US Solar Fund (USF) has given its potential buyer a second extension to complete due diligence on a portfolio whose 42 assets it has been assessing for five months.
The £115m investment trust, whose portfolio was stabilised by Amber Infrastructure Group when it replaced New Energy Solar Manager as investment adviser in December 2023, said it had granted the unidentified buyer a further 30 days of exclusivity. This was for it to gauge recently “remediated” assets such as Valley Centre and Granger in California and Chiloquin in Oregon.
This follows the expiry of a 60-day exclusivity period granted in August to the interested party, which was originally given 90 days to firm up a non-binding proposal made at a “significant premium” for USF’s solar portfolio in May. The approach came days before a continuation vote triggered by the wide share price discount.
Today USF said that while “detailed diligence has materially progressed”, USF’s US counsel had advised that the Federal Energy Regulatory Commission was currently taking up to five months to approve transactions.
The company said the decision to grant a second extension had been taken in preference to an “earn out” that could have seen the buyer adjust their payment according to how USF’s assets performed after acquisition. This would “introduce additional complexity” into the transaction, USF said.
USF’s dollar shares rose 1.3% to 38 cents in London, taking their gain this year to nearly 12%. Over five years they have fallen 46% and stand on a 38% discount below net asset value.
Our view
QuotedData senior analyst Matthew Read said: “While providing another extension to the exclusivity period will be frustrating for US Solar Fund shareholders, who have already endured a protracted wait for a resolution, allowing the prospective buyer more time to assess the performance of the recently remediated assets looks sensible at this point, particularly if this helps demonstrate that the problems have been resolved and supports a higher sale price. With USF in wind-down, a clean exit with greater certainty over the proceeds, rather than an earn-out arrangement, also has to be preferable at this stage. That said, regulatory approval could take up to five months and while the progress on due diligence is encouraging, without an agreed price or binding contract, there is still considerable uncertainty.”
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