TIDMGLO
RNS Number : 0787Z
ContourGlobal PLC
20 January 2022
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR
RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN
WHOLE OR IN PART, IN OR INTO ANY JURISDICTION IN WHICH IT WOULD BE
UNLAWFUL TO DO SO. PLEASE SEE THE IMPORTANT NOTICE AT THE OF THIS
ANNOUNCEMENT.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
20 January 2022
ContourGlobal plc
Successful sale of Brazil hydro-electric generation business to
Patria Investments for 1.73 Billion BRL
-- Sale of Brazil hydro business at a valuation of 1.73bn BRL
($313m (1) USD) including the assumption of net debt and other
customary adjustments
-- Creates compelling value for plc shareholders and bondholders
with an implied valuation of 9.7x LTM Q3 2021 EV/EBITDA and is cash
flow and credit accretive
-- Net proceeds to ContourGlobal of approximately $110m USD
-- Execution of strategy to close the discrepancy between share
price and private market value of the Company's assets
-- Wind assets under exclusivity with buyer and expected to be sold in 1H 2022
Kani Lux Holdings S.à r.l., a majority-owned subsidiary of
ContourGlobal plc ("ContourGlobal" or the "Company "), has signed a
definitive agreement with Infraestrutura Brasi l Holding XVII S.A
("Pátria Investments ") to sell its Brazilian hydro power plants
(the "Brazil hydro business") for a total cash consideration of
1.73 billion BRL ($313 million USD) including the assumption of net
debt and other customary adjustments (the "Transaction"). The
Transaction is expected to complete in 2Q 2022.
The Brazil hydro business generated 178.4 million BRL ($33.4
million USD) of adjusted EBITDA for the 12 months ended September
30, 2021. The Company expects proceeds from the transaction net of
tax and reflecting the Company's underlying share of ownership of
approximately $110 million USD .
The Transaction creates compelling value for ContourGlobal
shareholders with an implied valuation for the Brazil hydro
business of 9.7x LTM Q3 2021 EV/EBITDA. I n 2021, ContourGlobal
announced that it had started the process of monetizing its
renewables business in Brazil, in addition to considering further
transactions with respect to other renewable assets, in order to
unlock value for shareholders and close the gap between its share
price and the intrinsic value of the Company's assets as valued by
the private market. The sale of the Brazil hydro business
represents a first step in this direction and the Company expects
to sell its wind power generation assets in H1 2022, and has
granted exclusivity to Patria Investments to enter into a
transaction for those assets. T he Company will determine whether
to re-invest the expected proceeds into new growth opportunities or
return capital to shareholders consistent with its capital
allocation strategy and circumstances when the transaction closes,
expected in Q2 2022.
The Transaction is classified under the Listing Rules as a Class
1 transaction and therefore requires the approval of
ContourGlobal's shareholders.
Strategic rationale
-- Unlocks value for shareholders reflecting value in excess of
that implied for the business in GLO's stock price
-- Strengthens ContourGlobal's balance sheet and enables more effective capital allocation
-- Major step in the exit of the only meaningful non-EUR or USD
currency exposure for the Company
-- Transaction is cash flow and credit accretive from a parent
company perspective: the Brazilian assets, including the hydro
assets being divested, do not meaningfully contribute to the
ContourGlobal plc's cash flow available for debt service, "CFADS",
the key credit metric under the parent company's bond indenture. In
2021, CFADS for the ContourGlobal group was approximately $367
million USD of which 8% represented the Brazil hydro contribution
to the Company's total CFADS. The Debt Service Coverage Ratio under
Contour's indenture based upon 2021 CFADS is a robust 7.5x.
Transaction highlights
-- Sale of hydro-electric power generation plants for 1.73
billion BRL ($313 million USD) including the assumption of net debt
and other customary adjustments, with an implied valuation of 9.7x
LTM Q3 2021 EV/EBITDA
-- The Company intends to use the expected net proceeds to
either re-invest in attractive new growth opportunities in low
carbon power generation or return capital to shareholders
-- Non EUR or USD adjusted EBITDA currency exposure for the Group will decrease from 14% to 10%
Joseph C. Brandt, President and Chief Executive Officer of
ContourGlobal, said:
"We are pleased to have agreed the sale of our hydro assets in
Brazil to Pátria Investments following a competitive process.
