SDCL Energy Efficiency Income Trust H2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
June 25, 2026

Key Takeaways

  • Neutral Sentiment: The board has proposed a portfolio sale or managed wind down, with the company now prioritizing value realization, debt reduction, and returning cash to shareholders as quickly as practicable.
  • Negative Sentiment: NAV per share fell to GBP 0.778 from GBP 0.906 a year earlier, mainly due to lower growth assumptions, regulatory changes, and more cautious valuation of certain assets.
  • Positive Sentiment: The portfolio remained operationally resilient, generating about GBP 91 million of EBITDA in calendar 2025 and performing broadly within 5% of budget.
  • Positive Sentiment: The company completed a post-year-end disposal for roughly GBP 105 million, using about GBP 45 million to reduce RCF debt and bringing the facility down to around GBP 190 million, which lowered gearing.
  • Neutral Sentiment: Management said key assets like Onyx, RED-Rochester, Driva, Oliva, and Primary Energy are still performing, but future cash returns are being constrained by capital limits, retained cash, and the wind-down process.
AI Generated. May Contain Errors.
Earnings Conference Call
SDCL Energy Efficiency Income Trust H2 2026
00:00 / 00:00

Transcript Sections

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Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

Good morning, and thank you for joining us. I'm Tamsin, I'm here with my colleagues Jonathan Maxwell, Eugene Kinghorn, Ben Griffiths. Today, we're presenting the results for the year ended 31st of March 2026, alongside an update on the strategic direction of the company. As you will have seen from the announcement last week, the board has proposed a portfolio sale or managed wind down of the company with a clear focus on realizing value and returning cash to our shareholders. Today's session is intended to do three things. First, to summarize the highlights for the year. Second, to provide some context on the proposed sale or wind down. Third, to update on the progress since the end of the year.

Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

I'll hand over now to Jonathan, who's going to take you through the strategic update and key messages.

Jonathan Maxwell
Founder and CEO at SDCL

Thank you, Tamsin. Before we turn to the detailed results, I'd like to put the presentation into context and be very clear about our priorities. The portfolio continues to perform operationally. Our objectives are clear, the exit process, by means of a sale or wind down, is underway. We're focused on execution and discipline, protecting value, reducing debt, and converting the value of the portfolio into cash for shareholders as efficiently and promptly as practicable. The past year has been difficult and disappointing for shareholders. We're looking to provide a decisive response to challenges, such as the persistent discount to share price, the constraints on distributions, the lack of access to equity capital, and the consequent level of gearing. Our objectives are clear. They're to secure liquidity, realize value, and return capital to shareholders in the shortest practicable timeframe. There are three central elements to this strategy.

Jonathan Maxwell
Founder and CEO at SDCL

First, we're focused on maximizing the cash that will ultimately distributed to shareholders. We'll consider the full range of available mechanisms and use whichever approach is most efficient in the circumstances, whether by means of income or capital distributions. Second, reducing or refinancing debt is an immediate priority. A stronger and less leveraged balance sheet protects value. It costs less to run. It reduces financing risk and creates the capacity for shareholder distributions. Disposal proceeds will therefore initially be applied to reducing debt levels, then as soon as practicable, to distributions to shareholders. Third, we must continue to protect the operational performance and value of the portfolio throughout this process. These are functioning businesses with thousands of customers, hundreds of employees, lenders, and contractual and regulatory obligations.

Jonathan Maxwell
Founder and CEO at SDCL

The portfolio contains successful energy efficiency companies that continue to generate EBITDA and cash, most of the assets have been operating broadly in line with budget. However, growth and some near-term cash flows have been limited by the company's own capital constraints and by the prudent retention of cash following the wind down announcement. We've reflected the circumstances of the company in the valuation and the reduced NAV. Most of the reduction in the NAV year-over-year is attributable to a reduction in growth assumptions. For example, behind our investment in Onyx, which is not a reflection of the quality of Onyx, but of the capital constraints of SEIT. Also in RED, where we've reduced short-term growth expectations from existing and new clients.

Jonathan Maxwell
Founder and CEO at SDCL

Our objective through the proposed policy changes and realization process is to help to release the company's capital constraints and preserve the enduring value of the assets and platforms in which we've invested. Finally, a word on execution and governance. We're actively engaging with investors who are interested in individual assets or the portfolio as a whole. The sale process is itself controlled by the board and supported by independent advisors. To reiterate, the portfolio continues to operate, in fact, within about 5% of budget. Our objectives are clear, and the realization process is underway. We're focused on execution, protecting value, reducing debt, and converting the value of the portfolio into cash for shareholders as efficiently and promptly as practicable, while finding the best possible home for the valuable and important assets and platforms that we've built over the years.

Jonathan Maxwell
Founder and CEO at SDCL

Across to Tamsin.

Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

Thank you. I'll pick up on some of the key data points for the year and how those fit in with what we're doing now. The portfolio continues to generate earnings and cash with approximately GBP 91 million of EBITDA for the calendar year 2025. We reduced the NAV per share for March 31st to GBP 0.778, primarily reflecting the reduced growth assumptions, as Jonathan's touched on.

Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

As Eugene will explain further in the finance section, the three key valuation movers for the period were the adjustments to our growth assumptions, the impact on the broader environment and sentiment, particularly in the U.S. and what that meant for regulatory assumptions, and to a lesser extent, the impact of us taking a more prudent approach to valuing the timing of when we expect to be able to sell the excess capacity at RED. The portfolio was GBP 1.1 billion valuation, and the investment cash flows were GBP 84 million. Eugene will unpack that number a bit for you, but this is primarily driven by SEIT's capital constraints and what that means for our ability to continue funding the pipeline, particularly at Onyx. The underlying assets are continuing to perform even as we shift our focus to realizing value and returning cash.

Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

On distributions, GBP 0.048 per share of dividends were declared across three dividends. The fourth dividend was not declared. That reflects the prioritization of cash within the business, in particular, supporting the balance sheet and reducing leverage, with the intention to return cash as soon as practicable whilst protecting value. On the balance sheet and liquidity, we've already completed a disposal for approximately GBP 105 million post year-end. The upfront cash was just over GBP 80 million. GBP 45 million of that was used to reduce the RCF, with the remainder primarily retained on the balance sheet. That reduced our RCF from GBP 233 million down to GBP 190 million post the end of the year and reduced our gearing on a pro forma basis. We've already started to de-lever and to strengthen the balance sheet with more work still to be done.

Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

Finally, as we've already touched on, the managed wind down has been proposed and the circular has been published with a preference for a portfolio sale, but flexibility to pursue phased disposals if needed. We're prioritizing active management of the portfolio throughout to protect the value and ready the assets for sale. This slide is simply a reminder of the circular that has been published in the upcoming vote on the 10th of July. Its three key resolutions were put forward. Updating the investment policy to be able to realize assets and provide flexibility during the wind down. The second, to cancel the share premium account in order to create distributable reserves. Thirdly, to remove the continuation vote, which will align to the wind down as it supersedes the need for one.

Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

Taken together, those are fairly technical, but they are important. They're designed to give the company the flexibility to execute the managed wind down, to realize the portfolio in an orderly way, and to return cash to shareholders efficiently and equitably. In terms of how that works in practice, the proceeds from assets will be used first to reduce borrowings under the RCF and then distributions to shareholders using the most appropriate means at the time. Again, the emphasis is getting cash back to our shareholders in the most efficient way as possible and the most efficient way as practicable, while maintaining value through the realization process. It's important to note that the board unanimously recommends that you vote in favor of this. The manager will be voting in favor of that with our shares, as will the board members.

Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

Moving on to post year-end progress. Before I hand over to Ben, I just want to remind you, as we've already announced, that we did make a disposal of a diversified portfolio of assets earlier in the year. That completed in April, and that was within 10% of NAV. Of those proceeds, we used GBP 45 million to reduce drawings under the RCF and bring gearing down to GBP 190 million at the RCF, and that resulted in a pro forma gearing of approximately 43% of enterprise value, which equates to 75% of the NAV. The company and the manager are continuing to engage actively with investors who are interested in assets or the full portfolio. We're doing that with a view to optimize value in the shortest practicable timeframe.

Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

With that, I'll hand over to Ben to give you an update on the portfolio.

Ben Griffiths
Managing Director of Fund Management at SDCL

Thank you. To update on the portfolio. Shared on the slide here are our five biggest investments, which represent about 85% of the value of our diversified portfolio. Glad to report the operational performance and the cash generation of these investments, but also the portfolio as a whole has been robust. EBITDA has come in slightly behind budget, but only by about 4%. There do continue to be opportunities to grow NAV across the portfolio. In the current environment in which SEIT is trading, what we're focused on is maximizing realizable value. What this requires is additional focus on managing expenditure, management of the balance sheets of our investment companies, prioritization of the different opportunities, and maximizing returns. We're focused on this and delivering these results, along with the close coordination and dialogue with the management teams within our investment companies.

Ben Griffiths
Managing Director of Fund Management at SDCL

To go on to some project specific updates. To start with Onyx Renewables, which is our solar and storage platform in the U.S., which has been operating in a fairly changeable market in the U.S. Despite this, they have seen good demand continuing for distributed solar projects amongst commercial and industrial customers. As I said, despite this market backdrop, Onyx has been successful in signing of 50 MW of new contracts with new customers and also completing the installation of a considerable and significant 93 MW of new sites. There is a time horizon on the Investment Tax Credits, which Onyx Renewables benefits from, with projects needing to become operational before the end of 2027. Onyx has completed a lot of work in order to maximize the remaining availability of these tax credits, which also includes securing new tax equity partners.

Ben Griffiths
Managing Director of Fund Management at SDCL

Looking past that, they are also working on developing new customer contracts to ensure customer offerings remain competitive and project returns attractive. The immediate focus is on managing the balance sheet and the capital availability within Onyx, and we hope to be able to allow Onyx to use the remaining capacity of their construction debt facility in order to fund the near-term pipeline, and that is consistent with the proposed changes that Tamsin has just outlined in relation to the SEIT gearing limits, due to be voted on the 10th of July. The majority of value within Onyx is in the asset base, both in terms of operational sites and also those in construction. That represents about 85% of the value of Onyx.

