That UUUU sale was for about £90m. But I note an RNS in 2022 where they bought it from United Utilities for £100m, so although they sold it at a premium to the current book value, didn't they take a loss on the original purchase price?
Well spotted Team. Given the strong performance at fellow solar project developer Onyx another question could be what were the prospective future profits given up?
The purchase of £100m was for £96m project equity (i.e. they overpaid by £4m) and interestingly the write down was "technical performance, and hence electrical production, has been lower than expected owing to a variety of technical issues and delays in the related supply chain, favourable market rates for the sales of electricity not used by UUW have mitigated the impact on revenues."
As a 2024 shareholder and someone writing about it in 2024 I can see a long-term holder would feel sore about it being sold at a 10% "loss"; although SEIT say:
"The reduction in the valuation has predominantly resulted from distributions paid out in the period and discount rate increases."
In other words dividends are part of the reason for the reduction in valuation. The other reason those pesky discount rates!
It also looked to me that they are selling a prized asset just because they are under pressure to reduce their debt, so not the best reason for selling.
General Atlantic have come storming in with c.16% of SEIT and 25% of the manager. They could take coinvestment stakes to substantiate the NAV and see an immediate ROI on the discount narrowing.
The manager notes the companies need capital for growth. A lot of them are at the stage where additional debt financing will become possible, so debt could be moved from the trust to the asset level, freeing up RCF facility for any other investments not at that stage. I mean they say capital raises are not possible but actually it could be a good and proper thing to do, even if not conventional given the discount - a normal holdco would happily do a rights issue if it meant they could use capital more effectively. So really the talk of co-investment is really about providing a mark for the asset valuations, which is fine. You're basically doing a rights issue that someone else is paying for, its a bit dilutative but if it substantiates the NAV then fine.
That UUUU sale was for about £90m. But I note an RNS in 2022 where they bought it from United Utilities for £100m, so although they sold it at a premium to the current book value, didn't they take a loss on the original purchase price?
Well spotted Team. Given the strong performance at fellow solar project developer Onyx another question could be what were the prospective future profits given up?
The purchase of £100m was for £96m project equity (i.e. they overpaid by £4m) and interestingly the write down was "technical performance, and hence electrical production, has been lower than expected owing to a variety of technical issues and delays in the related supply chain, favourable market rates for the sales of electricity not used by UUW have mitigated the impact on revenues."
As a 2024 shareholder and someone writing about it in 2024 I can see a long-term holder would feel sore about it being sold at a 10% "loss"; although SEIT say:
"The reduction in the valuation has predominantly resulted from distributions paid out in the period and discount rate increases."
In other words dividends are part of the reason for the reduction in valuation. The other reason those pesky discount rates!
OB
It also looked to me that they are selling a prized asset just because they are under pressure to reduce their debt, so not the best reason for selling.
It is an interesting one.
General Atlantic have come storming in with c.16% of SEIT and 25% of the manager. They could take coinvestment stakes to substantiate the NAV and see an immediate ROI on the discount narrowing.
The manager notes the companies need capital for growth. A lot of them are at the stage where additional debt financing will become possible, so debt could be moved from the trust to the asset level, freeing up RCF facility for any other investments not at that stage. I mean they say capital raises are not possible but actually it could be a good and proper thing to do, even if not conventional given the discount - a normal holdco would happily do a rights issue if it meant they could use capital more effectively. So really the talk of co-investment is really about providing a mark for the asset valuations, which is fine. You're basically doing a rights issue that someone else is paying for, its a bit dilutative but if it substantiates the NAV then fine.