Polaris Infrastructure announced it has closed on the acquisition of 100% of the issued and outstanding shares of Union Energy Group Corp, an owner and developer of run-of-river hydro projects in Peru.
Assets Polaris Infrastructure acquired are:
- 5-MW Canchayllo hydro, in operation since 2015 and selling power under a power purchase agreement with the Peruvian Ministry of Energy and Mines (MEM).
- 8-MW El Carmen and 20-MW 8 de Agosto, two projects owned by Generacion Andina that are in the late stages of construction, with El Carmen to be completed in the third quarter of 2019 and 8 de Agosto in the fourth quarter of 2019. Both have PPAs in place with MEM.
- 20-MW Karpa, with a PPA in place with MEM. Construction has not yet begun.
- 189-MW portfolio of early stage development projects, including four smaller projects and one 119-MW project
Terms of the acquisition include purchase consideration of 600,000 common shares of the company at closing, 300,000 warrants exercisable at a 20% premium to the closing share price over the two-year period post-closing and 600,000 shares and $396,000 in cash upon the completion of construction of the Generacion Andina projects. Construction of these projects was halted in 2016 due to technical and financial issues.
The acquisition also includes fundamental restructuring of the Generacion Andina project debt. In exchange, Polaris Infrastructure agrees to invest necessary capital to bring the Generacion Andina projects to completion and will receive a 15% annual “preferred” return with respect to project-level cash flows.
“We are very pleased to have completed this transaction, which we expect will provide numerous benefits to the company and its shareholders,” said Marc Murnaghan, chief executive officer of Polaris Infrastructure. “In addition, we expect that the current owner of UEG, Union Group International, led by Chairman Juan Sartori, becoming long-term shareholders of Polaris Infrastructure will greatly improve our access to similar deal opportunities throughout Latin America.”
Murnaghan says this acquisition provides the company’s first projects in Peru and its first run-of-river hydro projects. He also says the company will “leverage available cash resources on the balance sheet to fund capital requirements of the Generacion Andina projects currently under construction.”
Polaris Infrastructure is based on Toronto and operates, acquires and develops renewable energy projects in Latin America. The company also owns and operates a geothermal project in Nicaragua.