International Electricity Supplier Announces Letter Of Intent To Acquire Majority Stake In CPV (Competitive Power Ventures)

September 16, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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OPC Energy Ltd., a competitive generator and electric supplier to customers in Israel, and a subsidiary of Kenon Holdings Ltd., said that it has signed a letter of intent to acquire control of a CPV (Competitive Power Ventures), with an estimated investment of $700-800 million, part of which is also intended for investment in future projects of CPV.

The deal is still subject to a number of approvals, and to the completion of the negotiation process between the parties.

OPC Energy Ltd. is a private electricity company in Israel engaged in the initiation, development, construction and operation of power plants, as well as electricity generation and supply to private customers and the Israel Electric Corporation.

Per OPC, CPV currently owns, together with partners, 5 active power plants powered by natural gas, with a total capacity of approximately 4,045 MW (the company's share - approximately 1,290 MW). CPV owns a wind energy farm with a total capacity of approximately 152 MW (CPV share is approximately 106 MW). CPV has developed power plants with a total installed capacity of approximately 14,800 MW, of which approximately 9,950 MW of conventional stations in several markets, along with wind-based power plants with a total capacity of approximately 4,850 MW.

Kenon said that a non-binding term sheet (the "Term Sheet") was executed between OPC and Global Infrastructure Management LLC for the acquisition of Competitive Power Ventures group ("CPV") by OPC (the "Potential Transaction").

Subject to the completion of the negotiation and the execution of a purchase agreement in connection with the Potential Transaction (a "Purchase Agreement"), the estimated consideration to complete the Potential Transaction, including expected additional investments in upcoming years to fund CPV's pipeline projects, is approximately $700-800 million, subject to certain adjustments and terms detailed in the Term Sheet, Kenon said

Should a Purchase Agreement for the Potential Transaction be executed, the acquisition is expected to be carried out through a partnership, in which OPC will hold approximately 70% of the ownership interests (including the general partner), and additional institutional/financial Israeli investor(s) will hold the remainder of the ownership interests.

OPC said that it intends to bring in a number of institutional investors from the Israeli capital market as partners in the transaction, and at the time of the report is negotiating with Migdal, Clal and Poalim Capital Markets in this regard.

"For the purpose of financing the transaction, it is expected to be based on raising capital and / or raising debt (public, private or banking) and / or cash balances, or a combination of them. Kenon Holdings, which controls OPC, informed the company that if it was offered to participate in such capital raising, it would seriously consider participating in it," OPC said

The Term Sheet includes an exclusivity period of 30 days for the completion of negotiations and the execution of a definitive Purchase Agreement.

The closing of the Potential Transaction, to the extent the Purchase Agreement is signed, is subject to the receipt of various regulatory approvals and clearances in the U.S. OPC estimates that the receipt of approvals is expected within approximately 3 to 6 months from the date of signing the Purchase Agreement (to the extent signed).

The sources to finance OPC's portion of the funding for the Potential Transaction are expected to be derived from capital raising and/or debt raising (private, public or through bank loans) or a combination of the above, as well as available cash.

Giora Almogi, CEO of OPC Energy said, "We have long recognized the potential inherent in the US electricity market, with an emphasis on expanding operations into the field of renewable energies. We see the US market as one of OPC's strategic target markets. There is growing momentum for increased development of renewable energy and a focus on a lower carbon approach to electricity supply. In parallel, the trends continue with a modernization of the grid with coal and uneconomic nuclear assets being retired and the construction of efficient, highly flexible natural gas power plants for economic and environmental reasons."

"We have been working for the past year to find a suitable platform to enter the American market, with one of the important criteria being that the American company has strong management with proven experience, and has accumulated significant projects for continued growth," Almogi said

Under the acquisition, CPV will become OPC's investment and expansion platform in the United States, "and will help the company grow and expand its operations while diversifying the company's revenue sources into a number of areas, regulations and states," OPC said

"The deal also puts OPC directly into the areas of green energy, and especially into the areas of solar energy and wind energy, which are marked as part of its and CPV's significant growth engines, in parallel with its natural gas stations," OPC said

OPC intends to focus and expand its U.S. power generation operations through the acquisition and expansion of CPV's operations, primarily in the field of 'green electricity'.

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