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.
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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.
