for specific work that may be undertaken
during the financial year. During the year ended 31 March 2023, each Director of the Company received a total of £2,500 for corporate work undertaken as part
of the September 2022 capital raise exercises.
The proposed remuneration recommendations for the year ended 31 March 2024 would result in an increase in the
aggregate Directors’ annual base remuneration to £278,500 in the coming year.
The Board also considered the availability of each Director, taking into account their other commitments, and concluded
that each Director made adequate time available for the appropriate discharge of the Company’s affairs. Each Director
abstains from voting on their own individual remuneration.
The Board has adopted the recommendations from the Remuneration Committee and will seek shareholder approval at the
upcoming 2023 AGM in relation to the proposed remuneration payable to the Directors for the year ending 31 March 2024
with a view to implementing the proposed increases backdated to the start of the Company’s current fiscal year.
The Directors’ Remuneration Report was approved by the Board on 28 June 2023 and signed on its behalf by:
Emma Griffin
Chair of the Remuneration Committee
108 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 4.8 Statement of Directors’ Responsibilities
### Statement of Directors’ Responsibilities Directors’ Confirmations
### in Respect of the Financial Statements The Directors consider that the Annual Report and
The Directors are responsible for preparing the Annual Accounts, taken as a whole, is fair, balanced and
Report and the financial statements in accordance with understandable and provides the information necessary
applicable law and regulation. for shareholders to assess the Company’s position and
performance, business model and strategy.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Each of the Directors, whose names and functions are
GOVERNANCE
Directors have prepared the financial statements in listed in Section 4.2, Board of Directors, confirm that, to the
accordance with UK-adopted international accounting best of their knowledge:
standards.
■ the Company financial statements, which have been
Under company law, directors must not approve the prepared in accordance with UK-adopted international
financial statements unless they are satisfied that they give accounting standards, give a true and fair view of the
a true and fair view of the state of affairs of the company assets, liabilities, financial position and result of the
and of the profit or loss of the company for that period. company; and
In preparing the financial statements, the directors are
■ the Strategic Report: Portfolio Review includes a fair
required to:
review of the development and performance of the
■ select suitable accounting policies and then apply them business and the position of the Company, together with
consistently; a description of the principal risks and uncertainties that
it faces.
■ state whether applicable UK-adopted international
accounting standards have been followed, subject to In the case of each Director in office at the date the
any material departures disclosed and explained in the Directors’ report is approved:
financial statements accounts; and
■ so far as the Director is aware, there is no relevant
■ make judgements and accounting estimates that are audit information of which the Company’s auditors are
reasonable and prudent; and unaware; and
■ prepare the financial statements on the going concern ■ they have taken all the steps that they ought to have
basis unless it is inappropriate to presume that the taken as a Director in order to make themselves aware
company will continue in business. of any relevant audit information and to establish that
the Company’s auditors are aware of that information.
The Directors are responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Annual Report and financial statements were approved
The Directors are also responsible for keeping adequate by the Board on 28 June 2023 and the above responsibility
accounting records that are sufficient to show and explain statement was signed on its behalf by:
the Company’s transactions and disclose with reasonable
Tony Roper
accuracy at any time the financial position of the Company
Chair
and enable them to ensure that the financial statements
and the Directors’ Remuneration Report comply with the
Companies Act 2006.
The Directors are responsible for the maintenance and
integrity of the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of
STRATEGIC REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION OVERVIEW
financial statements may differ from legislation in other
jurisdictions.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 109
## 5.
## FINANCIAL
## STATEMENTS
Pictured: Oliva Spanish Cogeneration site
110 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## Independent auditors’ report to the
## members of SDCL Energy Efficiency
## Income Trust plc
## Report on the audit of the financial statements
### Opinion
In our opinion, SDCL Energy Efficiency Income Trust plc’s financial statements:
● give a true and fair view of the state of the company’s affairs as at 31 March 2023 and of its loss and cash flows for the
year then ended;
● have been properly prepared in accordance with UK-adopted international accounting standards; and
● have been prepared in accordance with the requirements of the Companies Act 2006.
FINANCIAL STATEMENTS
We have audited the financial statements, included within the Annual Report and Audited Financial Statements (the “Annual
Report”), which comprise: the statement of financial position as at 31 March 2023; the statement of comprehensive income,
the statement of changes in shareholders' equity and the statement of cash flows for the year then ended; and the notes to
the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
### Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were
not provided.
Other than those disclosed in the notes to the financial statements, we have provided no non-audit services to the company
or its controlled undertakings in the period under audit.
### Our audit approach
Overview
Audit scope
● The company invests in a diversified portfolio of energy efficient projects through an intermediate holding company named
SEEIT Holdco Limited. We performed an audit of the company including its investment in SEEIT Holdco Limited.
● All of our audit work was conducted in the UK by the company audit team.
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 111
Key audit matters
● Valuation of Investments at fair value through profit or loss
● Ability to continue as a going concern (Continuation vote)
Materiality
● Overall materiality: £11.3m (2022: £10.7m) based on 1% of total assets.
● Performance materiality: £8.5m (2022: £8.1m).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of
the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Ability to continue as a going concern (Continuation vote) is a new key audit matter this year. Otherwise, the key audit
matters below are consistent with last year.
Key audit matter How our audit addressed the key audit
Valuation of Investments at fair value through

| The company has £1,127.8 million of investments | We planned our audit to critically assess |
| --- | --- |
| recorded at fair value and these are significant in | management’s assumptions and the investment |
| the context of the overall balance sheet of the | valuation model in which they are applied; |
| The company invests through a holding company | We have evaluated the design and |
| which in turn holds debt and equity interests in | implementation of relevant controls over the |
| project companies (the “underlying investment | preparation of the portfolio valuation; |
| The fair value of the underlying investment | We assessed the reasonableness of the |
| portfolio has principally been valued on a | assumptions made by management in the |
| discounted cash flow basis, which necessitates | applicable valuation models; |

significant estimates in respect of the forecasted
cash flows and discount rates applied.
We tested the mathematical accuracy of the
The directors’ assessment of those fair values We performed detailed testing over a sample of
involves estimates about the future results of the models and significant inputs for the selected
sample of investments. This testing entailed
revenues, growth rates and discount rates applied challenging key inputs in those models and
to future cash flow forecasts where there is a
higher degree of sensitivity. Based on the and evidence;
historical performance of investments and best
estimates of future assumptions, the directors
underlying businesses, in particular around future
obtaining appropriate supporting documentation
112 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
portfolio”) for which there is no liquid market. believe that these fair values are reasonable. matter profit or loss selected sample of valuation models; company. See note 11 for details.
Determining the valuation methodology and the We specifically considered management’s
inputs and assumptions within the valuation is assessment of the valuation impact of climate
subjective and complex. This, combined with the change on the future cashflows assumed in the
models and obtained further evidence to support
the statement of financial position, meant that management’s assumptions;
this was a key audit matter for our current year
We used our internal valuation specialists in the
United Kingdom, United States, Sweden and
Spain to provide audit support in reviewing and
concluding on the fair valuation of certain
investments in the underlying investment
portfolio. They (a) reviewed the appropriateness
of the valuation methodology and approach and
(b) reviewed and commented on the discounted
cash flow valuation models, including comparing
the discount rate and certain other key
assumptions against those used by comparable
market participants, where appropriate and/or
other macroeconomic data and (c) concluded
that the overall valuation is within a reasonable
In addition, our valuation specialists have also FINANCIAL STATEMENTS
challenged the independent third party reports
that management have obtained to support the
valuation of certain assets within the portfolio;
We have concluded that the overall valuation of
Ability to continue as a going concern
Refer to the Going Concern section in the Report Our audit procedures and findings in respect of
of the Directors and in the Note 2 to the financial going concern are set out in the "Conclusions
A continuation vote is due to take place at the
September 2023 AGM as required by the
company’s articles of association. A continuation
vote, by its nature requires the Directors to
consider and assess the potential impact on the
ability of the company to continue as a going
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the
industry in which it operates.
As part of designing our audit approach, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently
uncertain.
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW
significance of the unlisted investments balance in
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 113
(Continuation vote) audit. and range; the portfolio as a whole is reasonable. statements. relating to Going Concern' section below. concern.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on
the financial statements, and we remained alert when performing our audit procedures for any indicators of the impact of
climate risk. Our procedures did not identify any material impact as a result of climate risk on the company’s financial
statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
£11.3m (2022: £10.7m).

| How we | Based on 1% of total assets |
| --- | --- |
| Rationale for | We believe that total assets is |
| benchmark | key metric of interest to investors, and is a generally accepted measure used for |

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope
of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example
in determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £8.5m
(2022: £8.1m) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above
£0.56m (2022: £0.54m) as well as misstatements below that amount that, in our view, warranted reporting for qualitative
reasons.
### Conclusions relating to going concern
Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of
accounting included:
● In relation to the continuation vote specifically, we considered:
o that the directors have confirmed that they will recommend support for the continuation vote;
o the stability and diversity of the company’s shareholder register and the type of shareholders on the
register;
o the track record of company’s performance;
o the company’s history of successful fund raising since listing;
o the diversity of the company’s investment portfolio;
o the performance of the company compared to similar investment trusts and the renewables sector;
o the company’s share price compared with its net asset value per share;
o the potential outcomes of the continuation vote and the consequent impact on the ability of the company
to continue as a going concern; and
o the discussions with and/or feedback received by the Board and Investment Manager from a range of
shareholders.
● Testing the mathematical integrity of the cash flow forecasts and the models and reconciled these to Board approved
budgets;
the most appropriate benchmark because this is the
114 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Overall company
materiality determined it applied companies in this industry.
● Challenging management on the appropriateness of key assumptions and considering their reasonableness in the
context of other supporting evidence gained from our audit work;
● Reviewing the revolving credit facility agreement to confirm the terms and conditions, including covenants. The covenants
were consistent with those used in management’s going concern assessment;
● Agreeing all cash balances as at 31 March 2023 to third-party evidence and considering the available financing. This
supported the directors’ conclusion that sufficient liquidity headroom remained throughout the assessment period;
● Testing the mathematical accuracy of the projected covenant calculations. We concluded that covenant compliance
remained throughout the assessment period; and
● Reviewing the management’s severe downside scenario to assess the viability of the company in such circumstances
which included an assessment of the company’s ability to meet its debt covenants where appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for a period of
at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the company's
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the AIC Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting. FINANCIAL STATEMENTS
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
### Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic report and Report of the Directors, we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and
Report of the Directors for the year ended 31 March 2023 is consistent with the financial statements and has been prepared
in accordance with applicable legal requirements.
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic report and Report of the Directors.
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 115
Directors' Remuneration
In our opinion, the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006.
### Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that
part of the corporate governance statement relating to the company’s compliance with the provisions of the AIC Corporate
Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement
as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit,
and we have nothing material to add or draw attention to in relation to:
● The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
● The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being managed or mitigated;
● The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the company’s
ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
● The directors’ explanation as to their assessment of the company’s prospects, the period this assessment covers and
why the period is appropriate; and
● The directors’ statement as to whether 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 of its assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the company was substantially less in scope than
an audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking
that the statement is in alignment with the relevant provisions of the AIC Corporate Governance Code; and considering
whether the statement is consistent with the financial statements and our knowledge and understanding of the company and
its environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of
the corporate governance statement is materially consistent with the financial statements and our knowledge obtained
during the audit:
● The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable,
and provides the information necessary for the members to assess the company's position, performance, business
model and strategy;
● The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems; and
● The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the
Listing Rules for review by the auditors.
### Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation of
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
116 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws
and regulations related to environmental regulations, and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the
financial statements such as the Companies Act 2006 and UK Tax legislation. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined
that the principal risks were related to the valuation of investments and posting inappropriate journal entries to achieve desired
financial results. Audit procedures performed by the engagement team included:
FINANCIAL STATEMENTS
● Discussions with management, including consideration of known or suspected instances of non-compliance with laws
and regulations and fraud;
● Evaluation of design and implementation of management's controls designed to prevent and detect irregularities.
However, we have not relied on controls as substantive procedures are determined to be more effective for this audit;
● Reviewing the minutes of meetings of the Board and its committees;
● Challenging the assumptions and judgments made by management in their significant accounting estimates relating to
the valuation of investments; and
● Identifying and testing journal entries, in particular certain journal entries posted with unusual account combinations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 117
## Other required reporting
### Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
● we have not obtained all the information and explanations we require for our audit; or
● adequate accounting records have not been kept by the company, or returns adequate for our audit have not been
received from branches not visited by us; or
● certain disclosures of directors’ remuneration specified by law are not made; or
● the financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
### Appointment
Following the recommendation of the Audit and Risk Committee, we were appointed by the members on 10 December 2018
to audit the financial statements for the year ended 31 March 2019 and subsequent financial periods. The period of total
uninterrupted engagement is five years, covering the years ended 31 March 2019 to 31 March 2023.
## Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these
financial statements will form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of
the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’
report provides no assurance over whether the annual financial report will be prepared using the single electronic format
specified in the ESEF RTS.
Matthew Mullins (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
28 June 2023
118 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 5.2 Financial Statements
### Statement of Comprehensive Income
### For the year ended 31 March 2023

|  |  |  | For the |  |  | For the |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | year ended |  |  | year ended |  |
|  | 31 March 2023 |  |  | 31 March 2022 |  |  |
| Note |  | £’millions |  |  | £’millions |  |