Patria is the leading private equity investor in Brazil and has
built an impressive business based upon careful long-term
investing. They are a strong owner of this business.
This sale is consistent with our drive to unlock value from
undervalued assets in our portfolio and deliver further attractive
risk adjusted returns for our shareholders, and demonstrates that
value differential for our assets in the public and private
markets."
Brazil hydro business
The hydro assets in Brazil comprise nine run-of-river
hydro-electric generating businesses operating under long-term
contracts with 168MW of gross capacity. The assets in the portfolio
were developed, constructed or acquired by ContourGlobal. As of
September 30, 2021 the Brazil hydro business had a gross asset
value of $105.4 million USD.
For the 12 month period ended September 30, 2021 the Brazil
hydro business generated:
LTM September Brazil hydro % Total Pro-forma
2021 $'m business(2) Group Group excluding
Brazil hydro
Revenue 50.1 2.7% 1,827.8
------------- -------- -----------------
Adjusted EBITDA 33.4 4.2% 767.9
------------- -------- -----------------
Proportionate
Adj. EBITDA 24.6 3.8% 624.8
------------- -------- -----------------
PBT 11.0 15.9% 58.2
------------- -------- -----------------
Funds from
operations 21.1 5.1% 393.3
------------- -------- -----------------
Summary of key terms of the Transaction
On January 20, 2022 Kani Lux Holdings S.à r.l. (the "Seller"),
an indirect majority-owned subsidiary of the Company, and Pátria
Investments entered into an agreement in respect of the Transaction
(the "Sale Agreement"). Pursuant to the Sale Agreement, Pátria
Investments has agreed to acquire the entire issued capital of
Contour Global do Brasil Participações S.A. (the "Target") for
consideration of 897,923,000 BRL ($162.7 million USD) for 100% of
the equity, subject to certain customary post-closing adjustments
in respect of net debt and working capital. The Sale Agreement is
governed by Brazilian law.
Closing of the Transaction is conditional upon the satisfaction
or waiver of certain conditions under the Sale Agreement,
including: (i) the approval of ContourGlobal's shareholders; (ii)
certain regulatory approvals in Brazil; (iii) completion of a
pre-sale reorganization; and (iv) certain consents or waivers being
obtained from third parties who are counterparties to various
agreements with the Target or its subsidiaries (the "Target
Group").
The Seller and Pátria Investments have the right to terminate
the Sale Agreement in certain circumstances, including: (i) if the
Transaction has not closed by the date falling 9 months after the
date of the Sale Ag reement ; (ii) if certain closing obligations
have not been complied with; and (iii) in the case of Pátria
Investments only, if certain warranties given by the Seller are
breached before closing (or would be breached upon closing).
The Seller has given covenants customary for a Brazilian-law
governed acquisition of the size and nature of the Transaction
regarding the conduct of the business of the Target Group between
the date of the Sale Agreement and closing, including customary
obligations on the Seller to procure that the Target Group does not
do (or omit to do) certain acts prior to closing. The Seller has
also provided warranties and indemnities to Pátria Investments that
are customary for a Brazilian-law governed acquisition of the size
and nature of the Transaction. The warranties and indemnities are
subject to subject to customary qualifications and limitations.
In addition, the Company has entered into an English law deed of
guarantee, dated January 20, 2022, to guarantee the payment
obligations of the Seller under the Sale Agreement.
Irrevocable undertaking
ContourGlobal L.P., the Company's majority shareholder (holding,
as at January 20, 2022, approximately 71.4% of the Company's
ordinary share capital) has provided an irrevocable undertaking to
vote in favor of a shareholder resolution to approve the
Transaction.
1 Exchange rate 1 BRL = 0.181159 $
2 LTM September 2021 exchange rate 1 BRL = 0.18724 $
Enquiries
Investor Relations - ContourGlobal
Jose Cano
+44 203 626 9062
jose.cano@contourglobal.com
investor.relations@contourglobal.com
Media - Brunswick
Charles Pretzlik / Will Medvei
Tel: +44 (0) 207 404 5959
Contourglobal@brunswickgroup.com
The person responsible for arranging for the release of this
announcement on behalf of ContourGlobal plc is Jose Cano, Senior
Vice President Investor Relations.
