SDCL Energy Efficiency Income (SEIT ) has doubled down on its widening discount by launching a £20m share buyback programme, equivalent to 2.1% of net asset value (NAV), two months after chief executive Jonathan Maxwell purchased 20,000 shares to highlight the anomaly.

The £1bn trust’s current 18.5% discount falls below the renewable infrastructure trust sector’s average discount of 15.6% and is almost double the average across all renewable trusts.

SDCL will pay for the share purchases from cash reserves, and on an ongoing basis will review its impact on the discount against the opportunity cost of not investing in its existing portfolio or pipeline of new projects.

SDCL share discount/premium over 12 months to 1 March 2023

Source: Morningstar, 3 April 

SDCL is one of a number of infrastructure trusts to announce a buyback programme recently, including Pantheon Infrastructure (PINT ), which said it had allocated £10m after its discount widened into the mid-teens.

Investment companies hope their shares return to a premium so they can issue shares and continue to invest in pipeline assets.

Numis analyst Gavin Trodd said infrastructure funds have a limited ability to buy back shares because of the illiquid nature of their investments combined with their commitments to income, but he believes ‘they can be a useful tool in the toolbox to manage discounts, discount volatility and provide liquidity’.

Aquila European Renewables (AERS ) announced a €20m buyback programme in February and Downing Renewables & Infrastructure (DORE ) in March. GCP Infrastructure (GCP ) also announced a £15m programme in March.

‘Wording around buyback policies can be somewhat “woolly”, given numerous potential calls on cash flows, and we believe it is important to watch the approach to buyback in practice,’ Trodd said.