Investment (loss)/income 5 (7.8) 88.8
Total operating income (7.8) 88.8
Finance income 1.2 –
Fund expenses 6 (12.0) (9.0)
(Loss)/Profit for the year before tax (18.6) 79.8
Tax on (loss)/profit on ordinary activities 7 – –
(Loss)/Profit for the year (18.6) 79.8
Total comprehensive (loss)/income for the year (18.6) 79.8
Attributable to:
Equity holders of the Company (18.6) 79.8
FINANCIAL STATEMENTS
(Loss)/Earnings Per Ordinary Share (pence) 8 (1.8) 10.0
The accompanying Notes are an integral part of these financial statements.
All items in the above Statement derive from continuing operations.
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 119
## 5.2 Financial Statements

### Statement of Financial Position

as at 31 March 2023

|   | Note | 31 March 2022 £'millions | 31 March 2022 £'millions  |
| --- | --- | --- | --- |
|  **Non-current assets** |  |  |   |
|  Investment at fair value through profit or loss | 11 | 1,127.8 | 928.2  |
|   |  | **1,127.8** | **928.2**  |
|  **Current assets** |  |  |   |
|  Trade and other receivables |  | 0.6 | 0.3  |
|  Cash and cash equivalents |  | 0.3 | 146.1  |
|   |  | **0.9** | **146.4**  |
|  **Current liabilities** |  |  |   |
|  Trade and other payables |  | (3.3) | (1.5)  |
|  **Net current (liabilities)/assets** |  | **(2.4)** | **144.9**  |
|  **Net assets** |  | **1,125.4** | **1,073.1**  |
|  **Capital and reserves** |  |  |   |
|  Share capital | 12 | 11.1 | 9.9  |
|  Share premium | 12 | 1,056.8 | 925.1  |
|  Other distributable reserves | 12 | 39.3 | 39.3  |
|  Retained earnings |  | 18.2 | 98.8  |
|  **Total equity** |  | **1,125.4** | **1,073.1**  |
|  **Net assets per share (pence)** | 10 | **101.5** | **106.4**  |

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

The financial statements on pages 119 to 141 were approved by the Board of Directors on 28 June 2023 and signed on its behalf by:

Sarikar Patel Tony Roper  
Director Director

Company number: 11620859

120 | SEEST ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## Statement of Changes in Shareholders' Equity

For the year ended 31 March 2023

|   | Note | Share Capital £'millions | Share Premium £'millions | Other distributable reserves £'millions | Retained earnings £'millions | Total Equity £'millions  |
| --- | --- | --- | --- | --- | --- | --- |
|  **Balance at 1 April 2022** |  | 9.9 | 925.1 | 39.3 | 98.8 | 1,073.1  |
|  Shares issued | 12 | 1.2 | 133.8 | – | – | 135.0  |
|  Share issue costs | 12 | – | (2.1) | – | – | (2.1)  |
|  Dividends paid | 9 | – | – | – | (62.0) | (62.0)  |
|  Loss and total comprehensive loss for the year |  | – | – | – | (18.6) | (18.6)  |
|  **Balance at 31 March 2023** |  | **11.1** | **1,056.8** | **39.3** | **18.2** | **1,125.4**  |

|   | Note | Share Capital £'millions | Share Premium £'millions | Other distributable reserves £'millions | Retained earnings £'millions | Total Equity £'millions  |
| --- | --- | --- | --- | --- | --- | --- |
|  **Balance at 1 April 2021** |  | 6.8 | 584.4 | 58.1 | 44.4 | 693.7  |
|  Shares issued |  | 3.1 | 346.9 | – | – | 350.0  |
|  Share issue costs |  | – | (6.2) | – | – | (6.2)  |
|  Dividends paid | 9 | – | – | (18.8) | (25.4) | (44.2)  |
|  Profit and total comprehensive income for the year |  | – | – | – | 79.8 | 79.8  |
|  **Balance at 31 March 2022** |  | **9.9** | **925.1** | **39.3** | **98.8** | **1,073.1**  |

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

DABINAR

SERVICES ADOPT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

SDCL Energy Efficiency Income Trust plc | SEDIT ANNUAL REPORT 2023 | 121
5.2 Financial Statements
continued
### Statement of Cash Flows
### For the year ended 31 March 2023

|  |  |  | For the |  |  | For the |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | year ended |  |  | year ended |  |
|  | 31 March 2023 |  |  | 31 March 2022 |  |  |
| Note |  | £’millions |  |  | £’millions |  |

Cashflows from operating activities
Total Comprehensive (loss)/income for the year before tax (18.6) 79.8
Adjustments for:
Loss/(gain) on investment at fair value through profit or loss 74.3 (47.8)
Loan interest income 5 (9.0) (7.3)
Operating cashflows before movements in working capital 46.7 24.7
Changes in working capital
(Increase) in trade and other receivables (0.3) –
Increase in trade and other payables 1.8 0.3
Net cash generated from operating activities 48.2 25.0
Cashflows from investing activities
Additional investment in Holdco 11 (292.4) (319.9)
Loan principal repayment received 11 18.5 12.0
Loan interest income received 9.0 7.3
Net cash used in investing activities (264.9) (300.6)
Cashflows from financing activities
Proceeds from the issue of shares 12 135.0 350.0
Payment of share issue costs (2.1) (6.2)
Dividends paid 9 (62.0) (44.2)
Net cash generated from financing activities 70.9 299.6
Net movement during the year (145.8) 24.0
Cash and cash equivalents at the beginning of the Year 2 146.1 122.1
Cash and cash equivalents at the end of the year 2 0.3 146.1
The accompanying Notes are an integral part of these financial statements.
122 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## 5.3 Notes to the Financial Statements

### Notes to the Financial Statements

For the year ended 31 March 2023

#### 1. General Information

SOCL Energy Efficiency Income Trust plc (the "Company") is a Public Company limited by shares, incorporated on 12 October 2018 and registered and domiciled in England, United Kingdom under number 1162086/9 pursuant to the Companies Act 2006 and is the ultimate controlling party of the group. The Company's registered office and principal place of business is 6th Floor, 125 London Wall, London, EC2Y 5AS.

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

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

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

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

The financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Company operates. All values are rounded to the nearest million (£ million), except otherwise indicated. As a result, the prior year numbers have been rounded to the nearest million to facilitate comparability.

#### 2. Significant Accounting Policies

##### a) Basis of Accounting

The financial statements of the Company have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006, as applicable to companies reporting under those standards. The financial statements are prepared under the historical cost convention, except for certain investments and financial instruments measured at fair value through the Statement of Comprehensive Income.

Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Company takes into account the characteristics of the asset or

liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis.

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

##### (i) New standards and amendments to existing standards effective 1 April 2022

There are no standards, amendments to standards or interpretations that are effective for annual periods beginning on 1 April 2022 that have a material effect on the financial statements of the Company.

##### (ii) New standards, amendments and interpretations effective after 1 April 2022 and have not been early adopted

A number of new standards, amendments and interpretations are effective for annual periods beginning after 1 April 2022 and have not been early adopted in preparing these financial statements. None of these are expected to have a material effect on the financial statements of the Company.

