Carnegie offloads solar, battery business in exchange for a third of Tag Pacific
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Carnegie Clean Energy is selling off its money-making solar and battery division, leaving the company with a stake in the new owner and its wave technology.
Microgrid and utility battery installer Tag Pacific (ASX:TAG) is buying Carnegie’s Energy Made Clean arm in an all-scrip deal worth $4.1 million at today’s share price.
It will pay Carnegie (ASX:CCE) 58.5 million shares, or 32 per cent of new-look Tag, which Carnegie will give to its 11,000 shareholders.
The expanded Tag will be renamed MPower, the name of its own clean energy subsidiary.
The deal is conditional on Tag raising $4 million from investors.
CEO and managing director of Carnegie Clean Energy, Dr Michael Ottaviano, says while the subsidiary is throwing off cash — about $15 million this year — it isn’t profitable.
They had the choice of doubling down on that unit themselves, or selling it to another company specialising in the microgrid and energy storage area.
“Its a faster way to achieve the same aim in a market that’s moving rapidly,” he told Stockhead.
Another factor was the fact that once a company starts making more than $20 million a year it loses access to the tax rebate scheme, which Carnegie needs to fund the wave tech research.
Carnegie will go back to being a pure wave tech company. Dr Ottaviano says they’re about three years from commercialisation of that.
This doesn’t mean Tag will inherit a range of existing Energy Made Clean projects though, the 10 MW Northam Solar farm and the Garden Island microgrid.
Tag Pacific chief executive Nathan Wise told Stockhead they have first right of refusal over the existing projects if Carnegie chooses to sell.
He believes there is more consolidation coming in the energy storage and microgrid markets as companies begin to compete harder for remote, off-grid projects.
Where Tag has been busy moving into the utility battery storage arena, it has struggled to lift revenues.
In the six months to the end of December 2017 revenue slipped by 3 per cent, compared to the same period in 2016, to 21.7 million.
Similarly, Carnegie’s revenue began to rev up after it acquired Energy Made Clean in late 2016.
MPower and Energy Made Clean would have had revenue of $50 million in fiscal 2018 and Tag says they will start with an order book worth $20 million.
“We have plans to grow the combined group rapidly across our EPC, Build Own and Operate (BOO) and Products divisions. We also plan to establish a dedicated vehicle to house our BOO solar and battery assets as they are developed,” said Mr Wise.
Carnegie shares fell 7.4 per cent on the news that it’s selling its revenue engine, to 25c.
Tag shares bounced 11 per cent to hit 7c.