Ben Griffiths
Managing Director of Fund Management at SDCL

The EBITDA of the operational portfolios has been below budget, the majority of that does relate to timing matters or in relation to various incentive revenues, such as renewable energy certificates. There have also been some one-off impacts, though, in terms of in relation to weather and other site-specific matters, the asset management team at Onyx has been very busy implementing various performance improvements. We have recently reported a reduction in distributions from Onyx in the second half of the financial year, which is due to this constraints of SEIT's capital situation and the financing structure of Onyx itself. Eugene will cover this in a little bit more detail later. What this does mean is that the reduction in distributions from Onyx are a result specifically of SEIT's own constraints rather than the fundamentals and the core business model of Onyx itself, which remains strong.

Ben Griffiths
Managing Director of Fund Management at SDCL

Moving on to Driva, which is our biogas grid in Stockholm, which has outperformed targets this year, seen through stable demand from customers, also through additional revenue of new projects coming online. One of these new projects is the Södertörn gas connection, which came live at the end of 2025, which was the result of two years of construction and four to five years of very significant effort from the Driva management team themselves. They have also been successful with the year-on-year reduction in leakage from the gas grid. They have implemented and installed new pressure regulating systems on the grid, which have delivered instant results, both in terms of environmental and financial benefits.

Ben Griffiths
Managing Director of Fund Management at SDCL

They're also continuing to develop and deploy the new energy-as-a-service business line with, in 2025, bringing eight charging-as-a-service and a couple of biogas-as-a-service projects online, delivering new services directly to new customers and adding revenue to the business. At our district energy business, RED-Rochester, they're continuing to deliver 17 different utilities to over 120 customers across Eastman Business Park in New York. The EBITDA performance was slightly below budget this year, significantly up year-on-year by about 33%. This was underpinned by resilient customer demand, also operational efficiencies and savings delivered by the new cogen project. RED-Rochester are continuing to progress leads to bring new customers into the business park, there's been some positive progress.

Ben Griffiths
Managing Director of Fund Management at SDCL

Despite these being long lead items, there has been positive progress with items like the textile recycling company Reju, who have signed a land agreement with the landlord. Also RED-Rochester itself securing land options for various parcels of land on the site. We are expecting Glencore and their battery recycling facility to be a customer in the future still, we are also developing alternative plans in order to best utilize the capacity of RED-Rochester systems notwithstanding. Really, it's this organic growth of new customers, which is the focus of discussions with existing customers in relation to amendments to the tariff arrangements under which customers pay RED-Rochester, we're hoping to make significant progress on that during the next period.

Ben Griffiths
Managing Director of Fund Management at SDCL

As I reported during the interim results, our Spanish onsite energy generation portfolio at SEIT, Oliva, did experience some market pressures in the first half of the year. As a result of considerable efforts and improvements made by the management team, they were able to largely recover that position by year-end. Much of these efforts focused on adapting the hedging policy to better match the regulation changes that came in during 2024, also introduce an operational framework in order to ensure that assets are operating in a way that maximizes margins and therefore profitability. Long-term planning for this portfolio of assets continues with focus on various capital projects, life extensions, and other strategic options. What we're also mindful of now is dovetailing that with the strategic priorities of SEIT.

Ben Griffiths
Managing Director of Fund Management at SDCL

Last, by no means least, Primary Energy in Indiana, which continues to decarbonize the hard-to-abate steel industry. Performance continues to be very strong, slightly ahead of budget for the year. Notwithstanding that, the management team are not stopping there. They are very busy advancing accretive projects that were already in train. They're currently, as we speak, commissioning new variable frequency drives on the site, which are expected to deliver power savings, therefore increasing output and hence revenue for Primary Energy. During the period, there has been a one-off negative impact in relation to the Ohio REC scheme, which looks to monetize the renewable energy certificates that Primary Energy generates. The compulsory element of this scheme is set to expire at the end of 2026, there was a potential for that to be extended, which is still the case, a lack of regulatory action has cast more doubt on whether this will happen or not. We've reflected that in our latest valuation.

Ben Griffiths
Managing Director of Fund Management at SDCL

On the more positive end of the scale, at Primary Energy, the PCI contract has been renewed and extended for a further five years, with two-year further option. This really underscores the strong links that Primary Energy has with its key customers, and is also a positive indicator for future renewals that we expect going forwards, and also some other opportunities that the Primary Energy team are working on with their key customers. To summarize, I believe that the fundamental performance of the portfolio remains strong, and we remain focused on delivering shareholder results. Largely what that means for us is continuing our active management of the portfolio, diligent oversight of expenditure, delivery of initiatives that are currently underway, all with the aim of maximizing realizable value of the portfolio.

Ben Griffiths
Managing Director of Fund Management at SDCL

With that, I'll hand over to Eugene to talk us through the financial performance.