##### b) IFRS 10 – Basis of Consolidation and Investment Entities Exemption

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

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

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

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

SOCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 123

DIAGRAM

SOMTEC 2023

SEPTEMBER

FINANCIAL STATEMENTS

SECTION 4/7/2023
5.3 Notes to the Financial Statements
continued
The Company is an investment company, providing investors After assessing whether the Company meets the definition of an
exposure to a diversified portfolio of energy efficiency infrastructure investment entity set out in IFRS 10 the Directors concluded that
projects that are managed for investment purposes. as a whole:
During the year ended 31 March 2023, the Company, via Holdco, (i) the Company has multiple investors with shares issued
made significant new investments, and as a result the size of the publicly on London Stock Exchange and obtains funds from a
Company increased. These investments are described in Note 11. diverse group of shareholders who would otherwise not have
These investments were made in line with the stated objective of access individually to investing in energy efficiency projects;
the Company to generate returns from capital appreciation and
(ii) the Company’s purpose is to invest funds for both investment
investment income in accordance with the strategy that has been
income and capital appreciation. The Holdco and its SPVs
set by the Directors. The Directors assessed each new investment
have indefinite lives however the underlying assets have
carefully in order to determine whether the Company as a whole
minimal residual value because they do not have unlimited
still meets the definition of an investment entity.
lives, are not to be held indefinitely and have appropriate exit
As part of the assessments the Directors had regard for the nature strategies in place; and
of the underlying business and operations and the exit strategy
(iii) the Company measures and evaluates the performance of
of each new investment and how that compared to the already
all of its investments on a fair value basis which is the most
existing portfolio. The Company’s exit of investments may be at
relevant for investors in the Company. The Directors use fair
the time each investment reaches its current assumed end of
value information as a primary measurement to evaluate the
economic life. The Company is investing in a sector for which there
performance of all of the investments and in decision making.
is an active secondary market and therefore the Company may
also exit investments at an earlier stage for profit or for portfolio
### c) Going Concern
rationalisation purposes.
The Directors have considered the following current matters
The assessments concluded that the new investments shared
alongside the regular cashflow and business activities in assessing
similar characteristics to the existing investments, are in line
that it is appropriate to prepare the financial statements on a going
with the business purpose of the Company and that each has an
concern basis:
appropriate exit strategy. In particular, the Directors noted that:
Continuation Vote
■ the underlying businesses and the structure of the new
The Articles of the Company provide that a continuation vote
investments are in keeping with the existing portfolio through
be put to shareholders at the upcoming AGM to be held in
the provision of energy efficiency services to clients, or host
September2023.
counterparties, predominantly through long-term contracted
agreements;
The Directors recognise the importance of the continuation
vote mechanism for shareholders and believe that there is no
■ the underlying businesses are set up as Special Purpose
fundamental concern with the Company’s prospects and its ability
Vehicles (SPV’s) and although each SPV can have an indefinite
to deliver value for shareholders and therefore recommend the
life, the equipment associated with providing such services
shareholders vote in favour.
have finite lives, are capable of being upgraded or sold and the
contracts can be renewed;
The resolution requires a simple majority to pass and the Directors
and Investment Manager are confident the vote will be achieved.
■ as part of the exit strategy for each new investment, the
This is based on positive feedback from recent meetings held
structure of that investment is such that it could be readily
by the Chair or the Investment Manager with several major
made available for sale; and
shareholders alongside discussions with the Company’s Broker
■ each new investment is measured at fair value.
who has indicated their confidence the shareholders will vote in
favour of continuation. The Company also has a strong track record
Exit strategy:
of shareholder support through consistently oversubscribed capital
The Company’s general approach to exit is as follows:
raises since IPO and achieving overwhelming majority (over 90%)
■ The investments can be traded on the secondary market between support for all resolutions at all its general meetings to date. The
willing buyers and willing sellers, therefore the Company can sell Directors believe the Company is well positioned, with substantial
its interest in a project, via Holdco, before the end of its project life scale and a diversified portfolio able to deliver attractive returns.
if there is an attractive offer from a buyer where the valuation is
Should the resolution not pass, the Directors note that this would
higher than the carrying of the specific asset.
not automatically result in the Company not continuing as a going
■ Investments are not indefinite. Generally SEEIT would invest concern. The requirement from the Articles of the Company would
in a project for the maximum time frame during which it could be for the Directors to put forward proposals within six months of
achieve required capital appreciation and returns acceptable the vote. In practice, the Directors would consider that this would
for the Company’s shareholders even though the useful life be for a reconstruction, reorganisation or winding up.
of the underlying assets can be longer than the period the
investment is held.
124 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Although the shareholder vote on continuation is outside of the Company would have sufficient cash reserves to continue as a
control of the Company, the Directors remain confident that the going concern. As at 31 March 2023, the Company’s net assets
Company’s continuation vote will be passed and accordingly, were £1,125 million, including cash balances of £0.3 million.
having considered this carefully believe that it is appropriate
Further amounts of cash are held by the Company’s direct and
to continue to adopt the going concern basis in preparing the
indirect subsidiaries (including Holdco which has c.£62 million
financial statements.
at the year-end), which are sufficient to meet current obligations
Ukraine conflict as they fall due. The major cash outflows of the Company are the
payment of dividends and payments relating to the investment in
In light of the events in Ukraine, the Board and the Investment
new assets, both of which are discretionary.
Manager have been monitoring its continual development and
performed an assessment of the current exposure to Ukraine, The Company’s single subsidiary, Holdco, has an RCF that has
Russia and Belarus (the “Region”) and the potential impact to the adequate headroom in its covenants that have been tested for
Company’s and the portfolio companies’ operations. The Company historic and forward interest cover and loan to value limits. As
is a UK registered public company. Currently neither the Company at 31 March 2023, the facility was undrawn. The Company is a
nor the Investment Manager conducts business and operations guarantor to the RCF but has no other guarantees or commitments.
in the Region; therefore the Company is not subject to any direct
Closing summary
impact by this event.
The Directors have considered the upcoming continuation vote,
With regards to the Company’s investments, none of the portfolio
impact from the Ukraine conflict and the cost of living crisis, and
companies have business operations or client / supplier FINANCIAL STATEMENTS
relevant financial projections and cashflow forecasts.
relationships in the Region. Through this assessment, the Board and
the Investment Manager duly considered any restriction imposed The Directors are satisfied that the Company has sufficient
by the relevant sanctions, and its impact on the portfolio companies resources to continue in operation for the foreseeable future, a
and have concluded there are no direct material implications. period of not less than 12 months from the date of approval of the
annual financial statements, and that it is appropriate to prepare
Inflation and cost of energy crisis
the financial statements on a going concern basis.
The global impact of the Russian invasion of Ukraine on the oil
and gas prices is a significant contributor to inflation and cost
### d) Segmental Reporting
of living rises globally at present. The Company has carried out
The Chief Operating Decision Maker (“CODM”) being the Board
an assessment of the impact of the global rise in inflation on
of Directors, is of the opinion that the Company is engaged in a
its portfolio and have concluded that overall there is a positive
single segment of business, being investment in energy efficiency
correlation to inflation and there is no adverse impact. The
projects to generate investment returns whilst preserving capital.
Directors are satisfied that the Company has sufficient resources
The financial information used by the CODM to manage the
to continue in operation for the foreseeable future, a period of
Company presents the business as a single segment.
not less than 12 months from the date of approval of the financial
statements. The Directors have reviewed the Company’s financial
### e) Foreign Currency Translation
projections and cashflow forecasts, including the potential impact
from this and believe, based upon those projections and forecasts Foreign currency and presentation currency
and various risk mitigation measures in place, that it is appropriate Items included in the financial statements of the Company are
to prepare the financial statements on a going concern basis. measured using the currency of the primary economic environment
in which the entity operates, the Company's functional currency. The
Regular cashflow and business activity
financial statements are presented in pounds sterling which is the
The Company, through its investment in Holdco, benefits from a
Company's functional and presentation currency.
portfolio of investments that have a range of long-term contracts
with a diversified set of counterparties across multiple sectors and Transactions and balances
jurisdictions. A key risk facing the Company is that counterparties Foreign currency transactions are translated into pounds sterling
to the investments may not be able to make their contractual using the exchange rates prevailing at the dates of the transactions.
payments. The Directors have reviewed a cashflow forecast to June Foreign exchange gains and losses resulting from the settlement of
2024, taking into consideration potential changes in investment such transactions and from the translation at year-end exchange rates
and trading performance and applying a 10% reduction in income of monetary assets and liabilities denominated in foreign currencies
to test the resilience of cashflows in the near term. The forecast are recognised in the Statement of Comprehensive Income.
results in positive cashflows for the foreseeable future that meets
### the liabilities as they fall due. f) Income
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW
They also reviewed a severe downside scenario where the Dividend income and investment income from financial assets
Company receives no income from its investment for the next at fair value through profit or loss is recognised in the Statement
12months but continue with existing committed payments of Comprehensive Income within investment income when the
for running the Company. Even under this stress scenario, the Company’s right to receive payments is established.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 125
5.3 Notes to the Financial Statements
continued
Fair value gains on financial assets at fair value through profit or Investments are recognised when the Company has control of the
loss are recognised in the Statement of Comprehensive Income at asset. Control is assessed considering the purpose and design of
each valuation point. the investments including any options to acquire the investments
where these options are substantive. The options are assessed for
Finance income comprises interest earned on cash held on
factors including the exercise price and the incentives for exercise.
deposit. Finance income is recognised on an accruals basis. Loan
interest income is accounted for on an accruals basis using the The Company classifies its financial assets in the following
effective interest method. measurement categories:
■ those to be measured subsequently at fair value through profit
### g) Dividends Payable
or loss; and
Dividends to the Company’s shareholders are recognised when
■ those to be measured at amortised cost.
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
At initial recognition, the Company measures investments in
they are approved by the shareholders at the AGM.
energy efficiency projects at its transaction price net of transaction
costs that are directly attributable to the acquisition of the financial
### h) Fund Expenses asset. The Company subsequently measures all investments at
All expenses including investment management fees, transaction fair value and changes in the fair value are recognised as gains/
costs, non-executive directors’ fees are accounted for on an (losses) on investments at fair value through profit or loss within
accruals basis. Share issue expenses of the Company directly investment income.
attributable to the issue and listing of shares are charged to the
Financial liabilities are derecognised when the liability is
share premium account.
extinguished, that is when the contractual obligation is discharged,
cancelled or expired.
### i) Acquisition Costs
### Acquisition costs are expensed to the Income Statement as they m) Trade and Other Receivables
are incurred.
Trade and other receivables are non-derivative financial assets
with fixed or determinable payments that not quoted in an active
### j) Taxation
market. Those includes Prepayments, VAT Receivable and
The Company is liable to UK corporation tax on its income. Current other receivables which are intercompany balances due from
tax is the expected tax payable on the taxable income for the subsidiary. Receivables are initially recognised at fair value. They
period, using tax rates that have been enacted or substantively are subsequently measured at amortised cost, less any expected
enacted at the date of the Statement of Financial Position. Fair credit loss.
value movements and dividends received by the Company are
The Company has assessed IFRS 9’s expected credit loss model
exempt from UK corporation tax.
and does not consider that there is a material impact on these
financial statements.
### k) Cash and Cash Equivalents
Cash and cash equivalents include deposits held at call with banks
### n) Trade and Other Payables
and other short-term deposits with original maturities of three
Trade and other payables include accruals and other payables and
months or less. Cash is spread across three banks including at
initially are recognised at fair value, and subsequently re-measured
the Money market fund managed by JP Morgan. It is highly liquid
at amortised cost using the effective interest method.
investment and readily convertible to a known amount of cash.
There is no expected credit loss as the bank institutions have credit
### o) Share Capital and Share Premium
ratings of at least BBB+ and all cash is held at call from the banks.
The Company’s ordinary shares are not redeemable and are
### l) Financial Instruments classified as equity. Incremental costs directly attributable to the
issue of ordinary shares and share options are recognised as a
Financial assets and financial liabilities are recognised in the
deduction in equity and are charged from the share premium
Company’s Statement of Financial Position when the Company
account. The costs incurred in relation to the IPO and subsequent
becomes a party to the contractual provisions of the instrument.
fundraisings of the Company were charged from the share
Financial assets are derecognised when the contractual rights to
premium account.
the cashflows from the instrument expire or the asset is transferred
and the transfer qualifies for derecognition in accordance with
IFRS 9 Financial instruments.
126 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 3. Critical Accounting Estimates and Judgements

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

#### Judgements

##### Investment entity

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

#### Estimates

##### Investment valuations

The key area where estimates may be significant to the financial statements is the valuation of the Company's single subsidiary, SEET Hokko, which in turns holds investments in a portfolio that are held at fair value (the "Portfolio Valuation"$^{2023}$).

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

The Board of Directors has appointed the Investment Manager to produce the Portfolio Valuation$^{2023}$ at 31 March 2023, which includes estimates of future cashflows that have the potential to have a material effect on the measurement of fair value.

The key estimates made include:

##### Discount rate

The weighted average unlevered discount rate (post tax) applied in the 31 March 2023 valuation was 7.7% (2022: 7.0%) and 8.5% on a levered basis (2022: 8.0%). The discount rate is considered one of the most unobservable inputs through which an increase or decrease would have a material impact on the fair value of investment at fair value through profit or loss. An appropriate discount rate is applied to each underlying asset. The range of discount rates applied and its sensitivity to movements in discount rates is shown in note 4.

#### Macroeconomic assumptions

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

##### Investment specific cashflow assumptions and sensitivities

The below highlights several key investment specific estimates made for the Portfolio Valuation$^{2023}$ at 31 March 2023:

**Primary Energy** - An estimate has been made to determine the future demand for generation by the offsaler in the PCI asset. If the demand assumed is 25% less than estimated, the Portfolio Valuation$^{2023}$ at 31 March 2023 could be reduced by between £10 million and £20 million, assuming no other mitigants are available. An estimate in relation to the Cokenergy asset has been included for the cash flows that can be generated through renewal of contract terms with the counterparty after the expiry of the existing contract terms. Although this assumption has not changed materially since March 2022, if the actual increase in contractual terms assumed for the Cokenergy investment is 50% less than estimated, the Portfolio Valuation$^{2023}$ at 31 March 2023 could be reduced by between £10 million and £20 million, assuming no other mitigants are available.

**Orgs** - The process of converting development assets into construction and then operational stages has been adversely affected by delays in the financial year, however an estimate has been made for the amount of megawatts that is expected to be become mechanically complete and earn revenues in 2024 and 2025. If only 75% of the megawatts are achieved in each of 2024 and 2025, the Portfolio Valuation$^{2023}$ at 31 March 2023 could be reduced by between £5 million and £10 million, assuming no other mitigants are available.

An estimate has been made for the amount of megawatts that is expected to be deployed from the development pipeline in 2025 to 2029 which are valued on an EV multiple per MW. This estimate and methodology has not changed since March 2022, however if only 50% of the development pipeline is achieved, the Portfolio Valuation$^{2023}$ at 31 March 2023 would be reduced by between £20 million and £30 million, assuming no other mitigants are available.

**Oliva Spanish Cogeneration** - There are updates under the regulatory regime governing the nine investments that have currently been published in draft form and awaiting finalisation. Key estimates are made by applying the draft legislation. If the final legislation differs materially from the draft legislation and no other changes are introduced, then the Portfolio Valuation$^{2023}$ at 31 March 2023 could be reduced by between £10 million and £20 million.

**RED-Rochester** - Estimates have been made regarding future capital expenditure projects at the site and the expected increase to overall revenues, the most material being the construction of a cogeneration plant expected to complete in 2025. If the

DIAGNOSIA

EDIFICADO INDEZ

EDITORIALES

FINANCIAL STATEMENTS

EDITORIAL INFORMATION

SDCL Energy Efficiency Income Triumph | SEET ANNUAL REPORT 2023 | 127
5.3 Notes to the Financial Statements
continued
cogeneration plant delivers only 75% of the energy savings
(APM)
currently assumed, the Portfolio Valuation at 31 March 2023
would be reduced by between £10 million and £20 million.
Estimates have been included for revenues related to providing
electricity to customers based on projected demands and an
assumed power price charged to customers. If market power
(APM)
pricing is 25% lower than assumed, the Portfolio Valuation
at 31 March 2023 would be reduced by between £5 million and
£10million.
In addition, estimates have been included, based on projected
growth of earnings in the RED-Rochester business, that a gain
share pay-out will be made to the external asset management
team tasked with delivering the growth within the next seven years,
linked to the investment increasing its profitability. Furthermore,
the projected growth is assumed to deliver a business capable
of continuing to serve customers at the Eastman Business Park
for a further 20 years beyond the c. 20 years lifetime previously
assumed. Should only 15 years of the targeted economic life
(APM)
extension occur, the Portfolio Valuation at 31 March 2023
would be reduced by between £10 million and £20 million,
assuming no other mitigants are available.
Värtan Gas - The future cashflows includes an assumption that
the management team will target a decline in customer numbers at
a year-on-year rate that is lower than the historic average decline.
There are also a number of accretive expansion opportunities for
the Värtan Gas investment in the Stockholm region’s transport
sector for which estimates have been made around the future
growth profile in relation to decarbonisation targets and
electrification. If the recent historic average rate to customers
is applied for the next five years and no growth in revenue from
transport is achieved over the next ten years, the valuation
may potentially reduce by between £10 million and £20 million,
assuming no other mitigants are available.
128 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 4. Financial Instruments
### Valuation Methodology
As detailed in Note 1 and Note 11, the Company has a single investment directly wholly owned holding company (Holdco). It recognises
this investment at fair value. To derive the fair value of Holdco, the Company determines the fair value of investment held directly or
indirectly by Holdco and adjusts for any other assets and liabilities. See Note 11 for a reconciliation of this fair value. The valuation
methodology applied by Holdco to determine the fair value of its investments is described below.
THE
COMPANY
FINANCIAL STATEMENTS
THE
HOLDCO

| Portfolio |  | Portfolio |  | Portfolio |  | Portfolio |  | Holding |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Company |  | Company |  | Company |  | Company |  | Company |  |
|  | 1 |  | 2 |  | 3 |  | 4 |  | 1 |

