ReVolve Renewable Power Corp. (TSXV: REVV) (“ReVolve” or the “Company”), has signed a definitive purchase agreement (the “Purchase Agreement”) to acquire 100% of the share capital of Centrica Business Solutions Mexico S.A. de C.V. (“CBS Mexico), a Mexican incorporated company and subsidiary of Centrica PLC (LON:CLA) for MX$33,000,000 (the “Acquisition”). CBS Mexico is involved in the distributed generation market in Mexico focused on designing, installing and operating a range of different distributed generation solutions / projects located on the premises of various industrial customers.
The Acquisition once completed will immediately add a base of operating projects and recurring revenue to the Company’s newly established distributed generation division “ReVolve Renewable Business Solutions” as announced on the 26th April 2022. This division was established to target distributed generation projects with customers across a range of different industries in the US and Mexico. These projects include rooftop solar, battery storage and energy efficiency projects of up to 5MW located at the customers premises. The Company’s strategy is to develop, construct and finance these projects and will enter into long term (up to 10 years) power purchase agreements for the sale of electricity from the projects with the underlying customers.
- Revolve has agreed to pay Centrica MX$33,000,000 for the purchase of 100% of the issued and outstanding share capital of CBS Mexico subject to standard working capital adjustments at completion;
- The assets of CBS Mexico being acquired include six (6) operational rooftop solar projects and one (1) operational combined heat & power project with a combined capacity of 2.85MW’s (the “Operational Projects”). The energy generated by these projects is sold under a number of fixed price power purchase agreements with industrial clients located in Central Mexico with an average remaining term of approximately 8 years. The Operational Projects were commissioned during the period 2019 to 2021.
- The Operational Projects are expected to generate revenues and EBITDA in excess of equivalent US$400,000 and US$300,000 respectively per annum, refer to currency note below.
- In addition to these projects the assets of CBS Mexico also include (i) a 3MW combined heat and power project (the “Construction Project”), which has been installed at the site of an industrial user, has completed pre commissioning and is awaiting receipt of final permits prior to commercial operations commencing and (ii) cash and inventory. Once operational the energy generated by the Construction Project will also be sold under a fixed price power purchase agreement with a term of 10 years.
- The Acquisition is being completed on a debt and liability free basis and CBS Mexico is not expected to have any employees at completion.
- The Acquisition is subject to customary closing conditions and the other conditions set out in the Purchase Agreement. Subject to satisfaction of such conditions, the Acquisition is expected to close within the next 45 days. Conditional approval has been received from the TSX Venture Exchange (the “TSXV”) as the Acquisition is considered a “reviewable acquisition” in accordance with Policy 5.3 of the TSXV. Completion of the Acquisition is subject to final approval of the TSXV.
Concurrently with signing of the Purchase Agreement the Company has also signed financing agreements with RE Royalties Ltd (TSXV:RE) for the provision of a C$1.6m secured loan to part finance the Acquisition. The financing agreements consist of a secured loan agreement and a royalty agreement between ReVolve and RE Royalties.
The Secured Loan will be drawn down as part of completion of the Acquisition and will have a term of 24 months. It will be repayable at maturity, bear interest at 10% on drawn funds, with interest payable on a quarterly basis during the term. The Company will pay RE Royalties a financing fee of 1.5% of the Secured Loan amount on signing and final repayment of the loan. The Secured Loan will be secured on certain assets of the Company.
The Company has also entered into a royalty agreement with RE Royalties under, which they will receive a variable royalty of between 1% to 5% on gross revenues generated by a number of the Operational Projects for the life of the power purchase agreements for each relevant Operational Project.
The Company and RE Royalties expect to collaborate on further distribution generation projects as the Company looks to continue to aggressive grow this part of its business.
Steve Dalton, CEO of ReVolve, said: “We are extremely excited about the opportunity presented by the Acquisition. It will fast track the Company’s strategy for the distributed generation market while moving the business from being a pure development company to an independent power producer generating electricity, revenues and cashflow. We are also looking forward to establishing a broader partnership with the RE Royalties team as we look to develop and build out a pipeline of distributed generation assets in the US and Mexico throughout the course of this year and beyond.”