Eugene Kinghorn
Group CFO at SDCL

Thank you very much, Ben. We reported a NAV of GBP 0.778 compared to GBP 0.906 at March 2025 and GBP 0.87 at September 2025. The significant reduction in NAV of around GBP 0.12 during the year was mainly due to adjustments to longer-term cash flow assumptions related to growth and regulatory parameters. In the case of growth assumptions, we reduced the value ascribed to Onyx pipeline over the medium term. This contributed around GBP 0.05 to the overall reduction. Changes and risk of changes to regulatory parameters affected Oliva and Primary Energy, and on the basis that we assume these parameters are enacted and stay in place over the long term, contributed around GBP 0.04 to the overall reduction.

Eugene Kinghorn
Group CFO at SDCL

Changes at RED-Rochester reflected a net downwards movement to take into account timing adjustments caused by slower than anticipated utility utilization ramp-up of an existing customer, which is partially offset by an additional customer signing an agreement to enter the business park, and this contributed around GBP 0.02 to the overall reduction. Net FX movement remains in line with expectations of the current hedging strategy, which is to minimize movements in NAV from volatile FX markets, and our company expenses remained in line with expectations. The portfolio as a whole continues to generate EBITDA and cash, and the dividends paid was cash covered after paying company expenses, including finance costs. However, our objective has now become to maximize total return of cash to shareholders. This necessitated taking a view on whether to pay the final interim dividend for FY 2026 and of upcoming quarterly dividends.

Eugene Kinghorn
Group CFO at SDCL

The factors that have caused us to take a cautionary near-term approach included capital constraints and cash preservation. Capital constraints at SEIT has caused a necessary slowdown in business development at Onyx, as you've heard today. Previously, SEIT was able to allocate capital to Onyx that in turn allowed SEIT to receive a regular return of cash from the upfront monetizing of future cash flows linked to completion of construction activities. This is over and above cash flow generated from operational assets. The absence of capital availability from SEIT meant that Onyx could not be placed in a position where it could capitalize on the continued demand for distributed energy. This resulting slowdown in construction activity required cash to be retained at Onyx for its own construction and financial obligations.

Eugene Kinghorn
Group CFO at SDCL

Cash preservation is required during the completion of stakeholder assessment as a result of moving towards orderly realization of assets in a wind down strategy. With the objective of shifting to returning cash to shareholders in the most efficient and optimized way, protecting stakeholders such as customers, lenders, and portfolio companies becomes essential. This initially requires a focus on cash preservation within the larger projects. Cash continues to be generated at project level, and this does pay for the financing and operational cost at company level and provides us the opportunity to reduce the RCF debt as part of ensuring compliance with our requirements under the existing facility. A key focus for us. All of the underlying projects remain in compliance with covenants of their own facilities, and we continue to monitor and manage this on a regular basis, as you would expect from any company.

Eugene Kinghorn
Group CFO at SDCL

Looking ahead, you have heard from Ben that we are focused on ensuring the portfolio continues to deliver strong operational performance. Alongside the stakeholder assessment and the proposed changes to the investment policy, this allows us to plan for a return in the future to regular shareholder cash returns in addition to cash returns from disposal activity.

Eugene Kinghorn
Group CFO at SDCL

I will now hand you over to Jonathan to close the presentation.

Jonathan Maxwell
Founder and CEO at SDCL

Thank you, Eugene. Allow me to conclude by bringing the key points together. Announcement of the sale or wind down of the company has fundamentally changed our strategy and objectives. The focus is now firmly on realizing value, returning capital, and making distributions. At the same time, it's important to distinguish the company's capital and liquidity constraints from the underlying operational performance and quality of the portfolio. The portfolio generated over GBP 90 million of EBITDA during the 2025 calendar year. The portfolio as a whole performed within 5% range of budget, supported by long-term contracted revenues. The principal valuation reductions reflected revised assumptions relating to growth, development timing, regulation, and the availability of capital, rather than any broad deterioration in current operations.

Jonathan Maxwell
Founder and CEO at SDCL

The portfolio also continues to generate cash. Distributions have been constrained in the short term by three main factors. The first is the capital constraints at Onyx, which has reduced the upfront cash generated from new projects. The second is the retention of cash within portfolio companies following the wind-down announcement, while those businesses assessed and protected their obligations to customers, employees, lenders, and other stakeholders. The third is the decision to prioritize debt service, liquidity, and balance sheet resilience during the initial phase of the process. We believe that a significant proportion of these constraints are temporary, although the timing of their release will depend on operating requirements, liquidity, and progress with the realization program. Our priorities are therefore sequential and deliberate.

Jonathan Maxwell
Founder and CEO at SDCL

We must secure liquidity. We must reduce or, where appropriate, refinance debt. We must preserve the operational value of the assets while they're marketed. As the balance sheet is strengthened and proceeds become available, we must maximize distributions by any appropriate means, whether as income or capital, to shareholders using the most efficient mechanisms available. There's already been tangible progress. The disposals completed after the year-end generated approximately GBP 84 million of net cash proceeds at completion, GBP 45 million applied to reducing the debt, and most of the rest strengthening the balance sheet. The revolving credit facility is consequently reduced from just over GBP 230 million to about GBP 190 million, and pro forma gearing has reduced to around 43% of enterprise value. This is an initial step, not the conclusion of the process. We're seeking to deliver value for money for shareholders by means of a sale of the portfolio or its assets, whichever delivers the best value for money and timing.