Portfolio
Company
5
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 cashflow
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. Certain investments may be held at cost if in the early part of a construction phase, however this
will still be supported by a discounted cashflow analysis or similar method to determine fair value. For certain investments, fair value is
determined through assuming a price that can be achieved per MW.
The Investment Manager exercises its judgement in assessing the expected future cashflows from each investment based on the project’s
expected life and the financial models produced for each project company and adjusts the cashflows where necessary to take into account
key external macroeconomic assumptions and specific operating assumptions. Assumptions for future cashflows may include successful
recontracting and project life extensions as well as cashflow linked to assumptions made on growth rates and further business development
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW opportunities within existing projects.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 129
5.3 Notes to the Financial Statements
continued
The fair value for each investment is then derived from the application of an appropriate market discount rate (on an unlevered basis) to reflect
the perceived risk to the investment’s future cashflows and the relevant year end foreign currency exchange rate to give the present value of
those cashflows. Where relevant, project level debt balances are then netted off to arrive at the valuation for each investment The discount rate
takes into account risks associated with the financing of an investment such as investment risks (e.g. liquidity, currency risks, market appetite),
any risks to the investment’s earnings (e.g. predictability and covenant of the income) and a thorough assessment of counterparty credit risk,
all of which may be differentiated by the phase of the investment.
Specific risks related to each asset that can be attributed to the Ukraine conflict or climate-related risks are assessed and where required,
adjustments are made to expected future cashflows or reflected in the asset specific discount rate that is applied.
The Investment Manager uses its judgement in arriving at the appropriate discount rate. This is based on its knowledge of the market,
taking into account intelligence gained from its bidding activities, discussions with financial advisers in the appropriate market, and publicly
available information on relevant transactions.
All the operational investments included in the valuation have an underlying contract for energy services. The valuation is based on the future
expected cashflow derived from these contracts. For the March 2023 valuation the assumed cashflows match the maturity of the underlying
contract or regulatory life of the asset except in the case of RED-Rochester, four of the assets in Primary Energy, the assets in Oliva, and the
development assets in Onyx and EVN where it is assumed that future contract extensions are achieved and hence the expected cashflows are
currently projected to extend beyond the maturity date of the existing contract with the counterparty.
For the valuation as at 31 March 2023, the Directors commissioned a report from an independent third-party valuation expert to provide
their assessment of the appropriate discount rate range for each investment (excluding small investments with an aggregate value of less
(APM)
than 2% of the Portfolio Valuation ) in order to further benchmark the valuation prepared by the Investment Manager.
The valuation methodology is materially unchanged from the Company's IPO and has been applied consistently in each subsequent
valuation. Different measures are used to derive fair value, as summarised below:
% of Portfolio
(APM)
Valuation approach Investments Valuation
Discounted cashflow (“DCF”) All remaining investments 95%
Held at cost Turntide 3%
Iceotope
EVN (Zood construction)
Price per MW Onyx Development Pipeline 2%
Total 100%
### 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.
130 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments.

|  Investment at fair value through profit or loss | Level 1 £'millions | Level 2 £'millions | Level 3 £'millions  |
| --- | --- | --- | --- |
|  **31 March 2023** | – | – | **1,127.8**  |
|  31 March 2022 | – | – | 928.2  |

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 2023 | 31 March 2022  |
| --- | --- | --- | --- |
|  Inflation rates | UK (RPI) | 7.8% declining to 3.0% by 2025, 3.0% p.a. long-term | 7.9% declining to 3.5% by 2024, 2.75% p.a. long-term  |
|   |  UK (CPI) | 6.6% declining to 1.5% by 2025, 2.0% p.a. long-term | 6.0% declining to 2.3% by 2024, 2.00% p.a. long-term  |
|   |  Spain (CPI) | 4.6% declining to 2.1% by 2025, 2.0% p.a. long-term | 5.8% declining to 1.7% by 2024, 2.00% p.a. long-term  |
|   |  Sweden (CPI) | 7.0% declining to 2.2% by 2025, 2.0% p.a. long-term | 3.4% declining to 2.0% by 2024, 2.00% p.a. long-term  |
|   |  Singapore (CPI) | 5.0% declining to 2.0% by 2025, 2.0% p.a. long-term | 3.2% declining to 2.0% by 2024, 2.00% p.a. long-term  |
|   |  Ireland (CPI) | 5.8% declining to 2.3% by 2025, 2.0% p.a. long-term | 4.8% declining to 2.0% by 2024, 2.00% p.a. long-term  |
|   |  USA (CPI) | 3.7% declining to 2.1% by 2025, 2.0% p.a. long-term | 6.3% declining to 2.0% by 2024, 2.00% p.a. long-term  |
|  Tax rates | UK | 25% | 19% to 2023, 25% thereafter  |
|   |  Spain | 25% | 25%  |
|   |  Sweden | 20.6% | 21.4%  |
|   |  Singapore | 17% | 17%  |
|   |  Ireland | 12.5% | 17%  |
|   |  USA | 21% Federal & 3-9% State rates | 21% Federal & 3-9% State rates  |
|  Foreign exchange rates | EUR/GBP | 0.88 | 0.84  |
|   |  SEK/GBP | 0.08 | 0.08  |
|   |  SGD/GBP | 0.61 | 0.56  |
|   |  USD/GBP | 0.81 | 0.76  |

SDCL Energy Efficiency Income Trust plc | SEDIT ANNUAL REPORT 2023 | 131

DIABANK

SERVICES INSEPT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION
5.3 Notes to the Financial Statements
continued
### 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 2023 31 March 2022
Weighted Average discount rate (on unlevered basis) 7.7% 7.0%
Discount rates 4.75% to 10.25% 4.0% to 10.0%
### Sensitivities
(APM)
The sensitivities below show the effect on Net asset value of assuming a different range for each key input assumption, in each case
applying a range that is considered to be a reasonable and plausible outcome for the market in which the Company has invested.
### Discount Rates
The discount rates that are applied to each project’s forecast cashflow, form in aggregate the single most important judgement and variable
for the purposes of valuing the portfolio. The sensitivity shown in this section shows the sensitivity of changing the underlying discount
rates for each underlying project and where such a project has debt in place, the sensitivity takes into account the levered discount rate of
the project.
NAV/share -0.5% Net asset +0.5% NAV/share
Discount rate impact change value change impact
31 March 2023 5.0p £55.1m £1,125.4m (£50.3m) (4.5p)
31 March 2022 4.5p £44.1m £1,073.1m (£40.6m) (4.1p)
### Inflation Rates
The Company’s exposure to inflation via its investment portfolio is currently largely to the USA and Europe with c.59% and c.37% of NAV
respectively although the level of exposure to changes in inflation in underlying investments in each geography varies. The investment
portfolio as at 31 March 2023 has a positive correlation to inflation with approximately half of the current portfolio by value having revenues
that are partly or wholly inflation linked.
The Company’s portfolio includes investments that benefit from fixed or escalating revenues that are not directly linked to inflation. This
includes the assets in Primary Energy where periodic recontracting is assumed in the valuation. It is assumed that the renewed revenue
contracts (subject to negotiations) entered into in future years reset the revenues at such a level that it materially offsets increases to project
level costs such as O&M that is materially inflation-linked, effectively offsetting the effect of inflation. Within the portfolio of Oliva Spanish
Cogeneration assets there is some natural offsetting or protection between revenues and costs for inflation increases and decreases.
The assumption in the Värtan Gas investment is that the regular renewals of customer contracts (typically annually) include inflationary
increases to the tariffs charged, however it is also assumed that this would not result in the charges being above the regulatory cap and
that the full inflationary increase is not passed on to the customer each time. In the current portfolio there are several investments with no
or negligible exposure to inflation, notably the where investments are structured as senior debt loan investments.
As a result of the continued high inflationary environment, the Company has changed the sensitivity to inflation as at 31 March 2023 to
1.00% (31 March 2022: 0.5%)

|  |  |  |  |  | -1% |  |  |  |  | +1% |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | NAV/share |  | (2022: -0.5%) |  |  | Net asset |  | (2022: +0.5%) |  |  | NAV/share |  |
| Inflation rate |  | impact |  | change |  |  | value |  | change |  |  | impact |

31 March 2023 (1.5p) (£16.4m) £1,125.4m £18.3m 1.7p
31 March 2022 (1.1p) (£10.5m) £1,073.1m £11.9m 1.2p
132 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### Corporation Tax Rates
The sensitivity is shown on the basis that corporation tax rates remain at the sensitised level for the remainder of any period in which
cashflow is assumed for that project and that no mitigations that may be available are applied. Key mitigants available include portfolio
(APM)
structuring changes including gearing , and the option available to the Company to use interest streaming of dividend distributions to
shareholders in the future, whereby a portion of the dividend distribution is designated as interest, allowing net taxable interest income to
be reduced.
The sensitivity mainly shows the unmitigated impact of changes in US, Swedish, Irish, Singaporean and Spanish tax rates. The exposure to
UK corporation tax at project level has negligible sensitivity to the sensitised movements in UK corporation tax rates because of UK entities
within the group being able to offset aggregate profits and losses, whilst in Spain the impact is reduced for similar reasons.
NAV/share -5% Net asset NAV/share
Corporation tax rate impact change value +5% change impact
31 March 2023 2.7p £29.5m £1,125.4m (£29.8m) (2.7p)
31 March 2022 3.2p £31.7m £1,073.1m (£33.0m) (3.3p)
### Foreign Exchange Rates
(APM)
The Portfolio Valuation assumes foreign exchange rates based on the relevant foreign exchange rates against GBP at the reporting
FINANCIAL STATEMENTS
date. A change in the foreign exchange rate by plus or minus 10% (GBP against Euro, Swedish Krona, Singapore Dollar and US Dollar) has
the following effect on the NAV, with all other variables held constant. The effect is shown after the effect of current level of hedging which
reduces the impact of foreign exchange movements on the Company’s NAV.
NAV/share -10% Net asset NAV/share
Foreign exchange rate impact Change value +10% change impact
31 March 2023 0.8p £9.0m £1,125.4m (£9.0m) (0.8p)
31 March 2022 0.8p £8.3m £1,073.1m (£7.6m) (0.8p)
### 5. Investment Income

|  | Year ended |  | Year ended |
| --- | --- | --- | --- |
| 31 March 2023 |  | 31 March 2022 |  |
|  | £’millions |  | £’millions |

Dividend income 57.5 33.7
(Loss)/Gain on investment at fair value through profit or loss (Note 11) (74.3) 47.8
Loan interest income 9.0 7.3
Investment (loss)/income (7.8) 88.8
Loan interest income is in respect of coupon bearing loan notes issued to the Company by Holdco (Note 15) for the year ended 31 March
2023. The loan notes accrue interest at 6%, are unsecured and repayable in full on 18 April 2039. Loan Interest income is recognised on the
Statement of Comprehensive Income on an accruals basis. The loss/gain on investment is unrealised.
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 133
5.3 Notes to the Financial Statements
continued
### 6. Fund Expenses

|  | Year ended |  | Year ended |
| --- | --- | --- | --- |
| 31 March 2023 |  | 31 March 2022 |  |
|  | £’millions |  | £’millions |

Investment management fees (Note 15) 9.6 7.2
Non-executive directors’ fees (Note 16) 0.3 0.3
Other expenses 1.3 1.0
Fees to the Company’s independent auditors:
- for the audit of the statutory financial statements 0.7 0.4
- for audit-related assurance services 0.1 0.1
Fund Expenses 12.0 9.0
As at 31 March 2023, the Company had no employees (31 March 2022: 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 in Section 4.7 of the Annual Report.
There is no other compensation apart from those disclosed. Other expenses include professional fees, administration fees, irrecoverable
VAT and other fees in relation to the running of the Company.
### 7. Tax
The tax for the year shown in the Statement of Comprehensive Income is as follows.

|  | Year ended |  | Year ended |
| --- | --- | --- | --- |
| 31 March 2023 |  | 31 March 2022 |  |
|  | £’millions |  | £’millions |

