By Sam Kerr 19 Oct 2020

SDCL Energy Efficiency Income Trust (SEEIT), the UK listed energy efficiency investor, is buying Swedish regulated gas distribution network Värtan Gas Stockholm, with the acquisitive firm already completing an increased £105m equity sale and small debt raise to part finance the purchase.

Last week SEEIT set out to raise £80m for the acquisition of “an established, operational and regulated energy network in a major Western European city”.

The acquisition turned out to be Värtan Gas Stockholm.

The Swedish firm owns and operates Stockholm’s regulated gas grid, around 70% of which is sourced from locally produced biogas, and supplies and distributes to over 58,000 customers in Stockholm.

The capital raise was opened on Tuesday, October 13, and closed on Friday, October 16. Jefferies was sole global coordinator in the deal.

The company was inundated with investor interest over the three days of bookbuild and as such decided to grow the offering to £105m.

The decision to grow the offering is the latest sign of huge investor demand for any EMC transaction with an M&A angle.

“There are a lot of capital raises left to come, and while rescue rights issues are a big part of the pipeline, anything with a growth or acquisition angle is still proving to be very popular among shareholders,” said a senior ECM syndicate banker.

The new shares were sold at a fixed price of £1.05 a share a 5.4% discount to SEEIT’s closing price on October 12 but a 4% premium to its net asset value.

Not only was the deal popular because of the use of proceeds, the offering was also attractive for yield hunting investors.

SEEIT is targeting a dividend target of 5.5p per share for the financial year ending March 31, 2021, which represents a dividend yield of 5.2% for investors who took part in the capital raise.

Companies that still aim to pay out a regular dividend have been hugely popular in equity capital markets this year because of the huge number of FTSE companies that have either suspended or delayed dividend payments to shareholders.

The VGS deal will be funded from existing cash reserves and debt facilities, which include the capital raised in last week’s equity fundraising as well as a £30m short term acquisition facility that has been added to SEEIT’s current £40m revolving credit facility.

VGS’s existing project debt finance facilities, which are equivalent to around £26m, will remain in place.

“We are grateful for the strong support we have received from both new and existing investors. Given the strength of investor demand and the progress we have made with our near-term acquisition pipeline, we have increased the amount raised to £105m from £80m,” said Tony Roper, chairman of SDCL Energy Efficiency  Income Trust last week