28/06/2018 - 14:39

Carnegie sells EMC in merger deal

28/06/2018 - 14:39

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Carnegie Clean Energy has agreed to sell its battery storage and microgrid business to ASX-listed Tag Pacific as part of an all-scrip merger deal.

Carnegie sells EMC in merger deal
Mike Ottaviano says the deal will allow EMC to take advantage of the microgrid market.

Carnegie Clean Energy has agreed to sell its battery storage and microgrid business to ASX-listed Tag Pacific as part of an all-scrip merger deal.

Under the deal, Carnegie will receive 58.5 million Tag shares in exchange for Energy Made Clean, which will then be merged with Tag and renamed MPower.

The Tag shares will be distributed in-specie to Carnegie shareholders and represent a 32 per cent interest in the new company.

Tag is a Sydney-based investment group focused on the energy industry, wth MPower currently operating as a subsidiary of the company.

The combined company will integrate the engineering, procurement and construction activities of both existing businesses.

EMC had revenues of about $15 million for the 2018 financial year, while the combined outfit would have brought in more than $50 million.

Some of EMC's current projects include the 10-mega watt Northam solar farm and the 5MW Kalbarri microgrid. 

Carnegie’s half-year results, which don’t include all EMC revenue due to a number of joint venture agreements, reported revenue of $3.3 million.

The merged entity will start the 2019 financial year with a committed order book of about $20 million.

According to Carnegie managing director Mike Ottaviano, EMC accounted for almost all of the company’s half-year revenue.

As part of the merger, EMC managing director John Davidson has been made redundant and will resign from Carnegie’s board, along with non-executive director Kieran O’Brien.

Mr Davidson will receive a $378,000 termination payment and has entered into a voluntary escrow agreement for 12 months with Carnegie for his shares in the company.

According to the company’s 2017 annual report, Mr Davidson is Carnegie’s largest shareholder with an 11.44 per cent stake in the company.

Mr Davidson has also agreed to the same escrow period for the Tag shares that he will receive as part of the transaction.

The merged company will be led by current Tag chief executive Nathan Wise, with a board and management team combined from each business.

As part of the board renewal process, Carnegie will nominate two directors to join the MPower board.

Mr Ottaviano said the deal would allow EMC to take advantage of the microgrid market.

“A scrip-based merger of EMC with MPower provides Carnegie shareholders with direct ownership of a specialist microgrid market leader and a strong financial platform for the 2019 financial year and beyond,” he said.

“The Carnegie board believes this is a more compelling alternative for shareholders than an organic growth strategy with EMC, which would require additional working capital over a longer time frame.”

Carnegie's primary operations will now be its wave energy technology. 

Mr Wise said the merger was an exciting opportunity for both companies.

“The enlarged MPower business will be well placed to take a leadership position and dominate this market,” he said

“We have plans to grow the combined group rapidly across our EPC, Build Own Operate (BOO) and Products divisions.

“We also plan to establish a dedicated vehicle to house our BOO solar and battery energy storage assets as they are developed.”

Shares in Carnegie finished off 18.5 per cent at 2.2 cents each.  

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