(Loss)/Profit for the year before taxation (18.6) 79.8
Tax on (loss)/profit on ordinary activities for the year multiplied by the standard rate of (3.5) 15.2
corporation tax of 19% (31 March 2022: 19%)
Fair value movements (not subject to taxation) 14.1 (9.1)
Dividends received (not subject to taxation) (10.9) (6.4)
Surrendering of tax losses to unconsolidated subsidiaries 0.3 0.3
Total tax charge – –
The corporation tax rate will increase from 19% to 25% with effect from 1 April 2023. No deferred tax was recognised in the periods.
### 8. (Loss)/Earnings per Ordinary Share
Year ended Year ended
31 March 2023 31 March 2022
(Loss)/Profit for the year (£’millions) (18.6) 79.8
Weighted average number of ordinary shares (‘000) 1,056,150 795,954
(Loss)/Earnings per ordinary share (pence) (1.8) 10.0
There is no dilutive element during the financial year and subsequent to the financial year.
134 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 9. Dividends

|  | Year ended |  | Year ended |
| --- | --- | --- | --- |
| 31 March 2023 |  | 31 March 2022 |  |
|  | £’millions |  | £’millions |

Amounts recognised as distributions to equity holders during the year:
Fourth quarterly interim dividend for the year ended 31 March 2021 of 1.375p per share – 9.3
First quarterly interim dividend for the year ended 31 March 2022 of 1.405p per share – 9.5
Second quarterly interim dividend for the year ended 31 March 2022 of 1.405p per share – 12.7
Third quarterly interim dividend for the year ended 31 March 2022 of 1.405p per share – 12.7
Fourth quarterly interim dividend for the year ended 31 March 2022 of 1.405p per share 13.9 –
First quarterly interim dividend for the year ended 31 March 2023 of 1.5p per share 14.9 –
Second quarterly interim dividend for the year ended 31 March 2023 of 1.5p per share 16.6 –
Third quarterly interim dividend for the year ended 31 March 2023 of 1.5p per share 16.6 –
FINANCIAL STATEMENTS
Total Dividends 62.0 44.2
All dividends have been paid out of distributable reserves. Further information on distributable reserves can be found in Note 12.
In June 2023, the Company declared a fourth interim dividend for the year ended 31 March 2023 of 1.5p per share which is expected to
result in a cash payment of approximately £16.5 million on 30 June 2023.
### 10. Net Assets Per Share
31 March 2023 31 March 2022
Shareholders’ equity (£’millions) 1,125.4 1,073.1
Number of ordinary shares (‘000) 1,108,709 990,288
Net assets per ordinary share (pence) 101.5 108.4
### 11. Investment at Fair Value through Profit or Loss
The Company recognises the investment in Holdco, its single directly owned holding company, at fair value. Holdco’s fair value includes the
fair value of each of the individual project companies and holding companies in which the Holdco holds a direct or an indirect investment,
along with the working capital of Holdco.

|  | Year ended |  | Year ended |
| --- | --- | --- | --- |
| 31 March 2023 |  | 31 March 2022 |  |
|  | £’millions |  | £’millions |

Brought forward investment at fair value through profit or loss 928.2 572.6
Loan investments in year – 96.8
Equity investments in year 292.4 223.0
Loan Principal repaid in year (18.5) (12.0)
Movement in fair value (74.3) 47.8
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW Closing investment at fair value through profit or loss 1,127.8 928.2
Movement in fair value is recognised through Investment Income in the Statement of Comprehensive Income (see Note 5).
Of the closing investment at fair value through profit and loss balance, £131 million (31 March 2022: £150 million) relates to loan investment
(also see Note 5) and £996 million (31 March 2022: £778 million) relates to equity investment.
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 135
## 5.3 Notes to the Financial Statements

A reconciliation between the Portfolio Valuation $^{1000}$, 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 2023 £ millions | 31 March 2022 £ millions  |
| --- | --- | --- |
|  Portfolio Valuation (see Section 2.3 for details) | 1,099.6 | 912.7  |
|  Holdco cash | 85.4 | 24.9  |
|  Holdco debt | – | –  |
|  Holdco net working capital | (37.2) | (9.4)  |
|  **Investment at fair value per Statement of Financial Position** | **1,127.8** | **928.2**  |

### Investments by the Company

During the year ended 31 March 2023, the Company invested £292.4 million (31 March 2022: £320 million) into Holdco for new portfolio investments and to fund acquisition costs. Acquisition costs are expensed to the income statement at Holdco as they are occurred.

### Portfolio Investments, via Holdco

During the year ended 31 March 2023, Holdco invested £236 million (31 March 2022: £300 million) in new portfolio investments. The Company announced the following investment activity in the period:

|  Project | Investment/ Commitment Date | Type | Location | Investment/ Commitment Amount  |
| --- | --- | --- | --- | --- |
|  Baseload | Various in the period | New | Sweden | c.£4m  |
|  Turntide | May 2022 | New | USA | c.£9m  |
|  Iosotope | June 2022 | New | UK | c.£3m  |
|  UU Solar | July 2022 | New | UK | c.£100m  |
|  On Energy | August 2022 | New | USA | c.£4m  |
|  Biotown | Various in the period | Organic | USA | c.£1m  |
|  Onyx | Various in the period | Organic | USA | c.£50m  |
|  Spark US Energy Efficiency II | Various in the period | Organic | USA | c.£12m  |
|  Tallaght Hospital | Various in the period | Inorganic | Ireland | c.£4m  |
|  EV Network | Various in the period | Organic | UK | c.£23m  |
|  FES Lighting | Various in the period | Organic | USA | c.£6m  |
|  Lycra | Various in the period | Organic | Singapore | c.£3m  |
|  Bloc | November 2022 | New | UK | c.£0.2m  |
|  RED-Rochester | January 2023 | Organic | USA | c.£16m  |

106 | SEEST ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 12. Share Capital and Share Premium

|  |  | Year ended |  |  | Year ended |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 31 March 2023 |  |  | 31 March 2022 |  |  |
| Ordinary Shares of £0.01 |  |  | ‘000 |  |  | ‘000 |

Authorised and issued at the beginning of the year 990,288 677,087
Shares Issued – during the year 118,421 313,201
Authorised and issued at the end of year 1,108,709 990,288
Share capital Share Premium
£’millions ‘millions
Total as at 1 April 2022 9.9 925.1
Issue of ordinary shares 1.2 133.8
Costs of issue of ordinary shares – (2.1)
Total as at 31 March 2023 11.1 1,056.8
FINANCIAL STATEMENTS
In September 2022, the Company issued 118,421,053 new ordinary shares at a price of 114p per share raising gross proceeds of
£135million.
The Company currently has one class of ordinary share in issue. All the holders of the £0.01 ordinary shares, which total 1,108,709k
(31March 2022: 990,288k) and are fully paid (31 March 2022: fully paid), are entitled to receive dividends as declared from time to time and
are entitled to one vote per share at general meetings of the Company.
On 3 April 2023, the company announced the commencement of a Share Buyback Programme. The Share Buyback Programme will be
funded from the Company’s surplus liquidity and operating cashflows from the portfolio and only undertaken where the Board and the
Investment Manager believe it to be in the shareholders’ best interests at the prevailing share price and accretive to NAV per ordinary
Share.
The Company has allocated up to £20 million of its FY2024 operational income from SEEIT Holdco to the Share Buyback Programme and
will review this allocation on an ongoing basis considering the Company’s ongoing liquidity position, the opportunity cost of investing in
its own shares versus investing in its existing portfolio or pipeline of asset opportunities, as well as the discount to NAV that the shares are
trading at.
Other distributable reserves were created through the cancellation of the Share Premium account on 12 March 2019. This amount is
capable of being applied in any manner in which the Company’s profits available for distribution, as determined in accordance with the
Companies Act 2006, are able to be applied.
Other distributable reserves and Retained Earnings are detailed in the Statement of Changes in Shareholders’ Equity.
### 13. Financial Risk Management
### Financial Risk Management Objectives
The objective of the Company’s financial risk is to manage and control risk exposure of the underlying investment portfolio held by Holdco.
The Board is responsible for overseeing the management of financial risks, however the review and management of financial risks is
delegated to the Investment Manager. The Investment Manager monitors and manages the financial risks relating to the operations of the
Company through internal procedures and policies designed to identify, monitor and manage the financial risks to which the Company is
exposed.
These risks include market risk (including price risk, currency risk and interest rate risk), credit risk and liquidity risk.
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 137
5.3 Notes to the Financial Statements
continued
### 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
cashflows and as such may vary with movements in interest rates, inflation, power prices, market prices host demand for energy services
and competition for these assets.
### Currency Risk
Currency risk is the risk that the fair value or future cashflows of a financial instrument will fluctuate because of changes in foreign
exchange rates. The Company receives loan interest, loan principal and dividends from its single investment, Holdco, in sterling. However,
the Company is indirectly exposed to currency risk through its Holdco as its investments include non-sterling investments are held in euro,
US dollar, Singapore dollar and Swedish krona.
The Company monitors its foreign exchange rate exposures using its near-term and long-term cashflow forecasts. Its policy is to use foreign
exchange hedging to provide protection to the level of sterling distributions that the Company aims to pay over the medium-term, where
considered appropriate. This may involve the use of forward exchange.
### Interest Rate Risk
Interest rate risk is the risk that the fair value or future cashflows of a financial instrument will fluctuate because of changes in market
interest rates.
The Company, via Holdco, invests indirectly in loans in project companies, usually with fixed interest rate coupons. Where floating rate
debt is owned, the primary risk is that the portfolio’s cashflow will be subject to variation depending on changes to base interest rates. The
portfolio’s cashflows are continually monitored and re-forecasted to analyse the cashflow returns from investments.
The Company’s policy is to ensure that interest rates are sufficiently hedged, when entering into material medium/long-term borrowings,
to protect the Company and portfolio companies’ net interest margins from significant fluctuations in interest rates. This may include
engaging in interest rate swaps or other rate derivative contracts at the subsidiary level under direction of the Company.
The Company’s financial assets and financial liabilities are at a pre-determined interest rate, as a result the Company is subject to limited
exposure to risk due to fluctuations in the prevailing levels of market interest rates.
### Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company through
a reduction in future expected cash receipts.
The key counterparties are the project companies in which the Company makes indirect investments via Holdco. The projects companies’
near-term cashflows forecasts are used to monitor the timing of cash receipts from project counterparties and are reviewed regularly to
demonstrate the projects’ ability to pay interest and dividends when they fall due.
The Company does not have any significant credit risk exposure to any single counterparty in relation to trade and other receivables. On-
going credit evaluation is performed on the financial condition of accounts receivable.
As at 31 March 2023, there were no receivables considered impaired (31 March 2022: nil). At an investment level, the credit risk relating
to significant counterparties is reviewed on a regular basis and potential adjustments to the discount rate are considered to recognise
changes to these risks where applicable.
The Company maintains its cash and cash equivalents across various banks to diversify credit risk. These are subject to the Company’s
credit monitoring policies including the monitoring of the credit ratings issued by recognised credit rating agencies. The Company’s cash
and deposits are held with counterparties that meet strict investment rating criteria per the Company’s treasury policy.
The Company is at risk of credit loss on its loans, receivables, cash and deposits. Underlying investments are held by Holdco at fair value
using discounted cashflows. Receivables are primarily intercompany and taxation. While cash and cash equivalents are subject to the
impairment requirements of IFRS 9, there was no identified credit loss.
The Company’s maximum exposure to credit risk over financial assets is the carrying value of those assets in the Statement of Financial
Position.
138 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### 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 cashflows and by matching the maturity profiles of assets and liabilities.
Risk is spread by holding cash at three separate banking institutions and the Company also ensures that Holdco has sufficient banking
facilities by continuously monitoring forecast and actual cashflows and matching the maturity profiles of financial assets and liabilities.
Unconsolidated project companies are subject to contractual agreements that may impose temporary restrictions on their ability to
distribute cash. Such restrictions are not deemed significant in the context of the overall liquidity.
The table below shows the maturity of the Company’s non-derivative financial assets and liabilities. The amounts disclosed are contractual,
undiscounted cashflows and may differ from the actual cashflows received or paid in the future as a result of early repayments. Balances
due within 12 months equal their carrying balances as the impact of discounting is not significant.

|  |  | Up to | Between 3 and |  | Between 1 and |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 3 months |  |  | 12 months |  |  | 5 years |  | Total |
| As at 31 March 2023 | £’millions |  |  | £’millions |  | £’millions |  | £’millions |  |

Assets
FINANCIAL STATEMENTS
Cash and cash equivalents 0.3 – – 0.3
Trade and other receivables 0.6 – – 0.6
Liabilities
Trade and other payables (3.3) – – (3.3)
Total (2.4) – – (2.4)

|  |  | Up to | Between 3 and |  | Between 1 and |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 3 months |  |  | 12 months |  |  | 5 years |  | Total |
| As at 31 March 2022 | £’millions |  |  | £’millions |  | £’millions |  | £’millions |  |

Assets
Cash and cash equivalents 146.1 – – 146.1
Trade and other receivables – – – –
Liabilities
Trade and other payables (1.5) – – (1.5)
Total 144.6 – – 144.6
### Capital Management
The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders.
In accordance with the Company’s investment policy, the Company’s principal use of cash (including the proceeds of the IPO) has been to
fund investments via Holdco as well as ongoing operational expenses.
The Board, with the assistance of the Investment Manager, monitors and reviews the broad structure of the Company’s capital on an
ongoing basis. The capital structure of the Company consists entirely of equity (comprising issued capital, distributable reserves and
retained earnings).
The Company is not subject to any externally imposed capital requirements.
STRATEGIC REPORT GOVERNANCE ADDITIONAL INFORMATION OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 139
## 5.3 Notes to the Financial Statements
continued

### 14. Related Undertakings

The following table shows the Company's single direct subsidiary (SEEIT Holdco Limited). Appendix A lists the company's indirect subsidiaries through SEEIT Holdco Limited.

|  Investment | Country of Investment, % Place of Business | Reclassibility of 31 March 2022  |
| --- | --- | --- |
|  SEEIT Holdco Limited | United Kingdom | 100%  |

### 15. Related Parties

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

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

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

- ■ 0.9%, per annum of the adjusted NAV in respect of the Net Asset Value(APW) of up to, and including, £750 million; and
- ■ 0.8%, per annum of the adjusted NAV in respect of the Net Asset Value(APW) in excess of £750 million.