Jonathan Maxwell
Founder and CEO at SDCL

We'll pursue a portfolio-level solution where that offers the strongest combination of value, certainty, and speed, and we'll also undertake a phased disposal of assets where that produces the better outcome. Market conditions, financing availability, and buyer demand will influence the execution, of course. We're addressing the process with urgency. The objective is to act as quickly as practicable without unnecessarily compromising value. The board is in control of the process, supported by its advisors, and appropriate protocols are in place to ensure a level playing field. All proposals will be assessed consistently based on value, certainty, structure, and execution risk.

Jonathan Maxwell
Founder and CEO at SDCL

To conclude, the portfolio remains operationally resilient, the balance sheet is being addressed, and the realization process is underway. Every material decision will be judged against one overriding objective: delivering the greatest practicable value and liquidity for shareholders as efficiently and as promptly as possible. Thank you very much.

Ed Warner
Chairman at LMAX Group

Now we're going to open it up to questions. There's a number of questions that we've got online. First question is from Peter Whale. What is the board's, I guess the company's in this case, realistic expectation for the timing of first material capital return and the completion of the wind-down?

Jonathan Maxwell
Founder and CEO at SDCL

I'd say sort of two bookends to that. First of all, important really to recognize some of the progress of the last year or two. We have made substantial disposals of assets in the past couple of years. We sold a GBP 100 million asset in United Utilities. We've sold a very substantial proportion of the tail of our portfolio. These processes do take time. However, one of the ways of mitigating the time is to look at a portfolio sale as well as individual assets, and there are some nuances associated with that. Time is of the essence, and we're progressing avenues right now. Ed, was the other question about value as well as time?

Ed Warner
Chairman at LMAX Group

No, the timing on the portfolio sale.

Jonathan Maxwell
Founder and CEO at SDCL

I think it's really as soon as practical. We're not giving an artificial timetable or deadline associated with this because we're progressing the activity of achieving a portfolio sale or sale of individual assets in parallel in order to maximize a combination of value and time.

Ed Warner
Chairman at LMAX Group

Sorry, the completion of wind-down. Yeah.

Jonathan Maxwell
Founder and CEO at SDCL

In terms of the completion of the wind-down, it will be subsequent to either a sale of the portfolio, which would likely, I think in my view at least, be more expeditious. If it was going to go down an asset-by-asset disposal, in my view, I think it would take more time.

Ed Warner
Chairman at LMAX Group

This is from Gordon Noble: What's the likely impact on ordinary shareholders of the increasing stakes in the company being built up by Saba and Jefferies? Have you opened discussions with these significant shareholders to identify, clarify, and elaborate on their intentions?

Jonathan Maxwell
Founder and CEO at SDCL

I think the investment objectives of the company have pivoted towards a realization of its portfolio for cash, the highest value for money in the shortest practicable timeframe. I think that obviously we have a series of long-term investors who have backed the company over sometimes, in many cases, from the beginning. We say thank you very much to those shareholders. We'll be looking to maximize value. We also understand that the company is now owned by shareholders with a shorter term objective to realize cash. We will be bringing those objectives together and addressing both of them in one go by delivering the best possible sale at the best value for money for shareholders in the shortest practicable timeframe. I think at this point, that's in the best interest of the shareholders as a whole.

Jonathan Maxwell
Founder and CEO at SDCL

I don't think that there is a divergence of interest.

Ed Warner
Chairman at LMAX Group

Okay. Charlie Murphy from Singer Capital Markets. The retained portfolio, excluding geothermal assets, delivered pro forma EBITDA of circa GBP 76 million and GBP 72 million in 2024 and 2025 respectively. Is that the correct baseline for prospective cash generation? How much of that reaches holdco as distributable cash rather than being retained at the asset level for debt services, working capital, or CapEx?

Jonathan Maxwell
Founder and CEO at SDCL

I think I'm going to pass to Eugene to take that question. Thank you for it.

Eugene Kinghorn
Group CFO at SDCL

Thank you, Charles. The numbers you quoted for EBITDA are broadly correct. It's excluding the geothermal assets or the portfolio that we sold after the year-end. I would also just add that those EBITDA numbers have the potential for growth in the future. As a baseline, you can use that, but that is EBITDA, not necessarily the cash generation. After EBITDA, you have to service the interest, you have to service the construction activity, and the working capital at each of these assets. What it does point to, though, is the consistent and reliable indication of cash generation. These are long-term assets with key customers, long-term revenue contracts, it's therefore able to generate that cash.

Eugene Kinghorn
Group CFO at SDCL

I will just maybe point out because it was important as part of our presentation to explain the cash generation that we received from Onyx, from construction activity, which isn't generated from the EBITDA, you can't extrapolate that from the EBITDA because that is in relation to the pace of development, taking the assets through to construction and able to monetize, upfront monetize cash flow that would otherwise be received over a very long period. That's the one addition to the stable cash generation that you can extrapolate from the EBITDA.

Ed Warner
Chairman at LMAX Group

Will Crighton. How come cash inflows from the portfolio fell around GBP 13 million year-on-year despite EBITDA growing GBP 5 million year-on-year?

