MPC shareholders approve reorganisation
SHAREHOLDERS of MPC Caribbean Clean Energy Limited (MPCCEL) approved the reorganisation of the company and its associated fund at the annual general meeting (AGM) held on Tuesday.
The reorganisation is expected to be completed by the fourth quarter (October to December) of 2023 and will simplify the structure of the Barbadian-based MPCCEL, which will have direct ownership of the renewable energy assets that are currently held by the Cayman Islands-based MPC Caribbean Clean Energy Fund LLC. MPCCEL’s current investment in the Cayman Fund is valued at US$28.58 million ($4.29 billion).
As a result of the changes, MPCCEL’s earning potential is likely to improve as it would now be able to recognise revenue and other metrics from the assets, as compared to now when its sole income is the fair value change in the Cayman Fund.
In the first quarter (January to March) MPCCEL had a net loss of US$38,811, which was higher than the prior year’s net loss of US$29,133 due to increases in general operating expenses. The renewable energy assets generated US$21.62 million in revenue in 2022 and EBITDA (earnings before interest, tax, depreciation and amortisation) of US$15.46 million, with US$5.09 million being the pro-rated EBITDA related to its share of the projects.
“We’re confident that the reorganisation will result in significant benefits for our shareholders due to the increase in transparency, the reduced administrative costs, and the streamlined operation — resulting in improved profitability and dividends for our shareholders. Furthermore, we have high expectations for enhanced technical and financial performance which we believe will be positively received by the market, leading to increased liquidity of our stock and — as a consequence — a rise in the share price,” said MPCCEL Chairman Fernando Zúñiga in his response to a shareholder question on earning potential after the reorganisation.
The reorganisation will see 5,278,319 class B shares being issued to MPC CCEF Participation GmbH at US$0.877, and the company’s by-laws being amended. All resolutions were passed, including the extension of the non-voting convertible promissory note with RBC Trust (Trinidad & Tobago) Limited (MPCCEL) which received an extension from March 2023 to March 2026. The US$10-million promissory note will be converted into class B shares at US$1 per share at maturity.
The MPC Fund currently has US$3.66 million to be invested in projects over the next two years. While the company didn’t readily identify the potential markets or investments, it did highlight the significant potential which exists in the Caribbean and Latin America for wind and solar energy generation.
The MPC Fund is also set to benefit from the commissioning of Monte Plata Phase II later this year in the Dominican Republic. Monte Plata Phase I currently has 33.4 MWp of capacity and was acquired in May 2022 while Phase II is expected to have a capacity of 42.2 MWp. Both assets are expected to produce 74 MWp by the second quarter of 2024, which would make it the largest asset in the renewable energy portfolio. However, Monte Plata phase I is currently being affected by photovoltaic (PV) module degradation which saw its energy production being 5.45 per cent below the budgeted production in Q1.
“The operational focus for 2023 will be on rectifying the technical issues of accelerated degradation of solar panels of Monte Plata phase I which occurred in 2022. Discussions with technical advisors and the panel manufacturers have been initiated in Q1 2023 already and we seek to implement remedies later in 2023,” said head of asset management at MPC Capital AG Michael Kopenhagen on Monte Plata’s performance.
MPCCEL’s share price on the Jamaica Stock Exchange is down double digits year to date to $70 (US$0.55) while the Trinidad and Tobago Stock Exchange price remains unchanged from January at US$0.98.
When asked about potential opportunities in other regional markets the MPCCEL chairman highlighted that Trinidad & Tobago’s foreign exchange conversion issues and limited framework to sell renewable energy remains a hurdle to considering that market.
“In Barbados the industry is working on a bankable power purchase agreement with BLP [Barbados Light and Power], and it is in our view that this will be critical for the Government to first extend the concession with BLP before BLP will incentivise to enter into such long-term agreements. Guyana is an interesting growth market but, to date, there are very limited opportunities for independent power producers,” Zúñiga closed.