US Solar Fund (USF) has sold a purchase option over its 50% interest in its 200MW Mount Signal 2 (MS2) project in California to MN8 Energy (MN8), a renewable energy business formerly known as Goldman Sachs Renewable Power.
Under the terms of the deal, MN8 will pay a USF a non-refundable option fee of US$1m (€0.99m) and will have the option, for an initial term of six months extendable for a further three months by mutual agreement, to acquire USF’s 50% interest in MS2 for an additional US$52.2m excluding working capital.
The total proceeds of $53.2m that USF will receive if MN8 exercises the Option are consistent with the net asset value at which USF holds MS2 at 31 March 2022 and the sale would imply a gross return of 11% per annum, since USF announced the agreement to acquire up to 50% of MS2 from New Energy Solar (NEW) in December 2020.
MS2 is the only jointly-owned asset in the USF portfolio.
With NEW announcing the sale of its US portfolio of 14 solar assets to a subsidiary of MN8 today for a gross purchase price of US$244.5m, including its 50% interest in MS2, the Board and Investment Manager believe this is an attractive opportunity for USF to realise the value in the MS2 investment.
NEW has reached a binding agreement to sell its portfolio of 14 US solar assets to a subsidiary of MN8 Energy
The Option structure allows MN8 to complete the acquisition of USF’s 50% interest after their acquisition of NEW’s 50% while providing price certainty to USF, it said.
Chief executive of USF’s investment manager Liam Thomas said: “We’re pleased to agree this option with a high-profile renewable energy business like MN8, and we believe it is a win-win for USF.
“If exercised, it will monetise a significant existing asset at its current carrying value.
“If not exercised, it delivers an incremental US$1m of value in the current financial year.”
Should the sale proceed, USF will use the proceeds for new investments, working capital, and/or future capital management.
A further announcement will be made at the point when the Option is exercised or expires.