Eugene Kinghorn
Group CFO at SDCL

Yeah. Thank you, Will. I think it's the same point that I've just made around Onyx and the distributions that we get from Onyx, which is a mix of the operational cash flow as well as the construction cash flow. The construction cash flow is the part that reduced over the second half of the year compared to our own expectations, and that was as a result of the capital constraints at SEIT level that then filtered through to the amount of construction activity that Onyx could sign up without taking undue risk.

Ed Warner
Chairman at LMAX Group

Okay. Another one from Charlie Murphy on Onyx. How much of the value of Onyx is attributable to the existing completed or fully funded construction projects? When do you expect the construction projects to start and then complete? Absent the tax credits, which elements of Onyx's pipeline are visible?

Jonathan Maxwell
Founder and CEO at SDCL

I'll give a quick answer to that question and then hand across to Eugene and to Ben. The colloquial answer is the vast majority of Onyx's valuation in this NAV is attributable to operational assets or assets that are under construction and funded. There's been a very substantial reduction. I think, Eugene, you mentioned GBP 0.05 during the year, which is attributable to the reduction of growth. In other words, the valuation of the platform or the pipeline, the substantial majority of the investment value that we've attributed to Onyx is in the operational and construction. We did telegraph this in our signpost diagram in the interim results in December. We might direct shareholders back to that signpost.

Jonathan Maxwell
Founder and CEO at SDCL

There was a left-pointing signpost which said that if we reduced the value of the development business within Onyx, I think substantially 2x into zero or a very substantial proportion, then it could take off.

Tamsin Jordan
Director of Fund Management and Investor Relations at SDCL

Yeah, anything after 2027.

Jonathan Maxwell
Founder and CEO at SDCL

A large amount, we have taken off a large amount from the valuation this time around. Just to reiterate that it's not a reflection of the quality of the Onyx business, the potential, the relationship it has with its customers, or indeed its operational quality. It's got to do with a different approach that we've taken because this company has announced a sale of its portfolio, therefore, we are not attributing a growth to a growth asset within our business. We would hope that an owner of this business going forward will be able to enjoy the capacity that Onyx has to print very high-quality business.

Jonathan Maxwell
Founder and CEO at SDCL

Go to the specific numbers. I'll go back to Ben and then Eugene.

Ben Griffiths
Managing Director of Fund Management at SDCL

Yeah, I think, Jonathan, you've largely covered the specifics. I was going to also address the question in relation to timing of projects starting as well, and construction. Onyx has a continual flow of projects. Obviously, at the moment, what we're doing is, with Onyx very closely, is managing the balance sheet and the commitments of the company, but there is a steady stream of construction projects starting. It's important just to differentiate that Onyx addresses the C&I commercial and industrial space. These aren't utility solar systems. These are C&I systems. The construction timeline is relatively short compared to other solar projects. Anything from six to nine months, sometimes if it's a very big system, maybe 12.

Ben Griffiths
Managing Director of Fund Management at SDCL

With that in mind, and the end of the Investment Tax Credit horizon at the end of next year, we are still bringing projects starting construction now that will easily close and finish before the end of the Investment Tax Credits. There was also a question on, sorry, you referred to after that, in terms of the ITCs and what Onyx are doing now are developing different contractual structures with customers. I think it's important point in terms of timing, though, as well. Like I say, there's still quite a runway in terms of projects that can benefit from ITCs, for the foreseeable in the next 6-12 months.

Ben Griffiths
Managing Director of Fund Management at SDCL

The discussions with the customers there are quite early on in terms of those new structures, but there is quite a lot of work that's already been done on our side and with the Onyx team in terms of the economics of those projects. We're very confident, the Onyx team is very confident that there is a structure there and there is headroom within the economics that allows the offerings to customers still to be compelling in terms of cheaper power, and that the returns of those projects can be ensured from the shareholder perspective as well.

Ed Warner
Chairman at LMAX Group

A question from Conor Finn from Barclays. Can you expand on growth expectations and valuation for RED-Rochester? The trailing EV/EBITDA multiple is 20x.

Jonathan Maxwell
Founder and CEO at SDCL

I'm happy to take a go at that. I think there are a couple of opportunities maybe just to enhance what's in the annual results and the presentation. We have an opportunity for return on existing capital. Over the last couple of years, we've built expanded capacity at RED-Rochester. I think we've got another 50 MW of power generation capacity. We've adjusted downwards our expectations or our probability waiting for certain business development activities associated with that. I think we've taken the life cycle provision into the NAV this time. Things are fairly substantial. Reduction not necessarily because we don't think our customer will come online, but we've taken a more prudent approach to valuation. That 50 MW is a valuable and scarce resource, I should say, in the northeast of the U.S.

Jonathan Maxwell
Founder and CEO at SDCL

We're excited about the opportunity for return on existing capital going forward, although it's not necessarily marked in this NAV. We think there's opportunity for upside. There's, of course, opportunity for return on incremental invested capital, but we are not at this point putting anything material in place for incremental invested capital. I think growth at Onyx reflects a more cautious approach to expectations of new demand coming online. We would hope that those revised expectations could be met and even exceeded. We've also been in discussions with tenants, sorry, I should say tenants of the park and therefore clients of ours. From an energy perspective, we don't own the park, but we own the energy network. We've been in discussions with them about amending the tariffs.