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

The management fee accrues monthly and is invoiced monthly in arrears. During the year ended 31 March 2023, management fees of £9.6 million (31 March 2022: £7.2 million) were incurred of which £2.5 million (31 March 2022: £0.7 million) was payable at the year-end.

During the year ended 31 March 2023, £292.4 million (31 March 2022: £319.9 million) of funding was provided by the Company to the Holdco for investment acquisitions and the repayment of the RCF utilised by Holdco.

During the year ended 31 March 2023, coupon bearing loan notes of £nil (31 March 2022: £96.8 million) were issued which accrue interest at 6%. During the year ended 31 March 2023, Holdco had repaid coupon bearing loan notes of £18.5 million (31 March 2022: £12.0 million). In the year to 31 March 2023, £9.9 million interest had accrued on the loan notes (31 March 2022: £7.3 million) of which £0.2 million is outstanding at the year-end (31 March 2022: £nil).

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

### 16. Key Management Personnel Transactions

The Directors of the Company, who are considered to be key management, received fees for their services. Their fees were £0.3m (disclosed as non-executive directors' fees in Note 6) in the year (31 March 2022: £5.3m) which included £38k for Director salaries (31 March 2022: £254k), £18k for national insurance contributions (31 March 2022: £18k) and £10k for the reimbursement of expenses (31 March 2022: £3k).

140 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## 17. Guarantees and Other Commitments

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

The company holds a revolving-credit facility (RCF) that it holds through its wholly owned subsidiary, SEEIT Holdco amounting to £180 million. The RCF, which is SONIA linked and has a margin of 2.65%, expires in June 2024 with options to extend for a further two years and includes an accordion function for a further £20 million increase on an uncommitted basis.

## 18. Events after the Reporting Period

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

Between April and June 2023, the Company made the following investments, via SEEIT Holdco:

- A further c. £2.3 million in RED-Rochester
- A further c. £2.2 million in FES Lighting
- A further c. £5.1 million in Onyx
- A further c. £6.9 million in Spark US Energy Efficiency II
- A new investment of c. £1.2 million into CPP Biomass
- A new investment of c. £2.3 million into a thermal energy storage company.
- Acquisition of remaining 60% stake on Onyx's development platform for an initial c. £4.0 million plus performance related contingent deferred consideration in future periods

On 3 April 2023, the company announced the commencement of a Share Buyback Programme. See note 12 for further details.

DIABANK

BANK/SEE INSIGHT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 141
## Appendix A – List of SEEIT plc's indirect subsidiaries

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

|  Investment | Country of Incorporation & Place of Business | Amendments to 31 March 2023  |
| --- | --- | --- |
|  EECO Kingscourt Limited | United Kingdom | 100%  |
|  EECO Biomass No. 1 Limited | United Kingdom | 60%  |
|  EECO Data Centres No. 1 Limited | United Kingdom | 100%  |
|  EECO Wilton No. 1 Limited | United Kingdom | 100%  |
|  SmartEnergy Finance Two Limited | United Kingdom | 49%  |
|  SEEIT UK 1 Limited | United Kingdom | 100%  |
|  Combined Heat and Power Investments Limited | United Kingdom | 100%  |
|  Energy Efficient Global UK Project Limited | United Kingdom | 100%  |
|  SEEIT Asia Limited | United Kingdom | 100%  |
|  EECO Smithfield Limited | United Kingdom | 100%  |
|  SEEIT Europe 2 Limited | United Kingdom | 100%  |
|  SOCL Solar Edge Limited | United Kingdom | 100%  |
|  Zood Infrastructure Limited | United Kingdom | 100%  |
|  SEEIT Europe Limited | United Kingdom | 100%  |
|  SEEIT US TWO Limited | United Kingdom | 100%  |
|  SEEIT Magma Limited | United Kingdom | 100%  |
|  SEEIT Bloc Limited | United Kingdom | 100%  |
|  SEEIT CPP Limited | United Kingdom | 100%  |
|  StAF Energia S.A | United Kingdom | 80%  |
|  Iceotope Technologies Limited | United Kingdom | 100%  |
|  Iceotope Liquid Cooling Limited | United Kingdom | 100%  |
|  KUL Slatem Limited | United Kingdom | 100%  |
|  SEEIT Sol Limited | United Kingdom | 100%  |
|  Greenland Investment Partners Limited | United Kingdom | 100%  |
|  SEEIT US Limited | USA | 70%  |
|  SOCL TG COGEN LLC | USA | 71%  |
|  COGEN ONE LLC | USA | 100%  |
|  COGEN TWO LLC | USA | 100%  |
|  SEEIT CAPITAL LLC | USA | 100%  |
|  SEEIT CAPITAL II LLC | USA | 100%  |
|  SEEIT PE 1 LLC | USA | 100%  |
|  SEEIT PE 2 LLC | USA | 100%  |

142 | SEEIT ANNUAL REPORT 2023 | SOCL Energy Efficiency Income Trust plc
|  Investment | Country of Incorporation & Place of Business | Shareholding at 31 March 2023  |
| --- | --- | --- |
|  PERC Midco LLC | USA | 100%  |
|  PERC Holdings 2 LLC | USA | 100%  |
|  Primary Energy Recycling Corporation | USA | 100%  |
|  Primary Energy Recycling Holdings LLC | USA | 100%  |
|  Primary Energy Operations LLC | USA | 100%  |
|  Cokenergy LLC | USA | 100%  |
|  North Lake Energy LLC | USA | 100%  |
|  Portside Energy LLC | USA | 100%  |
|  Ironside Energy LLC | USA | 100%  |
|  Harbor Coal LLC | USA | 100%  |
|  PCI Associates | USA | 50%  |
|  SEEIT Red Holdco LLC | USA | 100%  |
|  SEEIT District Energy LLC | USA | 100%  |
|  Recycled Energy Development LLC | USA | 100%  |
|  RED - Rochester LLC | USA | 100%  |
|  SEEIT Hemisphere Holdco LLC | USA | 100%  |
|  SEEIT Hemisphere I LLC | USA | 100%  |
|  SEEIT Hemisphere II LLC | USA | 100%  |
|  SEEIT Hemisphere III LLC | USA | 100%  |
|  Iceotope Technologies US Inc | USA | 100%  |
|  SEEIT US Lighting Holdings LLC | USA | 100%  |
|  SEEIT US Lighting LLC | USA | 100%  |
|  SEEIT TT LLC | USA | 100%  |
|  Turntide Technologies Inc | USA | 100%  |
|  SEEIT ON Holdco LLC | USA | 100%  |
|  ON Energy Storage LLC | USA | 100%  |
|  SEEIT BTB LLC | USA | 100%  |
|  SEEIT Net Zero LLC | USA | 100%  |
|  EE CO Ireland Hospitals TUH Limited | Ireland | 100%  |
|  Iceotope Technologies Limited | Ireland | 100%  |
|  SEEIPL 4 Pte Ltd | Singapore | 100%  |
|  SEEIPL 1 Pte Ltd | Singapore | 100%  |
|  SEEIPL 3 Pte Ltd | Singapore | 100%  |

DIABANK

SCHEDULE SHEET

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

SDCL Energy Efficiency Income Transfer | SEEIT ANNUAL REPORT 2023 | 143
|  Investment | Country of Incorporation & Place of Business | Shareholding at 31 March 2023  |
| --- | --- | --- |
|  Shire Oak Green Asia Portfolio 2 Pte Ltd | Singapore | 100%  |
|  Walworth Invest S.L. | Spain | 100%  |
|  SEEIT Oliva, S.A. | Spain | 100%  |
|  SEEIT GAS S.L. | Spain | 100%  |
|  Compañía Orujera de Linares, S.L. | Spain | 100%  |
|  Bioeléctrica de Linares, S.L. | Spain | 100%  |
|  Compañía Energética de Linares S.L. | Spain | 100%  |
|  Compañía Energética Pata de Muto S.L. | Spain | 100%  |
|  Compañía Energética Puente del Obispo | Spain | 100%  |
|  Compañía Energética de La Roda, S.L. | Spain | 100%  |
|  Biomassas de Puente Genil, S.L. | Spain | 100%  |
|  Secadores de Biomasa, S.L. | Spain | 100%  |
|  Compañía Energética Las Villas, S.L. | Spain | 90%  |
|  SEEIT EUROPE 2 SWEDEN Holding AB | Sweden | 100%  |
|  Vårtan Gas Stockholm AB | Sweden | 100%  |
|  Vårtan Gas AB | Sweden | 100%  |
|  Gaenslåst Stockholm AB | Sweden | 100%  |
|  Stockholm Gas AB | Sweden | 100%  |
|  Baselnad Capital Sweden AB | Sweden | 100%  |
|  SOGA Uranus Company Limited | Vietnam | 100%  |
|  SOGA Mercury Company Limited | Vietnam | 100%  |
|  SOGA Triton Company Limited | Vietnam | 100%  |

All related undertakings that have a place of business in the United Kingdom are registered in the United Kingdom and their principal place of business and registered office is 9$^{th}$ Floor, 1 Vine Street, London, W1J 0AH.

All related undertakings that have a place of business in the USA are registered in Delaware, USA and their registered office is 1209 Orange Street, Wilmington, Delaware, USA with their principal place of business is 1120 Avenue of the Americas, New York, New York 10036, USA.

All related undertakings that have a place of business in Spain have principal place of business and registered office in Calle Príncipe de Vergara 112, Planta Cuarta, 28002 Madrid, Spain.

All related undertakings that have a place of business in Ireland have their principal place of business and registered office in 55 Merrion Square South, Dublin, D02 1QX6.

All related undertakings that have a place of business in Singapore have principal place of business and registered office in 6 Eu Tong Sen Street #11-09, The Central, Singapore 069817.

All related undertakings that have a place of business in Sweden have principal place of business and registered office in RÄSUNDAVÄGEN 12, 16967 Solna, Stockholm County, Sweden.

