Why the New Energy Solar (ASX:NEW) share price is climbing higher today

The New Energy Solar Ltd (ASX: NEW) share price is climbing higher today following the company's decision to sell its interest in one of its solar plants.

| More on:
an engineer in hard hat stands amid solar panels, part of a solar farm, as she holds a tablet in her hand and smiles.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The New Energy Solar Ltd (ASX: NEW) share price is climbing higher today, following the company's decision to sell its interest in Mount Signal 2.

At the time of writing the New Energy Solar share price is 0.5% higher to 86 cents. In comparison, the All Ordinaries Index (ASX: XAO) is down 0.2% to 6,931 points.

Sale of Mount Signal 2

This morning, New Energy Solar announced the sale of up to a 50% stake in its solar plant Mount Signal 2 (MS2) to US Solar Fund PLC. (USF).

The purchase price for a split stake in MS2 is valued between US$44 million to US$46 million. Management said that this is based on the last audited net asset value made for MS2 of US$89.5 million as at 30 June, 2020.

The sale of MS2 will comprise of two tranches. The first tranche will be an immediate acquisition of a 25% equity interest for the agreed price of US$23 million. The optional second tranche is an additional 25% interest for US$23 million. The latter can be increased or decreased by up to US$1 million based on achieving performance targets. It's worth noting that the second tranche can be exercised within 12 months of taking up the first tranche.

Completion of the first part of the sale is expected to be finalised sometime within the first quarter of 2021. New Energy Solar stated that the first of these funds received will be used to repay its outstanding debt. Should the sale of the second tranche follow through, the company will consider allocating funds towards additional capital management initiatives.

What did management say?

New Energy Solar CEO Mr John Martin commented on the deal:

MS2 is a substantial and well-situated project with a 20-year PPA with Southern California Edison. In light of the decision to sell NEW's Australian assets and focus on the US market, selling a smaller initial portion of the equity in MS2 this year is an outcome that suits NEW's positioning as it will maintain management of the asset. We look forward to entering into this partnership with USF.

About the New Energy Solar share price

The New Energy Solar share price has failed to perform in 2020 after reaching as high as $1.37 this time last year. At the current price of 86 cents, the company's shares have plummeted 36%, compared to the All Ords which is up almost 2% for the year.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

piggy bank at end of winding road
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors enjoyed a lucrative Tuesday session today.

Read more »

A hipster-looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.
Share Market News

ASX 200 dips on RBA interest rate decision

The ASX 200 gave up some of its intraday gains following the latest RBA interest rate announcement. But why?

Read more »

A man sees some good news on his phone and gives a little cheer.
Share Gainers

Why Capitol Health, Infratil, Newmont, and Race Oncology shares are charging higher

These shares are having a good session. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Beach Energy, Fortescue, Kina Securities, and Melbana Energy shares are dropping today

These shares are missing out on the good times today. But why?

Read more »

A young woman wearing overalls and a yellow t-shirt kicks one leg in the air showing excitement over the latest ASX 200 shares to hit 52-week highs
52-Week Highs

CBA, DroneShield, and these ASX stocks just hit 52-week highs

These shares are flying high on Tuesday. What's going on?

Read more »

Man smiling at a laptop because of a rising share price.
Broker Notes

Macquarie shares have 10% upside: Morgan Stanley

Another bullish broker on Macquarie.

Read more »

A woman looks questioning as she puts a coin into a piggy bank.
Broker Notes

Is the ANZ share price 'the best value of the major banks'?

ANZ shares are in the green today.

Read more »

Two kids in superhero capes.
Small Cap Shares

2 ASX small-cap shares I'd buy for massive growth potential

I’m bullish about these two stocks.

Read more »