Jonathan Maxwell
Founder and CEO at SDCL

Over the course of the last couple of years, we've seen some seasonality, and some demand adjustments that we do wish to pass through. Also, we've got a very long-term network there. Again, we are hoping, going forward, for a constructive outcome to those tariff negotiations. Again, we're taking a more cautious approach to that, I think in the valuation this time round. I think our expectations for return on existing capital going forward, relative to your EV/EBITDA calculations, would probably account for some of that. Even on a more cautious approach, we're expecting a reasonable unwind, or let's put it like this, a reasonable capacity for that EBITDA to grow within the context of the existing capital that we've already committed. There's an attractive growth profile embedded in RED, even after we've taken the provision. We expect that to be a continued performance.

Jonathan Maxwell
Founder and CEO at SDCL

Anything I've missed or misstated, Ben?

Ben Griffiths
Managing Director of Fund Management at SDCL

No. Although you referred to Onyx, but you were talking about RED-Rochester. Yes.

Jonathan Maxwell
Founder and CEO at SDCL

Okay. All right. My goodness.

Ben Griffiths
Managing Director of Fund Management at SDCL

Our portfolio's always on our mind.

Ed Warner
Chairman at LMAX Group

Sticking with RED-Rochester, another question from Charlie. RED-Rochester's covenant headroom is described as, quote, "tighter than normal." Can you please expand on this, and what is the solution? Eugene, I think it's you.

Eugene Kinghorn
Group CFO at SDCL

Yeah, no, we managed this carefully during the year. It was tighter than normal for a period of time. They've delivered post what we reported on in the annual results. They've delivered good performance in the first quarter. They are also amortizing their debt, similar or partially a response to Conor 's question just now in terms of EV multiple, but they're amortizing their debt quite fast naturally. We manage and monitor this. It's a little bit tighter than we would have liked, but it's not of such a concern to us in the sense that we wouldn't be able to manage it.

Ed Warner
Chairman at LMAX Group

Okay. It's a retail investor question. Are you able to fund required CapEx for the portfolio over the next five years without making disposals, tapping capital markets, brackets, debt/equity?

Jonathan Maxwell
Founder and CEO at SDCL

The major assumptions around CapEx have been limited to Onyx. As I've described, going across the rest of our portfolio, whether it's Primary Energy, which is EBITDA positive and contracted, Driva, Oliva, there is little, if any, in fact, I think in most cases no specific incremental invested capital requirements. I think the CapEx assumptions that we've had in the past and to date have been focused around Onyx and making sure that we can continue to support the business development. As we've described a number of times in today's meeting, we have, in this NAV, adjusted our expectations for further capital deployment and therefore growth in Onyx for the foreseeable future. In this valuation, coming back to it doesn't mean that Onyx doesn't have the opportunity to grow, but we have adjusted our expectations.

Jonathan Maxwell
Founder and CEO at SDCL

To answer your question, we intend to manage any incremental invested capital CapEx programs within the boundaries set out inside of the investment policy that we have proposed as part of the shareholder circular. I think the short answer would be yes, we should be okay going forward based on the proposals in front of you.

Ed Warner
Chairman at LMAX Group

Just sticking to Onyx again. Onyx appears to have delivered $10.6 million of EBITDA in the second half of calendar year 2025. Given the disclosures that only $128 million of the project equity relates to fully operational status, that seems a very positive result compared to budget. I just wondered if you want to comment on that.

Jonathan Maxwell
Founder and CEO at SDCL

Well, I always take the positive whenever to you.

Ben Griffiths
Managing Director of Fund Management at SDCL

Yeah, I think so. I think obviously very positive, as you say. We're confident about the performance of Onyx and the continued deployment of new sites. I think what this also represents is the growing aspect of the portfolio. As touched on, there is a steady stream of sites starting construction, and as a result of that, without wanting to point out the obvious, there's a steady stream of sites becoming operational continuously. There is year-on-year growth from an EBITDA point of view within the portfolios. This is what we're looking to continue with what we've proposed in terms of changes going forwards.

Jonathan Maxwell
Founder and CEO at SDCL

That EBITDA should continue to unwind. We've got assets under construction. Assets don't remain in construction for a very long time. Once they come out of construction, that will be further contributing to EBITDA numbers.

Ed Warner
Chairman at LMAX Group

Just turning to Primary Energy. Oh, hang on. Just lost the question. Is there now zero in the valuation for an extension of the Ohio Renewable Energy Certificate regime? Was this change in assumption the only reason for the fall in the value of Primary Energy?

Eugene Kinghorn
Group CFO at SDCL

It was the significant reason for the change in valuation in Primary. Outside of that, there wasn't too much to report on Primary in a good way. Yeah, we have retained an element of value for the renewable energy certificates in Primary Energy beyond 2026 on the basis that there is still work going on to find alternatives to the existing regime. There's not a lot of value retained, but there's an element of retained to move from mandatory to voluntary certificates, as well as initiatives to try and replace the existing scheme with something that remains meaningful to Primary Energy.

