UK infrastructure fund manager Equitix is to acquire a 25% stake in the 220-MW Uskmouth coal-to-waste-pellets conversion project in Wales of SIMEC Atlantis Energy Ltd (LON:SAE), the latter said Tuesday.
The parties have signed a Heads of Terms (HoT), under which Equitix will pay GBP 32.9 million (USD 42.3m/EUR 37m) in cash for the stake. It would also contribute 25% of the remaining budgeted development costs to achieve financial close of the third party debt financing for the conversion costs, and then 25% of the conversion costs that will be covered by shareholders.
The fund manager’s investment is conditional on the completion of due diligence and satisfactory transaction documentation. The Equitix Investment Committee also needs to give its final approval for the transaction, which is seen to be concluded in the first half of 2019, SIMEC Atlantis said.
“Equitix is one of the most sophisticated and experienced investors in the waste to energy sector in the UK. They will bring expertise in financing, EPC contracting and negotiation, waste contracting and offtake negotiation to this world leading project,” said SIMEC Atlantis CEO Tim Cornelius.
The project involves the conversion of the coal-fired power plant to burn pellets produced from non-recyclable waste. A 20-year fuel supply agreement has already been agreed.
The conversion is estimated to take a year and a half after completion of the front-end engineering and design (FEED), the contract for which has been recently awarded to a consortium including engineering firm WSP UK Ltd and combustion system design specialist RJM Corporation Technical Services Ltd.
The waste-to-energy plant, once operational, will sell some of its electricity to an adjacent energy pellet processing facility at a fixed price, while the remainder will be exported to the grid, benefiting from an indexed floor price with potential upside from higher market prices.
The Equitix deal implies an equity value of GBP 131.5 million for Atlantis' 100% shareholding in Uskmouth Power.
(GBP 1 = USD 1.28/EUR 1.12)
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