Ecofin US Renewables Infrastructure (RNEW) has announced that it has agreed to sell its portfolio of US distributed solar assets (the DG portfolio) to a subsidiary of True Green Capital Fund IV, LP for a cash consideration of approximately US$38.4m plus the assumption by the buyer of approximately US$15.6m of project-level debt and subject to certain customary completion adjustments. This disposal is the first sale to be signed as part of the managed wind-down and follows RNEW’s announcement on 9 September 2024 that the conclusion of its strategic review was that a managed wind-down was in the best interest of all shareholders.

Investment policy change

In order to implement the managed wind-down RNEW’s existing investment policy needs to be changed and this requires shareholder approval. Accordingly, a circular is to be sent to shareholders setting out the details of the managed wind-down and the disposal, as well as convening a general meeting to get the necessary shareholder approvals.

Highlights and financial effects of the disposal

RNEW has set out the following key highlights of the disposal

• The Disposal will be effected pursuant to a conditional membership interest purchase agreement (the Sale Agreement) made between the Seller, the Company and the Buyer under which the Seller has agreed to sell to the Buyer all of the membership interests of those wholly-owned intermediate holding companies through which the Company holds its interests in the DG Portfolio, which comprises the “ECHO”, “SED”, “Ellis Road”, “Oliver”, “Skillman” and “Delran” solar assets.
• The headline enterprise value of the Disposal is US$54.5m (which includes the assumption of approximately US$15.6m of debt secured on the DG Portfolio) (Headline Price). The cash payment to be payable by the Buyer to the Seller at completion of the Disposal (the Consideration), after making certain customary adjustments and after a further reduction equal to the Time-based Adjustment (which depends on the time taken to complete the Disposal as described further in the section headed “Summary of the Sale Agreement” below), is expected to be approximately US$38.4m (assuming completion by 31 January 2025).
• The value of the DG Portfolio as at 30 June 2024 of US$63.2m reduced on 27 November 2024 by US$11.3m to US$51.9m following final completion of the project-specific back-leverage bank facility in respect of the ECHO portfolio as announced on 28 November 2024 (the ECHO Financing). The estimated Consideration therefore represents a discount of approximately 26 per cent. to US$51.9m, being the pro forma asset value as at 30 June 2024 of the DG Portfolio after having taken account of the additional ECHO Financing.
• The net proceeds of the Disposal (after deduction of tax liabilities and other costs, including the costs of the Disposal) are expected to be approximately US$34.5m. Such net proceeds will be used by the Company to pay down the remaining balance on the Seller’s revolving credit facility (RCF) in full. As at 9 December 2024, US$32.5m was drawn on the RCF and the Group had cash balances of US$12.7m.  Separately, certain costs totalling US$2.5m resulted from the Strategic Review and were reflected in the Company’s net asset value as at 30 June 2024.
• As announced on 21 October 2024, the Seller (as borrower) has entered into an agreement to amend and extend the RCF with KeyBank with effect from 18 October 2024. Both tranches of the RCF are now set to mature on 18 October 2025. As from 18 October 2024, the total commitments of the two tranches reduced to US$32.5m and US$10.5m respectively. Upon completion of the Disposal, the total commitment of each tranche will be reduced further to US$7.5m and US$2.5m respectively, and the Seller is required to make a mandatory repayment of an amount equal to the greater of the net proceeds of the Disposal or the amount to reach such revised borrowing limits. The revised borrowing limits reflect the Seller’s lower borrowing base after the DG Portfolio is sold. Amounts repaid above the revised borrowing limits cannot be reborrowed.
• The Company also estimates that, taking into account the net proceeds receivable pursuant to the Disposal, the unaudited net asset value per ordinary share (as at 30 June 2024 on a pro forma basis) will be reduced to approximately US$0.53, representing a discount of 18.5 per cent. to the latest published unaudited net asset value per ordinary share as at 30 June 2024 of US$0.65).
• Completion is expected to occur in the first quarter of 2025 and in any event on or before 11 April 2025. Completion is subject to Shareholder approval of the new Investment Policy at the General Meeting to be convened in due course, the satisfaction or waiver of certain tax equity investor and lender consents, final completion occurring in respect of certain projects and certain other customary conditions under the Sale Agreement (the Conditions). Subject to completion occurring, the Company expects the Seller to receive the Consideration at completion of the Disposal less certain customary retentions against the Consideration, including for certain post-completion adjustments.