Dublin-based Mainstream Renewable Power will more likely be sold on from as soon as 2020 rather than go through an initial public offering (IPO), according to the company’s chief executive, Andy Kinsella.
Speaking to The Irish Times as the company prepares for an annual investor briefing on Monday following a transformational sale of a Scottish offshore wind farm development this year for up to €650 million, Mr Kinsella said the group's geographical spread, in both emerging and developed markets, may be difficult for stock market investors "to get their heads around".
“Also, we’re a company that develops projects and then sells on. While we have the ability to retain equity positions in projects, we’re not focused on generating long-term repeatable revenue streams, which is what the IPO market would be looking for.”
Mr Kinsella said, however, that the company would appeal strongly to trade and strategic buyers. “But I still think we’re taking about the back end of the decade, or early in the next decade,” he said.
Mainstream, set up by businessman Eddie O’Connor a decade ago, confirmed in a recent shareholder letter that it will proceed with a grey market for its shares later this year, and that the company sees its shares as being worth up to €11.70 each, after a planned buyback of stock owned by legacy investors Barclays and Japan’s Marubeni.
Original equity raise
Investors, including a number of Irish high-net-worth individuals, paid €3 per share in the company’s original equity raise.
However, Mr Kinsella’s recommendation to shareholders is to remain invested, given the scale of its near-term projects which are locked into power purchase agreements by authorities in countries like Chile, South Africa and Egypt. Neither Mr Kinsella nor Mr O’Connor, who owns 42 per cent of the company, plans to sell share in the grey market.
Mainstream expects its Chilean joint venture with investment firm Actis that’s building 300 megawatts of wind farms to be sold by the end of 2019.
It also emerged last week that Mainstream has begun the search for a potential equity partner to help build and run 1,300 megawatts of wind and solar projects that will cost $1.65 billon to develop. The size of the projects, which will mainly be debt financed, equate to more than a quarter of Ireland’s peak electricity needs.
The initial €600 million payday from the Scottish project sale helped Mainstream deliver a €556.9 million gross profit for the first half of this year, allowed it to pay off all its debt and left it with €593 million of cash on its balance sheet at the end of June, the company said in its recent letter to shareholders.
Financial constraints
Meanwhile, an African joint venture, Lekela Power, is likely to be sold by the end of this decade by the company and its partners.
Mainstream was set up just months before the global financial crash and the company often had to sell projects at an earlier stage than planned because of financial constraints as it navigated the downturn.
“People were patient with us, but you can scan the horizon and look at renewable companies who’ve bitten the dust in the last 10 years,” said Mr Kinsella. “Now only have we survived, but we’ve thrived in difficult circumstances.”
Mainstream, which also has pipeline projects in Vietnam and the Philippines, plans to go into the Australian, Colombian markets. It is also looking again at offshore opportunities – including in the UK, France, New York, India and Ireland.
