Coro Energy Plc, the Southeast Asian energy company with a natural gas and clean energy portfolio is pleased to announce that the Company has now signed the Sale and Purchase Agreement ("SPA") for the disposal of its Italian natural gas assets (the "Italian Portfolio") to Zodiac Energy plc ("Zodiac" or the "buyer") by way of the sale of the entire issued share capital of Coro Europe Limited. Zodiac Energy plc is a UK based holding company for an Italian subsidiary company Pengas Italiana Srl, which extracts crude petroleum and natural gas in Italy.
The disposal is fully in line with the Company's strategic objectives, enabling Coro to focus exclusively on Southeast Asia where demand for energy and the opportunity for material expansion remain very strong.
- SPA signed for a total consideration of up to EUR 7.5M, including contingent payments of up to an aggregate of EUR 1.5M through a 10% net profit interest ("NPI") in the Italian Portfolio over the three years from the date of completion of any disposal of the Italian Portfolio.
- An initial cash payment of EUR 1.5M will be made by Zodiac within 7 business days of signing the SPA.
- The proposed disposal of the Italian Portfolio under the SPA will be subject to Coro shareholder approval pursuant to Rule 15 of the AIM Rules for Companies and regulatory approval in Italy.
A circular containing detailed information about the disposal of the Italian Portfolio will shortly be published and available from the Company's website at www.coroenergyplc.com.
Background to and reasons for the disposal
Following structural increases in global gas prices in 2022, the Company relaunched its Italian gas asset portfolio (the "Italian Portfolio") earlier in that year. The Italian Portfolio has since delivered significant free cash flows for the Coro Group. The previously reported 2022 unaudited revenues of the Italian Portfolio were EUR 6.0 m and is expected to be profitable once Coro's audited accounts are published. The reported loss in 2021 was US$1.5 m. Current production is around 24,000 scm/day (2022: 13,979 scm/day) with an average realised gas prices of around EUR 0.65/scm to the end of February 2023 compared to an average realised price in 2022 of EUR 1.17/scm.
However, the Company remains primarily focused on Southeast Asia and the significant growth and investment opportunities the region provides. In expectation of near term and long awaited developments on the Duyung PSC and the Company's renewable portfolio in Southeast Asia and with a view to capturing the value inherent in the Italian Portfolio following gas price rises, the SPA was concluded with Zodiac, with the consideration then being available to deploy in line with the stated strategy.
The funds received will therefore be used to meet Duyung PSC expenditure; potential further solar projects in Vietnam (of which a likely acquisition was announced on 25th November 2022); to continue to progress Philippines solar and wind projects to achieve ready to build status; and for working capital whilst being mindful that the Eurobond due date is in April 2024.
The Board believes that incremental capital expenditure in Southeast Asia is a more value accretive use of Coro's resources and ultimately has a greater possibility of generating greater returns for Shareholders than allocating additional capital to the development of the Italian Portfolio.
Details of the Disposal
Further to the Heads of Terms announced on 24 August 2022, the Company has now signed the SPA with Zodiac to sell 100% of the issued share capital of Coro Europe Limited ("Coro Europe"), the Company's wholly owned subsidiary which in turn holds 100% of the issued share capital of Apennine Energy S.p.A, the Group entity holding the Company's interests in the Italian Portfolio for up to EUR 7.5m.
Of the total maximum consideration of EUR 7.5m, EUR 0.3m was paid as a non-refundable deposit upon signature of the Heads of Terms, an additional EUR 1.5m is payable within 7 business days of SPA signature and a further EUR 2.2m will be paid upon completion of the disposal. As soon as practicable following completion of the SPA, Zodiac shall make a further payment of EUR 2m less a sum equal to any amount owed to Apennine by the Company on the intercompany loan account as of the date of completion.
The SPA contains a standard working capital adjustment mechanism which is expected to yield a positive and significant adjustment to Coro if the intercompany loan account is settled by completion. Any positive adjustment will be settled by Zodiac in cash within ten business days or, as is expected and agreed in the SPA, from the assignment to Coro of 70% of Apennine distributable annual profits until such time as the balance is paid in full. If the balance is not paid in full by 31 December 2027, the remaining balance will be immediately due to Coro by Zodiac irrespective of the distributable profits of Apennine.
The EUR 1.5 m payment to be received by Coro with 7 business days of signing the SPA will be repayable together with a 10% per annum coupon in the event that the transaction does not complete, and is secured over the Apennine bank account and gas sales.
Any proceeds from the Bezzecca legal claim which was detailed in an announcement dated the 14th February 2023, and the cash flows from the business prior to completion, accrue to Coro and are in addition to the consideration of up to EUR 7.5m.
In addition to the approval of Coro shareholders, completion of the disposal ("Completion") is also conditional on, amongst other things, regulatory approval by the Italian authorities. Whilst the Company retains full ownership and cash flows from the Italian Portfolio prior to Completion, the Company has agreed not to withdraw further cash from Coro Europe and its subsidiary. The accumulated cash in the business, alongside any inter-company loans and the 2022 Italian tax payments (including the extraordinary windfall tax introduced recently) will be adjustments to the final consideration using an industry standard net cash/debt adjustment at Completion.