VivoPower International has agreed to sell minority interests in two operating solar plants in North Carolina to a subsidiary of New Energy Solar, a sustainable investment fund ("NES") and the current majority owner of the plants.
The minority interests represent a 14.5% ownership in the 47 MW dc solar project in Maxton, North Carolina and 10.0% ownership in the 43 MW dc solar project in Bladen County, North Carolina. The projects were developed and brought to commercial operation by VivoPower and partially sold to NES in 2017. VivoPower will receive a cash consideration of $11.4 million, subject to closing adjustments, representing a valuation multiple of 12.7 times projected 2018 EBITDA. This valuation multiple does not reflect VivoPower’s expectation to eliminate more than $0.6 million in annual overhead related to managing the projects on behalf of NES. In connection with the sale, NES has also agreed to provid an advance payment of $4.0 million, with the balance paid upon final closing of the transaction, expected within 90 days, subject to customary closing conditions.
“The sale of these minority interests is the first step in executing decisions arising from the previously announced strategic review that will free up capital and allow us to reduce overhead costs” said Carl Weatherley-White, CEO of VivoPower. “Following our recently announced strategic shift to a more focused solar project development strategy, we determined that owning non-control, minority interest stakes in operating solar plants had no strategic value for us and were time and manpower intensive to manage. We will redeploy the capital towards higher returning initiatives with a better strategic fit and return on invested capital. The proceeds of the sale will go to either development activities, pay down debt, buy back stock or other corporate purposes.”
The sale will result in a non-cash charge of approximately $10.2 million, which represents an immediate adjustment to the carrying value of the minority interests of $21.6 million. This book value was established in the initial partial sale to NES, and represented the valuation of a long-term holding for 35 years. The difference is primarily due to the uncertainty that has manifested in relation to the projected future value of the sale of electricity in the wholesale North Carolina market after the current power sale contracts expire in 2027. Predicting the future value of wholesale power so far in the future is difficult, and results in a wide range of possible asset values for asset-in-use valuations. It also reflects changes in the interest rate environment.
The Company also continues to progress on initiatives arising from its strategic review and is currently in active discussions with a number of interested parties in relation to securing co-development capital or a sale of its 1.8GW US development portfolio.
The Company is also exploring new initiatives and strategic partnerships with power offtakers.
It is also pleased to inform the market that its Australian subsidiary, Aevitas currently has an all time record high pipeline of works, having also been awarded a further 5MW of solar project electrical works. In addition, the Company is in discussions to sell its Australian operating solar assets and expects to realise a book value gain.
Source: Company Press Release