144 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
## ADDITIONAL
## INFORMATION
Pictured: Primary Energy site
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 145
## COMPANY INFORMATION

| Directors | Sponsor, Broker and Placing Agent |
| --- | --- |
| Tony Roper (Chair) | Jefferies International Limited |
| Helen Clarkson | 100 Bishopsgate |
| Emma Griffin | London |
| Christopher Knowles | EC2N 4JL |

Sarika Patel
Legal Adviser

| Registered Office | Herbert Smith Freehills LLP |
| --- | --- |
| 6th Floor | Exchange House |
| 125 London Wall | Primrose Street |
| London | London |
| EC2Y 5AS | EC2A 2EG |
| Company Secretary and Administrator | Depositary |
| Apex Group Secretaries (UK) Limited (Company Secretary) | Apex Group Administration Services (UK) Limited |
| Apex Group Fiduciary Services (UK) Limited (Administrator) | 6th Floor |
| 6th Floor | 125 London Wall |
| 125 London Wall | London |
| London | EC2Y 5AS |

EC2Y 5AS
Registrar

| Investment Manager | Computershare Investor Services plc |
| --- | --- |
| Sustainable Development Capital LLP | The Pavilions |
| 5th Floor 1 Vine Street | Bridgwater Road |
| London | Bristol |
| W1J 0AH | BS13 8AE |
| Independent Auditors | Bankers |
| PricewaterhouseCoopers LLP | RBS International |
| 40 Clarendon Road | 440 Strand |
| Watford | London |
| Hertfordshire | WC2R 0QS |

WD17 1JJ
Public Relations
TB Cardew
5 Chancery Lane
Holborn
London
EC4A 1BL
146 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
# KEY COMPANY DATA

|  **Company name** | SDOL ENERGY EFFICIENCY INCOME TRUST PLC  |
| --- | --- |
|  **Registered address** | 6th Floor, 125 London Wall, London EC2Y 5AS  |
|  **Listing** | London Stock Exchange – Premium Listing  |
|  **Yicker symbol** | SEIT  |
|  **SEDOL** | BGHVZM4  |
|  **Index inclusion** | FTSE All-Share, FTSE 250  |
|  **Company year-end** | 31 March  |
|  **Dividend payments** | Quarterly  |
|  **Investment Manager** | Sustainable Development Capital LLP  |
|  **Company Secretary & Administrator** | Apex Group Secretaries (UK) Limited and Apex Group Fiduciary Services (UK) Limited  |
|  **Shareholders' funds** | £1.1 billion as at 31 March 2023 (31 March 2022: £1.1 billion)  |
|  **Market capitalisation** | £0.9 billion as at 31 March 2023 (31 March 2022: £1.2 billion)  |
|  **Management fees** | 0.9% p.a. of NAV (adjusted for uncommitted cash) up to £750 million, 0.8% p.a. thereafter  |
|  **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.seerlplc.com  |

ORIGINAL

SCIENCE DESIGN

GOVERNMENT

FINANCIAL DEVELOPMENT

ASSESSMENT INFORMATION

SDOL Energy Efficiency Income Trust plc | **SEDIT ANNUAL REPORT 2023** | 147
# SUSTAINABLE FINANCE DISCLOSURE REGULATION (“SFDR”)

Periodic disclosure for the financial products referred to in Article 9, paragraphs 1 to 4a, of Regulation (EU) 2019/2088 and Article 5, first paragraph, of Regulation (EU) 2020/852

Product name: SDCL Energy Efficiency Income Trust plc

Legal entity identifier: 213800ZPSC7XUVD3NL94

## Sustainable investment objective

**Sustainable investment** means an investment in an economic activity that contributes to an environmental or social objective, provided that the investment does not significantly harm any environmental or social objective and that the investee companies follow good governance practices.

The **EU taxonomy** is a classification system laid down in Regulation (EU) 2020/852, establishing a list of **environmentally sustainable economic activities**. That Regulation does not lay down a list of socially sustainable economic activities. Sustainable investments with an environmental objective might be aligned with the Taxonomy or not.

### Did this financial product have a sustainable investment objective?

|  Yes | No  |
| --- | --- |
|  ☐ It made **sustainable investments with an environmental objective: 100 %** ☐ In economic activities that qualify as environmentally sustainable under the EU Taxonomy ☑ In economic activities that do not qualify as environmentally sustainable under the EU Taxonomy ☐ It made **sustainable investments with a social objective: 0 %** | ☐ It promoted **Environmental/Social (E/S) characteristics** and while it did not have as its objective a sustainable investment, it had a proportion of ___% of sustainable investments ☐ with an environmental objective in economic activities that qualify as environmentally sustainable under the EU Taxonomy ☐ with an environmental objective in economic activities that do not qualify as environmentally sustainable under the EU Taxonomy ☐ with a social objective ☐ It promoted E/S characteristics, but **did not make any sustainable investments**  |

**Sustainability indicators** measure how the environmental or social characteristics promoted by the financial product are attained.

## To what extent was the sustainable investment objective of this financial product met?

### How did the sustainability indicators perform?

The sustainability indicators used to measure attainment of the sustainable investment objectives are tonnes of carbon saved (measured in tonnes CO₂e) and amounts of electrical and thermal energy saved (measured in kWh), as both directly relate to the Company’s sustainable objective of climate change mitigation. Both indicators performed well during the period due to new and follow-on investments in energy efficiency projects.

1,202,528 tCO₂e saved across the portfolio in the period ending 31 March 2023

387,868,000 kWh electrical and thermal energy saved in the period ending 31 March 2023

### ...and compared to previous periods?

1,060,617 tCO₂e saved across the portfolio in the period ending 31 March 2022

242,160,000 kWh electrical and thermal energy saved in the period ending 31 March 2022

146 | SEEST ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
How did the sustainable investments not cause significant harm to any
Principal adverse
impacts are the most sustainable investment objective?
significant negative
The Company ensures that its sustainable investments do not cause significant harm to any
impacts of investment
decisions on sustainable investment objectives through its ESG management process, which incorporates
sustainability factors ESG considerations into investment due diligence and asset management. Potential
relating to environmental, investments are carefully assessed during due diligence through multiple stages, including a
social and employee
red flag review, a review of all mandatory principal adverse impact indicators (PAI indicators),
matters, respect for
the completion of a broader set of ESG due diligence questions, and a review of relevant
human rights, anti-
corruption and climate and social indicators. After project acquisition, SDCL’s asset management and ESG
anti-bribery matters. teams monitor the operations, policies and business conduct of an investment through
quarterly and annual questionnaires to make sure it is not doing significant harm and is
performing in line with the Company’s ESG minimum standards.
How were the indicators for adverse impacts on sustainability factors taken into account?
The Investment Manager uses the PAI indicators to confirm that the Company’s asset
companies do no significant harm. When a potential investment opportunity is assessed, the
ESG questionnaire has specific questions covering mandatory PAI indicators and the relevant
climate and social indicators to uncover any potential red flags that would cause significant
harm to any other of the other sustainable investment objectives. The PAI indicators are then
monitored annually through an ESG questionnaire, that asks specific questions based around
said indicators.
Were sustainable investments aligned with the OECD Guidelines for Multinational Enterprises
and the UN Guiding Principles on Business and Human Rights? Details:
The Company avoids investing in projects that are in breach of the ILO standards, UNGPs,
UNGC or OECD Guidelines for Multinational Enterprises. The Investment Manager actively ADDITIONAL INFORMATION
considers alignment of potential investments with the OECD Guidelines and UNGPs through
the ESG due diligence process and investment decision and during the asset management
phase. The Company‘s ESG principles include commitments to:
1. aide in the transition to a low carbon economy by maximising energy efficiency through
its investment strategy and operations;
2. minimise the environmental footprint of its operations through managing negative
impacts, such as waste, biodiversity loss and emissions;
3. secure robust governance and business integrity, including assessing resilience to
physical climate risk and engaging as an active participant on ESG with its delivery
partners; and
4. provide safe environments for all workers, contractors and members of the community
who use or come into contact with its projects.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 149
Sustainable Finance Disclosure Regulation (“SFDR”)
continued
### How did this financial product consider principal adverse impacts on
### sustainability factors?
As disclosed above, the Fund takes indicators for principal adverse impacts into account as
part of the do no significant harm process. However, as the Fund's AIFM does not consider
principal adverse impacts at entity level under Article 4 SFDR, the Fund does not consider
principal adverse impacts at product level for the purposes of Article 7 SFDR.
### What were the top investments of this financial product?
Large investments Sector % Assets Country
RED-Rochester Energy 22 US
The list includes the
investments constituting Primary Energy - Cokenergy Energy 9 US
the greatest
Onyx Obsidian II Energy 8 US
proportion of
investments of the UU Solar Energy 8 UK
financial product during
Värtan Gas Energy 6 Sweden
the reference period
which is: 31 March 2022
– 31 March 2023
### What was the proportion of sustainability-related investments?
What was the asset allocation?
100% of the Company’s assets are sustainable with an environmental objective.
Asset allocation
describes the share of
investments in specific
assets.

|  |  |  | Taxonomy-aligned |  | #1 Sustainable |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  | 0% | covers sustainable |
|  | Environmental |  |  |  | investments with |
|  |  | 100% |  |  | environmental or social |
| #1 Sustainable |  |  |  | Other |  |

objectives
100% 100%
Social
Investments
0%
#2 Not sustainable
#2 Not sustainable
includes investments
0%
which do not qualify
assustainable
investments.
In which economic sectors were the investments made?
All of the Company’s investments fall into the “energy” sector.
150 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
### To what extent were sustainable investments with an
Taxonomy-aligned
### activities are expressed environmental objective aligned with the EU Taxonomy?
as a share of:
Currently, 0% of the Company’s assets are EU Taxonomy aligned.
- turnover reflects the
“greenness” of
investee companies
today.
- capital expenditure
(CapEx) shows the
green investments
made by investee
companies, relevant
for a transition to a
green economy.
- operational
expenditure (OpEx)
reflects the green
operational activities
of investee
companies.
Did the financial product invest in fossil gas and/or nuclear energy-
To comply with the EU
1
Taxonomy, the criteria for related activities that comply with the EU Taxonomy ?
fossil gas include
limitations on emissions Yes
and switching to
In fossil gas In nuclear energy
renewable power or
low-carbon fuels by the 6 No
end of 2035. For nuclear
1 Fossil gas and/or nuclear-related activities will only comply with the EU Taxonomy where they ADDITIONAL INFORMATION
energy, the criteria
contribute to limiting climate change (“climate change mitigation”) and do not significantly harm
include comprehensive
any EU Taxonomy objectives - see explanatory note in the left hand margin. The full criteria for
safety and waste
fossil gas and nuclear energy economic activities that comply with the EU Taxonomy are laid
management rules.
down in Commission Delegated Regulation (EU) 2022/1214.
The graphs below show in green the percentage of investments that were aligned with
the EU Taxonomy. As there is no appropriate methodology to determine the Taxonomy
-alignment of sovereign bonds*, the first graph shows the Taxonomy alignment in
relation to all the investments of the financial product including sovereign bonds, while
the second graph shows the Taxonomy alignment only in relation to the investments of
the financial product other than sovereign bonds.
1. Taxonomy-alignment of investments 2. Taxonomy-alignment of investments
including sovereign bonds* excluding sovereign bonds*
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OVERVIEW
This graph represents 100% of the total investments.This graph represents 100% of the total investments.
* For the purpose of these graphs, ‘sovereign bonds’ consist of all sovereign exposures
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 151
Sustainable Finance Disclosure Regulation (“SFDR”)
continued
What was the share of investments made in transitional and
Enabling activities
directly enable other enabling activities?
activities to make a
0%
substantial contribution
to an environmental How did the percentage of investments that were aligned with the
objective.
EU Taxonomy compare with previous reference periods?
Transitional activities
N/A
are activities for which
low-carbon alternatives
### What was the share of sustainable investments with an
are not yet available and
### among others have GHG environmental objective not aligned with the EU
### emission levels Taxonomy?
corresponding to the
100% - the sustainable investments made by the fund all have an environmental
best performance.
objective and are 0% Taxonomy-aligned.
### are sustainable What was the share of socially sustainable investments?
investments with an
0% - the fund does not make socially sustainable investments.
environmental objective
that do not take into
### What investments were included under “#2 Not sustainable”,
account the criteria for
### what was their purpose and were there any minimum
environmentally
### environmental or social safeguards?
sustainable economic
activities under N/A – the Company allocated 100% of assets to sustainable investments. Other
Regulation (EU)
assets of the Company are limited to cash held on deposit and cash equivalent
2020/852.
investments, which may include short-term investments in money market type funds
and tradeable debt securities.
### What actions have been taken to attain the sustainable
### investment objective during the reference period?
As laid out in its pre-contractual disclosure and pursuant to the Company's
investment policy, save for any investment in cash and cash equivalents, the
Company principally invests in Energy Efficiency Projects, the objectives of which are
to achieve one or more of the following: a reduction in energy consumption,
areduction of GHG emissions, or an increase in the supply of renewable energy.
Thesustainable objective achieved by the Company’s investments is climate change
mitigation, as all the investments must contribute to one or more of the above criteria.
During the period, the Company attained its sustainable investment objective by
growing its portfolio of energy efficiency projects, both by expanding upon its current
projects and by adding new projects that add further diversification through new
technologies and companies.
The Company invested over £240 million during the period, in new and follow-on
investments.
The new investments made during the period include:
1. A portfolio of small-scale geothermal projects that utilise existing heat sources,
increasing the supply of renewable energy;
2. An investment in energy efficient variable-speed motor systems technology
that reduces carbon emissions and provides energy cost savings to various
industries without incorporating environmentally damaging rare earth minerals
used in alternatives;
152 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
3. Data centre immersion cooling technology that provides significant reduction in energy usage
and associated CO emissions versus traditional air-cooling technology;
2
4. A portfolio of predominantly solar PV assets, providing renewable energy generated on-site
directly to end-users across the north-westNorth West of England;
5. An investment in a battery energy storage system and microgrids solutions provider, focusing
on delivering long-term, on-site ‘energy storage as a service’ projects, thereby reducing
energy demand and improving reliability;
6. An investment in energy efficiency solutions, including heat pumps, LED lighting, solar PV,
battery storage, etc., for small and medium-sized enterprises and low-to-moderate income
communities in New York State.
More details of these investments and their sustainability characteristics are detailed in the
Company’s Annual Report, Section 2.2 The Investment Manager’s Report.
### How did this financial product perform compared to the reference
### benchmark?
The Company does not use a reference benchmark to assess ESG performance.
Reference
How did the reference benchmark differ from a broad market index?
benchmarks are
indexes to measure N/A
whether the financial
product attains the How did this financial product perform with regard to the sustainability indicators
environmental or
to determine the alignment of the reference benchmark with the sustainable
social characteristics
investment objective?
that they promote.
ADDITIONAL INFORMATION
N/A
How did this financial product perform compared with the reference benchmark?
N/A
How did this financial product perform compared with the broad market index?
N/A
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 153
# GLOSSARY

