Although the New Energy Solar (ASX: NEW) share price fell today, it rose around 12% this week. There appear to be a number of reasons for the action in the New Energy share price lately, not the least of which is a potential takeover by a US fund.
New Energy Solar is an investment fund that buys develops and operates solar-powered generation plants. This includes operating assets in Australia, Nevada, California, North Carolina, and Oregon.
What’s moving the New Energy share price
On 26 October New Energy announced it had completed the initial phase of a strategic asset review it launched in September.
According to a report in Renew Economy, New Energy’s head of investor relations Fleur Jouault said the ‘strategic review of the company’s portfolio would seek to identify how New Energy Solar can maximise the value of the business for its security holders, and to ensure that the company’s security price was better aligned with the business’ value’.
The strategic review has found the New Energy share price impeded predominantly by two issues. First, the current structure of the company, and second the limited support for the listed renewables sector in Australia. Moreover, the review noted that the Australian assets are in a mature operational state. Meanwhile, the US-based portfolio has yet to reach optimal operational performance. Fortunately, it identified material interest in the underlying solar assets from both domestic and international investors.
As a result, the board of New Energy Solar has decided to sell the two Australian assets. Accordingly, proceeds from the sale of assets will be available for a range of capital issues. These may include security buybacks, capital returns, and debt reduction.
Asset sales and takeovers
Thus far, there has been a lot of interest in New Energy’s Australian assets. The Australian reports that Palisade Investment Partners, Lighthouse Infrastructure, First Sentier, and the Dutch Infrastructure Fund are believed to be among those lining up to buy New Energy Solar’s Australian assets.
However, this is at a time when the national energy operator, AEMO, has warned against the rapid growth of solar power. In South Australia, there’s even been some discussion about potentially banning any new installations. Australia is a world leader in the adoption of rooftop solar power, and according to the AEMO, this has created an “invisible and uncontrolled” power source that risks destabilising electricity grids.