The Sequoia Economic Infrastructure investment trust (SEQI) is questioning the actions of the UK government as the value of its loan to collapsed energy supplier Bulb Energy halves.
The latest monthly update for the £1.8bn investment trust confirms Bulb’s valuation has been marked at approximately 52p in the pound, given Bulb’s collapse is being handled through the special administration regime, which was created in 2011 to ensure the continuity of energy supply to consumers during administration. The special administrator has access to government funds to continue energy supply for Bulb’s 1.7 million customers, but as a result lenders to Bulb are unable to enforce their security while the administration process is ongoing.
In November, the investment trust hit back at claims it should have slashed the value of its £55m loan to Bulb in the months leading up to the energy supplier’s collapse.
SEQI is now working under the assumption the assets of Bulb will have no value at all after the repayment of the government’s capital. The 52p valuation reflects the value of assets at Bulb’s parent company Simple, which is undergoing a normal administration process.
But SEQI’s investment advisers said they would have expected full repayment of the investment trust’s loan in a relatively timely manner if a supplier of last resort process had been adopted. As such, they are working with advisers to understand if due process was followed in the appointment of the special administrator.
The decrease in Bulb’s valuation has prompted a 1.6p hit to the investment trust’s net asset value, which stood at 101.1p at the end of the month.
SEQI described the update to the valuation of Bulb’s loan as “conservative and realistic” given the government and special administrators had not disclosed any plan for Bulb’s exit from the special administration regime.
SEQI noted it had two other underperforming loans in its portfolio: an Australian potassium project, and a property tenanted by a private school in Washington DC. It said it remained “actively focused” on all three loans and would update investors when appropriate.