**AIC** the Association of Investment Companies

**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 2009/41/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, depositories, leverage, transparency and supervision

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

**CHP** combined heating and power

**Company** SCCL 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 6th Floor, 125 London Wall, London, EC2Y 6AS

**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, beneficiary or procurer of the Energy Efficiency Project 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 that 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 or near the premises of a Counterparty or a site directly associated with an Energy Efficiency Project, including but not limited to solar, storage, CHP units, heat pumps, HVAC units, lighting equipment, motors, controls, biomass boilers and steam raising boilers (including IP steam processors) and green fuels for use in the built environment or transport produced at or near the point of use or via a distribution network

**Energy Efficiency Project** a project, the objective of which is to achieve one or more of the following criteria:

- ■ reduce energy consumed and/or related GHG emissions arising from the existing and/or future supply, transmission, distribution or consumption of energy;
- ■ reduce its Scope 1 GHG emissions ("Direct GHG emissions occur from sources that are owned or controlled by the

Company") and Scope 2 GHG emissions ("electricity indirect GHG emissions from the generation of purchased, or generated on-site, electricity consumed by the Company") as defined by the GHG Protocol, directly and/or in conjunction with offsets that may be used to deliver additional net emissions reduction benefits;

- ■ increase the supply of renewable energy generated on the premises of a Counterparty or generated at a site directly associated with the premises of a Counterparty;
- ■ reduce emissions and energy consumption in non-domestic sectors, which include

- - all forms of energy supply, conversion, distribution or transmission not originating within a private domestic dwelling, including district heating systems and CHP systems;
- - demand for energy in non-domestic buildings including commercially owned or used property and public sector owned buildings;
- - demand for energy in industrial and light manufacturing plant and machinery, operations and logistics;
- - demand for energy in the transport sector; and
- - through the deployment of energy efficiency measures in public and private infrastructure, such as in utilities (including the installation of smart metering equipment) and street lighting; or

- ■ otherwise satisfy, in the Investment Manager's reasonable opinion, any other criteria or measurement of energy efficiency in an industry or sector, or by using energy efficiency technologies that are compatible with the Company's investment objective and policy

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

**EPC** Engineering, procurement and construction

**GHG** greenhouse gases

**Holdco** is SEET 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 OC330398

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

**ISA** individual savings account

**KWh** kilowatt-hours used or generated per hour

164 | SEET ANNUAL REPORT 2003 | SCCL Energy Efficiency Income Trust plc
Lighting equipment energy efficient lighting used in connection
with an Energy Efficiency Project, including but not limited to LEDs
and associated fittings
MWh megawatt hours used or generated per hour
NAV net asset value
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 Projects
PEP personal equity plan
(APM)
Portfolio Valuation the Investment Manager is responsible for
carrying out the fair market valuation of the SEEIT Group’s portfolio
of investments
RAB regulated asset base
RCF is the revolving credit facility of SEEIT Holdco Limited, used by
SEEIT for capital efficiency in making new investments
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
ADDITIONAL INFORMATION
assets are compensated, in the medium to long term, for
fluctuations in revenues and costs against an established
basecase
SIPP self-invested personal pension
SDCL Group the Investment Manager and the SDCL Affiliates
SEEIT the Company
SEEIT Holdco see Holdco
SPVs special purpose vehicles
WACC weighted average cost of capital
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OVERVIEW
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 155
## GLOSSARY OF FINANCIAL ALTERNATIVE
## PERFORMANCE MEASURES (“APM”)
The Company uses APM’s to provide shareholders and stakeholders with information it deems relevant to understand and
assess the Company’s historic performance and its ability to deliver on the stated investment objective.
Measure Calculation Why the 31 March 31 March 2022 Reconciliation/cross
Company uses 2023 (comparison) reference
the APM

| Gross Asset | All assets of | It provides a metric | £1,128.7m £1,074.6m Statement of Financial |  |
| --- | --- | --- | --- | --- |
| Value (“GAV”) | the Company | that allows for |  | Position shows (Non- |
|  | (Non-current assets | useful analysis of |  | current assets and Current |
|  | and current assets) | underlying portfolio |  | assets) |

exposures

| Net Asset | Net assets attributable | It provides a | £1,125.4m £1,073.1m NAV is shown on the |  |
| --- | --- | --- | --- | --- |
| Value (“NAV”) | to Ordinary Shares | metric that |  | Statement of Financial |
|  | by deducting gross | allows for useful |  | Position |
|  | liabilities (£3.3m) | comparison to |  |  |
|  | from gross assets | similar companies |  |  |
|  | (£1,128.7m) | and that allows for |  |  |

useful year-on-year
comparisons of the
Company

| NAV per share NAV (£1,125.4m), |  | This provides | 101.5p 108.4 NAV per share shown on |  |
| --- | --- | --- | --- | --- |
|  | divided by total shares | shareholders |  | the Statement of Financial |
|  | in issue 1,108.7m at the | with a metric that |  | Position |
|  | balance sheet date | allows for tracking |  |  |

the Company’s
performance year
on year

| Total Return on | Interim dividends paid | This provides | (0.9%) 11.2% Referred to in the |  |
| --- | --- | --- | --- | --- |
| NAV basis | and movement in NAV | shareholders |  | Highlights section on |
|  | per share over the | with a metric that |  | page1 and Section 2.3, |
|  | course of the relevant | allows for tracking |  | Financial Review and |
|  | period, divided by | the Company’s |  | Valuation Update |
|  | opening NAV | performance year |  |  |

on year
NAV return in the
period:
Dividends paid: 5.9p
NAV movement: -6.9p
NAV return since IPO:
Dividends paid: 21.6p
NAV movement: 3.5p

| Portfolio Basis Portfolio Basis includes |  | See Section2.3 | n/a n/a Reconciliation provided |  |
| --- | --- | --- | --- | --- |
|  | the impact if Holdco | for detailed |  | in Section 2.3, Financial |
|  | (the Company’s only | description |  | Review and Valuation |
|  | direct subsidiary) were |  |  | Update |

to be consolidated on a
line-by-line basis
156 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
Measure Calculation Why the 31 March 31 March 2022 Reconciliation/cross
Company uses 2023 (comparison) reference
the APM

| Ongoing | In accordance with | Used as a metric | 1.02% 1.00% Discussed in Section2.3, |  |
| --- | --- | --- | --- | --- |
| Charges Ratio | AIC guidance, defined | in the investment |  | Financial Review and |
|  | as annualised ongoing | company industry |  | Valuation Update |
|  | charges on portfolio | to compare cost- |  |  |

Reconciliation of expenses
basis (i.e. excluding effectiveness
used in ongoing charges
investment costs and
calculation
other non-recurring
items) £11.4m divided £’m
by the average
Fund expenses
published undiluted (income statement) 11.8
net asset value in the
Less Company
year £1,142m
expenses excluded
from definition of
ongoing charges (0.5)
Add Holdco
expenses included
in definition of
ongoing charges 0.1
A Total annualised
ongoing expenses 11.4
B Average NAV
(includes March 22,
Sept 22 and
March 23) 1,119.2
Ongoing charges
(A/B) 1.02%
ADDITIONAL INFORMATION

| Portfolio | The fair value of | It provides relevant | £1,100m £913m Reconciliation provided |  |
| --- | --- | --- | --- | --- |
| Valuation | all investments in | information of |  | in Section 2.3, Financial |
|  | aggregate that are | the value of |  | Review and Valuation |
|  | held directly or | the underlying |  | Update |
|  | indirectly by Holdco | investments |  |  |

held indirectly
by the Company
from which it is
ultimately expected
to derive its future
revenues.

| Cash on | Cash at bank of the | To provide relevant | £65.7m £170.9m Reconciliation provided |  |
| --- | --- | --- | --- | --- |
| Portfolio Basis | Company and Holdco | information to |  | in Section 2.3, Financial |
|  |  | shareholders of |  | Review and Valuation |
|  |  | the Company’s |  | Update |

ability for new
investments,
working capital
and payment of
dividends

|  | Investment | Cash received | This provides | £85.1m £64.7m Referred to in Section2.3, |  |
| --- | --- | --- | --- | --- | --- |
|  | cash inflow | from the portfolio | shareholders |  | Financial Review and |
|  | from the | investments at Holdco | with a metric that |  | Valuation Update |
|  | portfolio | during the period | allows for tracking |  |  |
| STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OVERVIEW |  |  |  |  |  |

the Company’s
performance year
on year
SDCL Energy Efficiency Income Trust plc | SEEIT ANNUAL REPORT 2023 | 157
Glossary of Financial Alternative Performance Measures (“APM”)
continued
Measure Calculation Why the 31 March 31 March 2022 Reconciliation/cross
Company uses 2023 (comparison) reference
the APM

| Dividend cash | Operational | Provides a metric | 1.2x 1.2x Net cash inflow (portfolio |  |
| --- | --- | --- | --- | --- |
| cover | cash inflow from | for the level of cash |  | basis) divided by dividends |
|  | investments into | generated enabling |  | paid in Statement of |
|  | Holdco less fund | the Company to |  | Changes in Equity |
|  | expenses in the | pay dividends to |  |  |
|  | Company and Holdco, | shareholders |  |  |

divided by dividends
paid to shareholders

| Cumulative | Excess cash inflow | Provides a metric | £29.2m £19.1m Referred to in Section2.3, |  |
| --- | --- | --- | --- | --- |
| excess cash | from investments net | for the number of |  | Financial Review and |
| cover | of dividends paid to | times the Company |  | Valuation Update |
|  | shareholders, on a | can pay dividends |  |  |
|  | cumulative basis since | to shareholders |  |  |

IPO

| Gearing Consolidated |  | To indicate the | 32% 34% Referred to in the Chair’s |  |
| --- | --- | --- | --- | --- |
|  | outstanding debt | Company’s direct |  | Statement and the |
|  | at Holdco and | and indirect |  | Investment Manager’s |
|  | investment level | exposure to debt |  | Report |
|  | (£361.0m) divided by | obligation. |  |  |

NAV at the year-end
(£1,125.4m)

| Operational | Cash inflow from | Used in dividend | £71.4 £52.9 Referred to in Section2.3, |  |
| --- | --- | --- | --- | --- |
| Cashflow | investments net of | cash cover |  | Financial Review and |
|  | operating and finance | calculation |  | Valuation Update |

costs

| Rebased | Portfolio Valuation | Used to derive | £1,068.6m £788.6 Referred to in Section2.3, |  |
| --- | --- | --- | --- | --- |
| Valuation | brought forward, plus | the fair value |  | Financial Review and |
| (Portfolio | new investments | movement of the |  | Valuation Update |
| basis) | (including transaction | portfolio. |  |  |

costs) during the
period less cash from
investments.
158 | SEEIT ANNUAL REPORT 2023 | SDCL Energy Efficiency Income Trust plc
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SDCL Energy Efficiency Income Trust Plc Annual Report and Audited Financial Statements for the year ended 31 March 2023
SDCL Energy Efficiency Income Trust plc
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## SDCL ENERGY EFFICIENCY
125 London Wall
London
## INCOME TRUST PLC
EC2Y 5AS
## Annual Report and Audited Financial Statements
## www.seeitplc.com
### For the year ended 31 March 2023