Australia’s only publicly listed pure-play solar energy company, New Energy Solar, says it is on track to secure a sale of its Australian assets by the middle of the year as the company moves to focus its investments on overseas projects.
In its latest quarterly update, New Energy Solar told shareholders that the sale process for the company’s two Australian solar farms, the 111MW Beryl and 55.9MW Manildra solar farms, is nearing completion.
Last year, the ASX-listed company instigated a strategic review of its business operations in an effort to boost value for shareholders, concluding that it should focus on expanding its presence in overseas solar markets and would likely find value in selling its Australian projects.
The company has long flagged that it believes that there is better value to be found in overseas solar projects, particularly those in the United States, as a scarcity of Australian projects sees local profit margins squeezed.
Shares in New Energy Solar have consistently traded at a sizeable discount to the net asset value of the company’s portfolio, and the company’s board has sought ways to maximise the value of the company for shareholders.
The company’s shares closed at 80.5 cents at the end of trading on Wednesday, while the company recently calculated the company’s net-asset-value at $1.22 per security in a weekly update published on Tuesday.
It says it has already selected potential buyers for each of the Beryl and Manildra solar farms and is currently undertaking negotiations with the bidders, who were completing due diligence processes and conducting visits on site.
The company expects to announce the outcome of the sale by the end of June.
“The process remains on schedule with completion anticipated by mid-2021,” the company said in its quarterly update. “Subject to completion, proceeds from the asset sale will be available for a range of capital management initiatives, which may include security buybacks, capital returns and debt reduction.”
The company will seek shareholder approval at its forthcoming AGM to undertake a share buyback of up to 25 per cent of the company’s issued securities to provide the company that option – although flagged that it was not a given that a buyback would take place.
The two Australian assets have been strong performers in the Australian market, having been located in an ideal part of the grid – operating at high capacity factors and with favourable marginal-loss-factor determinations. The Manildra solar farm has an existing off-take agreement with EnergyAustralia, and the Beryl solar farm sells power to a group of off-takers, including Sydney Metro and Kellogg’s.
However, the company has suffered curtailments in both its Australian and Californian plants and said that its portfolio underperformed for the first quarter of 2021, partly as a result of an ongoing outage at plants located as Rosamond in California that had been damaged by bushfire.
The exit of New Energy Solar from the Australian market is part of a larger trend that has seen other ASX listed renewable energy companies taken off the market. Last year both Windlab and Infigen were delisted from the ASX and taken into private ownership, and Tilt Renewables is set to follow the same fate, as an AGL led consortium makes a $2 billion play for Tilt’s Australian business.