Tag Pacific and Carnegie Clean Energy agree to corner Australian renewable energy and microgrid markets

Tag Pacific (ASX: TAG) has entered an agreement to acquire Carnegie Clean Energy’s (ASX: CCE) subsidiary Energy Made Clean (EMC) in exchange for 58.5 million shares which amounts to around A$4 million at current market prices.

Under the proposed all scrip acquisition, Tag will remain listed on the ASX and undergo a rebrand to MPower. EMC will be amalgamated into the expanded business, with the strategy for the combined entity to “hold a market leading position” by benefiting from increased scale and enhanced national reach.”

Through MPower, Tag and Carnegie Clean Energy aim to capitalise on the rapidly growing off-grid and fringe-of-grid solar, battery storage and microgrid markets.

Tag chief executive officer Nathan Wise said that the rapid growth of the microgrid market means that consolidation in the sector is “inevitable”.

“The enlarged MPower business will be well placed to take a leadership position and dominate this market,” Mr Wise said.

“We have plans to grow the combined group rapidly across our engineering, procurement, construction and build own and operate (BOO) and products divisions.”

“We also plan to establish a dedicated vehicle to house our BOO solar and battery assets as they are developed,” Mr Wise added.

The combined entity will maintain its strong presence in existing New South Wales and Western Australian markets and expand nationally.

MPower will also assimilate EMC’s solar and battery storage project development pipeline in order to establish a stand-alone BOO solar and microgrid asset portfolio in the future.

Powered deal making

The terms of the deal state that Carnegie Clean Energy shareholders will hold 32% of MPower while Tag shareholders will retain 68%. The acquisition is expected to increase Tag’s tangible assets by A$4.2 million.

Sydney-based Tag said it also plans to conduct a capital raising “around the time of completion of the transaction”.

According to Tag, MPower and EMC would have jointly generated A$50 million in pro forma revenue in this financial year and the earnings of the enlarged group is expected to increase in the 2019 financial year and beyond.

The combined entity would start the 2019 financial year with an amalgamated committed order book of circa A$20 million.

“This is a compelling opportunity to unlock the significant potential from the microgrid market in Australia, New Zealand and the Pacific, bringing together two of the leading entities in Australia to create a national champion,” said Dr Michael Ottaviano, managing director and chief executive officer of Carnegie Clean Energy.

According to Navigant Research, global deployment in microgrids generated an estimated US$4.3 billion per annum in 2013 and this is expected to grow to US$40 billion per annum by 2020.

Today’s news helped Tag’s shares to climb 11% to A$0.07, while Carnegie shares slipped 15% down to A$0.023 per share.