Resus Energy Plc, a renewable energy investment and development company, has decided to amalgamate itself with three wholly-owned subsidiaries effective 28 February 2019 to boost shareholder returns.
The three subsidiaries are Giddawa Hydro Power Ltd., Upper Agra Oya Hydro Power Ltd., and Okanda Power Grid Ltd.
Resus said at present each of the subsidiaries operates a mini hydro power plant with an aggregate capacity generation of seven megawatts. The entirety of electricity generated through the power plants is supplied by the subsidiaries to CEB under a power purchase agreement.
At present electricity generated by Giddawa ( 2 MW) and Upper Agra (2.6 MW) are supplied to CEB on the avoided-cost based tariff scheme. In the event the agreements are renewed by the CEB in October 2023 and February 2021 respectively, it is likely that they will be renewed at a significantly lower tariff scheme. Therefore Giddawa and Upper Agra would potentially have difficulty in managing their projects on a standalone basis in the future and continuation of the operations is likely to be challenging.
The Resus Board also notes that the efficiency, productiveness and efficacy of the three projects can be substantially improved if the operational and administrative functions are streamlines and centralised, reducing duplication of functions and associated costs.
The Board expects that the amalgamation will result in increased profits of the company, thereby optimising shareholder returns.
Resus’s net assets are worth Rs. 354.1 million, and that of Giddawa is Rs. 235.8 million, Upper Agra Rs. 206.8 million and Okanda Rs. 287.6 million. The amalgamation will increase the net assets to Rs. 737.2 million.
An Extraordinary General Meeting has been called for 18 January to get shareholder approval for the amalgamation move.
For the six months ended on 30 September 2018, Resus Energy Group revenue was Rs. 280.8 million, up by 39% and pre-tax profit was Rs. 122.3 million, up by 111%. Bottom line attributable to equity holders of parent was Rs. 107.4 million, up by 107% from a year earlier.
AC Cables Plc holds a 32.5% stake in Resus Energy and Trydan Partners Ltd. owns a 32% stake followed by Ayenka Holdings with 12.7% and ETF with 2.7%.