ABOUT CONTOURGLOBAL
ContourGlobal is listed on the premium segment of the London
Stock Exchange (TKR: GLO). ContourGlobal is an international owner
and operator of contracted wholesale power generation businesses
with approximately 6.3 GW in operation in 20 countries.
ContourGlobal operates a portfolio of 138 thermal and renewable
power plants across Europe, North America, Latin America, and
Africa utilizing a wide range of technologies.
ABOUT PATRIA INVESTMENTS
Patria is a leading alternative investment firm focused in Latin
America, with over 30 years of history and managing products across
Private Equity, Infrastructure, Credit, Public Equities and Real
Estate. As of September 30, 2021, including the combination with
Moneda Asset Management which closed on December 1, 2021, the
combined platform managed nearly $25 billion of assets under
management, with a global presence in 11 offices across 4
continents. Through its investments Patria seeks to transform
industries and untangle bottlenecks, generating attractive returns
for its investors, while creating sustainable value for society.
Further information is available at www.patria.com .
ADVISORS
BNP Paribas and Cantor Fitzgerald are serving as financial
advisors to ContourGlobal in relation to the Transaction.
Pinheiro Neto Advogados and Slaughter and May are serving as
legal advisors to ContourGlobal in relation to the Transaction.
IMPORTANT NOTICE
This announcement has been issued by and is the sole
responsibility of the Company. The information contained in this
announcement is for background purposes only and does not purport
to be full or complete. The information in this announcement is
subject to change without notice. Subject to the UK Listing Rules,
the UK Disclosure Guidance and Transparency Rules and the Market
Abuse Regulation (596/2014) as retained in the UK (UK MAR), the
issue of this announcement shall not, under any circumstances,
create any implication that there has been no change in the affairs
of ContourGlobal since the date of this announcement or that the
information in this announcement is correct as at any time
subsequent to the date of this announcement.
Certain information contained in this announcement, including
any information as to ContourGlobal's strategy, plans or future
financial or operating performance constitutes "forward-looking
statements". These forward looking statements can be identified by
the use of terminology such as, "aims", "anticipates", "assumes",
"believes", "budgets", "could", "contemplates", "continues",
"estimates", "expects", "intends", "may", "plans", "predicts",
"projects", "schedules", "seeks", "shall", "should", "targets",
"would", "will" or, in each case, their negative or other
variations or comparable terminology. Forward looking statements
appear in a number of places throughout this announcement and
include, but are not limited to, express or implied statements
relating to ContourGlobal's business strategy and outlook;
ContourGlobal's future results of operations; ContourGlobal's
future financial and market positions; expectations as to future
growth; general economic trends and other trends in the industry in
which ContourGlobal operate; the impact of regulations on
ContourGlobal and its operations; and the competitive environment
in which ContourGlobal operates.
By their nature, forward-looking statements are based upon a
number of estimates and assumptions that, whilst considered
reasonable by the Directors and the Company, are inherently subject
to significant business, economic and competitive uncertainties and
contingencies. Known and unknown factors could cause actual results
to differ materially from those indicated, expressed or implied in
such forward-looking statements. Forward-looking statements are not
guarantees of future performance. Any forward-looking statements in
this announcement reflect the Directors' and the Company's current
view with respect to future events and are subject to certain risks
relating to future events and other risks, uncertainties and
assumptions. The forward-looking statements contained in this
announcement speak only as at the date of this announcement. The
Directors and the Company disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained in this announcement to reflect any change in
their expectations or any change in events, conditions or
circumstances on which such statements are based unless required to
do so by applicable law, the UK Prospectus Regulation Rules, the UK
Listing Rules, the UK Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority and UK MAR. You are cautioned
against placing undue reliance on any forward-looking statement in
this announcement.
A copy of the any circular published in connection with the
Transaction will be available from the registered office of the
Company and on the Company's website at
https://www.contourglobal.com . Neither the content of the
Company's website nor any website accessible by hyperlinks on the
Company's website is incorporated in, or forms part of, this
announcement.
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END
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