Renewable energy investor Trading Emissions (TRE:AIM) may pay a dividend close to its entire market cap after it agreed the sale of poorly-performing solar power assets in Italy.
Shares trade 27% higher at 3.28p after the private equity-style vehicle said solar power developer Sonnedix has offered €8.5 million (£7.2 million) for two of its Italian solar subsidiaries, which have a combined output of 11.2 megawatts.
Trading Emissions’ investments in Italy have struggled because of degradation on newer technology thin film solar cells provided by manufacturer First Solar (FSLR:NYSE), problems with contractors and failure to secure damage claims with insurers.
If the deal goes through, Trading Emissions will receive €4.5 million up front and a further €3 million spread over the first and second anniversary of completion, subject to normal transaction conditions. Proceeds will be distributed to shareholders when received as part of a strategy to sell investments and return capital to investors.
Expected receipts of €8.5 million compare to a market value of Trading Emissions at its current 3.28p share price of €9.7 million.
Sonnedix, the buyer of the assets, was itself acquired by the asset management arm of US banking giant JP Morgan (JPM:NYSE) yesterday, after previously operating as a 50:50 joint venture between the bank and management.
In April, Trading Emissions returned £12.5 million via a capital return, equivalent to 5p a share, after selling assets for £14.2 million.
Key risks to shareholders in the company include the sale falling through, dividends not being paid, or unexpected losses incurred on Trading Emissions’ remaining portfolio, including costs associated with selling assets.
Trading Emissions was also subject to a €26 million arbitration claim by China-based renewable energy operator Yunnan Dianneng which it said in July had reached settlement for no cash payment.
Before the sale of its Italian subsidiaries and agreement with Yunnan, the company boasted net assets of £26.3 million at 31 December 2015, which included £16.1 million of investments measured at fair value. Trading Emissions had a £13.2 million cash balance, most of which will have been absorbed by its April return of capital, reducing net assets since the reporting date.