IPPToday #320: Equitix to acquire 25% stake in 220 MW coal conversion project in Wales
Related M&A Transactions
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Atlantis has announced that it has signed a Heads of Terms to sell a 25% shareholding in Uskmouth Power Station to Equitix for a cash consideration of GBP32.9 million (US$42.2 million).
Uskmouth Power Station is an existing coal-fired power plant located in Newport, south-east Wales. Atlantis plans to convert the plant to generate electricity from 100% waste-derived energy pellets. Following conversion, the power station will generate 220 MW of baseload power using energy pellets produced from non-recyclable waste destined for landfill, with an average caloriﬁc value of 20 MJ per kg.
The conversion is expected to take 18 months post completion of front-end engineering and design, with a target of ﬁrst production in Q4 2020. The converted station will have an operational life of at least 20 years.
Atlantis has already agreed 20-year power purchase agreements (PPAs) and a 20-year fuel supply agreement for the project. Under the PPAs, a proportion of the electricity generated will be sold to the adjacent energy pellet processing facility at an indexed fixed price with the remainder exported to the grid and benefiting from an indexed floor price with potential upside from higher market prices.
The agreed consideration implies an equity value of GBP131.5 million (US$168.7 million) for Atlantis’ current 100% shareholding in the project.
Equitix's investment is conditional on the completion of its confirmatory due diligence on the project and agreeing satisfactory transaction documentation. Final approval of the Equitix Investment Committee is required prior to completion of the transaction, which is anticipated to complete in H1 2019.
Subject to the above conditions, Equitix will also contribute 25% of the remaining budgeted development costs to achieve financial close of the third party debt financing envisaged for the conversion costs of the power station and then 25% of the conversion costs that will be funded by shareholders.
As a major investor and developer in the UK and European infrastructure markets, Equitix has extensive experience in raising competitive finance for infrastructure projects covering traditional bank funding, private placements, publicly listed wrapped and unwrapped bonds. As such, it has excellent relationships with the potential funders being considered for the project to supplement and further strengthen those of Atlantis.