Ed Warner
Chairman at LMAX Group

Just staying with Primary Energy, I think I understand this question. If the compulsory element of the certificate was due to expire at the end of 2026, why was extension assumed in the valuation?

Ben Griffiths
Managing Director of Fund Management at SDCL

I was just going to add that there was a general expectation, and that wasn't just our expectation, it was that held by people in the industry, our management teams, advisors as well, that there was due to be an extension. They have seen that in other states in the U.S. as well. This is a state-specific scheme, needless to say. We did factor in uncertainty originally speaking, we did have some value in the valuation for the reasons I mentioned in terms of the wide expectation that there was going to be an extension. I think people will be highly aware of the political situation within the U.S. and the changes over the last 18 months, the desire to extend what is a compulsory or voluntary scheme around renewables and crediting those.

Ben Griffiths
Managing Director of Fund Management at SDCL

I think that is largely the result of the situation where we are today.

Jonathan Maxwell
Founder and CEO at SDCL

I'll make one other point actually, which is just an observation rather than anything that's specifically in our results. There's been a sort of widely described- headwind, regulatory headwind in the U.S., it does not actually hit all forms of efficiency particularly, indeed, clean energy solutions. Solar and wind, I think have had a particularly hard time then. There is a range of solutions, particularly those relate to on-site generation and efficiency, which continue to benefit from ITCs and support. One of the things that I think is most important to understand about Primary Energy is its enormous impact in terms of heat recovery, flue gas recovery, and environmental footprint improvement.

Jonathan Maxwell
Founder and CEO at SDCL

I think Primary Energy is actually, candidly, of all the things that we own in the U.S., I think it's probably our biggest bang for the buck from a pollution prevention and carbon emission reduction perspective. From an efficiency perspective, not wasting all of that heat and blast furnace gas. Instead of it boiling the atmosphere, instead we're using it to produce power and steam for the steel mills. It's a very solid project, whether it's in a red or a blue or a purple state, I think it's exactly the sort of thing that the U.S., frankly, the rest of the world needs to do.

Ed Warner
Chairman at LMAX Group

Why have you started a managed wind down before the vote on the 10th of July? What are your intentions if the wind down is rejected?

Jonathan Maxwell
Founder and CEO at SDCL

I think the company for the last 1.5 year has talked about its need to achieve disposals. I wouldn't say that we've started it ahead of the vote. I think we've been looking, as a procedural matter, to seek disposals of assets at good value for money over the last period. I think the difference that's being put to shareholders is actually a consent to sell the portfolio in its entirety rather than the individual disposal process, which has been candidly ongoing for a period of time, Ed. I don't think anything from a tactical perspective has changed. I think from a portfolio perspective, going back to the previous comment, and also many other comments and a comment question that you might come to, Ed, is that I think that some investors have expressed disappointment with the potential process taking a substantial amount of time.

Jonathan Maxwell
Founder and CEO at SDCL

Clearly the board have quite rightly telegraphed that that is a possibility or a risk. The other side of this, and I hope it's come across today, is that we feel it's particularly important to deliver value for money for shareholders and liquidity and distributions as soon as practicable. We are considering disposals tactically and also subject to the vote on the disposal of the portfolio as a whole. The disposal of the portfolio as a whole, as a final reflection, and I'll make this personal, I think personally, I think could achieve a combination of value for money and expediency, I should say, as soon as practicable. That will be tested, but I think that is obviously subject to the shareholder vote, Ed.

Ed Warner
Chairman at LMAX Group

Thanks, Jonathan. If you've got any final wrap-up comments, I think we'll end the Q&A there.

Jonathan Maxwell
Founder and CEO at SDCL

I think we are, first of all, very grateful for our long-term shareholders. Our message to you is that we're looking to maximize value for money at this point in the cycle, and we've been listening carefully to shareholders, as have the board. There'll be a vote exactly on the point that we've just made about selling the portfolio as a whole, as well as individual disposals, and we would be grateful, as we have been in the past, for your support. I think for shorter-term shareholders on the register, those objectives should align with the opportunity to create cash and get it back to shareholders as soon as practicable. I think the key messages, though, Ed, that we really wanted to get home today is that the underlying portfolio performance and operational characteristics of the business is robust.

Jonathan Maxwell
Founder and CEO at SDCL

The portfolio companies are strong. We own good businesses, good assets with a good future, and we're looking forward to finding the right home for them. We wanted to make sure that it's clear to shareholders that we're looking to deliver value for money as soon as practicable. We want to make it absolutely clear, notwithstanding the dividend process at the moment, that our priority and our eyes are focused on making sure we get distributions to shareholders through whatever means, capital or income distributions, as soon as practicable.

Jonathan Maxwell
Founder and CEO at SDCL

With that, Ed, I think that concludes our presentation. Thank you.

Analysts
    • Ben Griffiths
      Managing Director of Fund Management at SDCL
    • Ed Warner
      Chairman at LMAX Group
    • Eugene Kinghorn
      Group CFO at SDCL
    • Jonathan Maxwell
      Founder and CEO at SDCL
    • Tamsin Jordan
      Director of Fund Management and Investor Relations at SDCL
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