Why New Energy Solar (ASX: NEW) sold stake in Mount Signal 2 to US Solar Fund

  • December 31, 2020 10:12 AM AEDT
  • Hina Chowdhary
    Hina Chowdhary
    Director, Equity Hina Chowdhary
    1706 Posts

    Hina Chowdhary is the Director, Equity Research at Kalkine and has an extensive experience of about 15+ years in the area of Research, which includes 5+ years in Equities Research particularly. She has earned a Master of Science degree from the renow...

Why New Energy Solar (ASX: NEW) sold stake in Mount Signal 2 to US Solar Fund

Summary

  • New Energy Solar (ASX: NEW) announced a stake sale of up to 50 per cent in its solar power plant, Mount Signal 2 (MS2), to US Solar Fund (USF).
  • The transaction will be closed for a total price of between US$44 million and US$46 million.
  • Tranche 1 of the MS2 transaction is expected during the first quarter of 2021.

New Energy Solar (ASX: NEW) on Thursday announced the sale of up to a 50 per cent stake in its solar power plant to US Solar Fund (USF). The Mount Signal 2 (MS2) solar plant has been sold at a price between US$44 million and US$46 million, the company said in its latest update. 

 

Image Source: Shutterstock

The company in the solar power generation sector also said that the purchase price is consistent with the implied net asset value (NAV) for 50 per cent of MS2 of US$44.75 million. While the Tranche 1 of the transaction consists of an immediate acquisition of an initial 25 per cent equity interest for US$23 million, Tranche 2 has an option for USF to acquire a further 25 per cent equity interest for US$22 million. 

On 24 June 2020, New Energy Solar had announced the conditional stake sale in MS2 to a different buyer. However, the two companies were unable to reach an agreement on the terms of the transaction. Following this, the board of New Energy Solar decided to proceed with the superior proposal from USF.

Tranche 1 to complete in Q12021

The company said that Tranche 1 of the MS2 transaction is expected during the first quarter of 2021. Once the Australian asset sale process reaches completion, the company will consider additional capital management initiatives.

Image Source: Shutterstock

READ MORE: New Energy Solar To Undertake Strategic Review

What company says

Commenting on the development, John Martin, NEW CEO said that the comp[any is all set to sell 50 per cent stake in MS2 this year to bring down NEW’s gearing, confirm MS2's net asset value (NAV) and to reduce the weighting of the 200MWDC MS2 in NEW’s portfolio.  Sale of a smaller initial portion of the equity in MS2 this year is something that suits the company’s positioning as it will maintain management of the asset, Martin added.

READ MORE: How is agri business shifting to solar power system?

Stock performance

Shares of New Energy Solar remained unchanged at A$0.86 on Wednesday,30 December 2020, against the previous closing on Tuesday, 29 December 2020. The stock has given negative YTD returns of 36.76 per cent.

 

 


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