Australia’s only listed pure solar play, New Energy Solar, is considering the sale of more of its solar energy portfolio – this time in the United States – as the company’s management struggles to lift the company’s share price.
New Energy Solar delivered an update for shareholders on Friday, in which it slashed dividend payments after output across its US-based solar portfolio fell short of expectations.
Last year, New Energy Solar offloaded its only two Australian assets – the Manildra and Beryl solar farms – in an effort to improve the value of the company for shareholders, by paying down debts and buying back a portion of outstanding shares.
It left the company with a portfolio of 14 solar energy projects, all located in the United States, where the company said that it saw a more profitable economic environment for solar projects.
However, the performance of the US portfolio has been impacted by a range of unexpected events, including the Covid-19 pandemic, damage at two of its Californian projects caused by bushfires and curtailment impacting output at a third project.
The company’s management has openly expressed frustration that its shares have valued the company at a significant discount to its asset valuation, promoting the company to consider selling some or all of its remaining US solar portfolio.
“NEW, with its portfolio now entirely located in the United States, is part of an industry that is experiencing extraordinary disruption and change. Unfortunately, NEW has been unable, thus far, to translate its participation in the US market into value in its listed securities for the benefit of its shareholders,” the company said in a statement to shareholders on Friday.
In a separate statement on Monday, New Energy Solar confirmed that it would commence a search for potential buyers for some or all of its US portfolio.
RenewEconomy understands that the company will not look to reinvest the proceeds of any sale of its US-based assets, instead will return the proceeds to shareholders. It raises the prospect of the company exiting the market altogether.
New Energy Solar’s shares currently trade at around 91 cents per share – at quite a discount to the $1.15 per share valuation produced by the company’s management – prompting the company’s management to further re-evaluate how to lift the share price.
In 2020, RBC Capital Markets was commissioned to undertake a strategic review of the New Energy Solar business, recommending the Australian asset sale and a simplification of the company’s corporate structure.
On Friday, the company said it would reconsider the recommendations of the review and undertake further measures to improve its performance.
“While it has been a busy year, unfortunately the share price has not shown sustained improvement, so the Board has decided to revisit the recommendations of its Strategic Review to return value to NEW shareholders,” New Energy Solar CEO Liam Thomas said.
“These recommendations include individual asset and portfolio sales. Exploring such transactions is expected to take at least six months.”
New Energy Solar was listed on the ASX to offer Australian investors access to a conventional solar ‘yield-co’ – where the primary aim of the business is to distribute profits to shareholders through regular dividends – by amassing a portfolio of solar projects that have already secured long-term power purchase agreements.
While the company promotes the business model as being capable of generating regular and predicable revenues, it hasn’t prevented the performance of some projects from being impacted by unexpected events.
