Coro Energy PLC (AIM:CORO) said it has signed a sale and purchase agreement (SPA) for the disposal of its Italian natural gas assets to Zodiac Energy PLC by way of the sale of the entire issued share capital of Coro Europe Limited for up to €7.5mln.
Coro, which has a natural gas and clean energy portfolio, said the disposal is fully in line with its strategic objectives, enabling the company to focus exclusively on Southeast Asia where demand for energy and the opportunity for material expansion remain very strong.
Zodiac Energy is a UK-based holding company for an Italian subsidiary company, Pengas Italiana Srl, which extracts crude petroleum and natural gas in Italy.
The total consideration under the SPA of up to €7.5mln includes contingent payments of up to an aggregate of €1.5mln through a 10% net profit interest (NPI) in the Italian portfolio over the three years from the date of completion of any disposal of the Italian portfolio.
An initial cash payment of €1.5mln will be made by Zodiac within seven business days of signing the SPA.
Following structural increases in global gas prices in 2022, Coro relaunched its Italian gas asset portfolio earlier in that year and it has since delivered significant free cash flows for the group. The previously reported 2022 unaudited revenues of the Italian portfolio were €6.0mln and it is expected to be profitable once Coro's audited accounts are published.
However, Coro said it remains primarily focused on Southeast Asia and the significant growth and investment opportunities the region provides. In expectation of near-term and long-awaited developments on the Duyung PSC and the company's renewable portfolio in Southeast Asia and with a view to capturing the value inherent in the Italian portfolio following gas price rises, the SPA was concluded with Zodiac, with the consideration then being available to deploy in line with its stated strategy.
The funds received will therefore be used to meet Duyung PSC expenditure; potential further solar projects in Vietnam (of which a likely acquisition was announced on 25 November 2022); to continue to progress Philippines solar and wind projects to achieve ready-to-build status; and for working capital whilst being mindful that the Eurobond due date is in April 2024, Coro said in a statement.
The company said its board believes that incremental capital expenditure in Southeast Asia is a more value-accretive use of Coro's resources and ultimately has a greater possibility of generating greater returns for shareholders than allocating additional capital to the development of the Italian portfolio.
Coro also announced that, further to the intended non-executive board appointment announced on 6 March 2023, Mark Hood has agreed to step down as a non-executive director to ensure the company maintains a balanced and cost-effective board.