ReVolve Renewable Power Corp (TSX-V:REVV) said it has completed the previously announced purchase of a 100% interest in Centrica Business Solutions Mexico SA de CV (CBS Mexico) from Centrica PLC, which owns and operates six distributed generation projects, with a seventh under development, in Mexico.
ReVolve paid Centrica a cash consideration of 29 million Mexican pesos for CBS Mexico, following the application of standard adjustments to the consideration price of 33 million Mexican pesos announced on May 26, 2022.
In a statement, Steve Dalton, CEO of ReVolve, commented: "We are extremely excited about completing the acquisition of CBS Mexico. It accelerates ReVolve's entry into the distributed generation market while transitioning our business from being solely a development company to an independent power producer generating electricity, revenues and cashflow."
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“We are looking forward to establishing a broader partnership with RE Royalties as we develop and create a pipeline of distributed generation assets in the US and Mexico and expect to announce new sales contracts as we continue to convert our pipeline of opportunities into new renewable energy generating capacity and revenue," he added.
ReVolve said the acquisition will provide the company with an established and ongoing recurring revenue stream from six operating distributed generation projects and near-term visibility to revenues from one additional distributed generation project.
The operational projects have a total capacity of 2.85 megawatt (MW) while the construction project, now fully constructed, awaiting final permits and expected to be operational in the first half of 2023, adds further capacity of 3MW.
The operational projects are estimated to generate annual revenues of $400,000 and earnings before interest, tax, depreciation and amortization (EBITDA) of US$300,000, while the construction project, once operational, is estimated to generate an additional $1 million in revenue and $400,000 of EBITDA.
ReVolve said the acquisition of CBS Mexico immediately delivers a solid foundation of operating projects and a recurring base of revenues to the company's newly established distributed generation (DG) division, which operates as ReVolve Renewable Business Solutions.
The DG division was established to target distributed generation projects with customers across a range of different industries, including manufacturing operations and hotel chains, in the US and Mexico. These projects include rooftop solar, battery storage and energy efficiency projects of up to 5MW located at the customer's premises.
The company said its vision is to develop, construct and finance projects entering into long-term (typically in the range of 10 years) power purchase agreements (PPAs) for the sale of electricity from the projects to underlying customers.
ReVolve said the cash consideration of the CBS Mexico transaction will be funded through a combination of cash on hand and a C$1.6 million, two-year secured loan and royalty agreement between Revolve and RE Royalties Ltd.
The secured loan is repayable at maturity and bears interest at 10% payable on a quarterly basis during the term.
ReVolve said it has paid RE Royalties a financing fee of 1.5% of the secured loan amount on signing and drawdown of the loan facility. An exit fee of 1.5% will also be due on final repayment of the loan at the end of the two-year term.
In addition, ReVolve has entered into a royalty agreement with RE Royalties, under which RE will receive a variable royalty of between 1% to 5% on gross revenues generated on certain of the operational projects for the life of the PPAs for each relevant operational project.
ReVolve and RE Royalties expect to collaborate on further distribution generation projects as the company looks to continue to aggressively grow this part of its business.
ReVolve Renewable Power is in the business of developing utility-scale renewable energy generation projects in North America with a particular focus on wind, solar and battery storage technologies.
Going forward, the company is targeting 5,000MW of utility-scale projects under development in the US and Mexico, and in parallel is rapidly growing its portfolio of revenue-generating distributed generation assets.
Contact the author at jon.hopkins@proactiveinvestors.com