Stock Exchange Release|20.12.2021

Enersense acquires Megatuuli Oy, an onshore wind farm developer

Enersense International Plc
Insider information, 20 December 2021 at 7:45 a.m.

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Enersense International Plc (“Enersense”), a provider of zero-emission energy solutions, has signed an agreement on acquiring Megatuuli Oy (“Megatuuli”), an onshore wind farm developer company. The total purchase price to be paid in the share transaction (“Share Transaction”) is EUR 18.5 million. The purchase price will be paid in full by means of new Enersense shares to be issued.

With the acquisition of Megatuuli, Enersense will continue to expand its role in the value chain for renewable energy production projects. Upon completion of the Share Transaction, Enersense will become a developer of onshore wind power projects. Megatuuli and its partners have projects in progress or in the feasibility study phase in different parts of Finland, with a total capacity of around 3,000 MW.

Jussi Holopainen, CEO, Enersense International Plc:

“Megatuuli complements and supports Enersense’s strong selection of services, making us a more broad-based partner for implementing zero-emission energy solutions. Upon completion of the Share Transaction, we will begin to develop wind farms in cooperation with Megatuuli’s partners and will participate in their construction and possibly in their contracting. We will also seek to partly serve as owners of wind farms and produce zero-emission energy. Fingrid forecasts that the production of onshore wind power will grow in Finland from around 2,000 MW in 2020 to more than 14,000 MW by 2030. Megatuuli’s and its partners’ project development portfolio corresponds to approximately 20 per cent of the amount of wind power capacity in Finland in 2030 as estimated by Fingrid. Megatuuli aims to develop and build 1,000 MW of wind power by 2025 in cooperation with its project development partners. If completed, the Share Transaction will enable utilisation of Megatuuli’s expertise on project development also on offshore wind power projects.”

The number of new Enersense shares to be issued to the sellers as consideration will be determined five business days before the completion of the Share Transaction based on the 25-day volume-weighted average price of the Enersense share on the Nasdaq Helsinki. The maximum number of new shares is limited to 2,675,000 shares (19.9 per cent of the current number of shares in Enersense). If the maximum number of shares is not sufficient to cover the full amount of the purchase price, the sellers are entitled to require that the difference be settled in cash.

The Share Transaction is conditional on, among other things:

-the Extraordinary General Meeting of Enersense, convened to be held on 11 January 2022, deciding to change the Articles of Association of Enersense and authorising Enersense’s Board of Directors to decide on a directed share issue related to the Share Transaction and related security arrangement;

-certain of Megatuuli’s project development partners issuing a waiver in relation to the change of control terms included in the agreements between Megatuuli and these parties in connection with the Share Transaction, as well as on renegotiating the duration and certain terms and conditions of the cooperation agreement with Megatuuli’s key project development partner;

Megatuuli’s Articles of Association being amended to create a series of non-voting shares and Enersense and the current shareholders of Megatuuli having negotiated a shareholder agreement concerning Megatuuli; and

– certain other customary terms and preconditions.

The transaction is expected to be completed, subject to the fulfilment of the conditions precedent, during January 2022.

The new Enersense shares given as consideration to the sellers are subject to a lock-up restriction and security arrangement. The new shares in Enersense will be submitted for trading approval on the Nasdaq Helsinki after the Share Transaction is completed.

If the Share Transaction is completed, the current shareholders of Megatuuli will remain the owners of Megatuuli’s new series of non-voting shares. The series of non-voting shares will entitle these shareholders to dividends based on the sales revenues of certain future projects. These non-voting shares in Megatuuli will not entitle their holders to other distribution of profit, nor will they, subject to certain exceptions, provide their holders with other rights related to Megatuuli.

Subject to the completion of the Share Transaction, Enersense’s business operations in the wind power sector will expand from wind farm design and construction services to also cover onshore wind power project development carried out by Megatuuli in cooperation with its partners.  Value chain expansion is expected to even out the profitability and cash flow risks arising from cyclicality and fluctuations in demand in project construction in Enersense’s current business operations. In addition, participation in wind power development is expected to provide Enersense with an advantage in construction and maintenance services related to wind farms.

Project development operations are very long-term by nature, and their most typical risks and uncertainties include the approvability of projects, as well as complaints related to statutory land use planning processes and permit procedures in particular, which may delay or prevent the implementation of development projects. Megatuuli’s operations also focus on early-stage development work in wind power projects, and the implementation of development projects depends on certain key partners and the continuity of contracts with these partners, which requires, for example, that Megatuuli is able to comply with the obligations included in such contracts.

Megatuuli in brief

Established in 2010, Megatuuli is a Finnish developer of onshore wind power projects. Its operations focus on early-stage development work in wind power projects. Megatuuli develops onshore wind power projects in cooperation with its partners. Megatuuli and its partners have projects in progress or in the feasibility study phase in different parts of Finland, with a total capacity of around 3,000 MW. Seven wind power projects have been developed and built or are under construction by Megatuuli and its partners, consisting of 41 wind power plants. The total investment value of these projects is around EUR 250 million. Tyrinselkä, the first project that progressed to the construction phase, has been producing wind power since 2016 and was after its commissioning the wind farm with the best capacity factor.

Megatuuli’s turnover for the financial year that ended in 2021 (1 April 2020 to 31 March 2021) was EUR 0.5 million (EUR 0.5 million for the financial year that ended in 2020). The company’s EBITDA was around EUR 3.5 million in the financial year that ended in 2021 (EUR 0.2 million in the financial year that ended in 2020), and its balance sheet stood at around EUR 0.7 million at the close of the financial year that ended in 2021 (EUR 1.1 million in 2020). The company has nine employees.

Terms and conditions of the Share Transaction in brief

Subject to the completion of the Share Transaction, Enersense will pay EUR 18.5 million as the purchase price to Megatuuli’s current owners. The purchase price will be paid in full in new shares in Enersense by means of a share issue against payment directed to Megatuuli’s current shareholders (“Directed Share Issue”).

The number of new shares to be issued through the Directed Share Issue will be determined five business days before the completion of the Share Transaction based on the 25-day volume-weighted average price of the Enersense share on the Nasdaq Helsinki (the period beginning 30 days before the completion of the Share Transaction and ending 5 days before the completion of the Share Transaction). The transaction is expected to be completed during January 2022. The total number of new shares to be issued through the Directed Share Issue is always limited to a maximum of 2,675,000 shares (19.9% of the current number of shares in Enersense), meaning that the total number of shares in Enersense will increase to a maximum of 16,072,729 shares if the Directed Share Issue is completed. If the maximum number of shares is not sufficient to cover the full amount of the purchase price, the sellers are entitled to require that the difference be settled in cash.

Subject to the completion of the Share Transaction, the current shareholders of Megatuuli will own the shares in a new series of non-voting Megatuuli shares to be established. The non-voting shares will entitle their holders to dividends based on sales revenues from certain wind farms under development by Megatuuli and its partners. These minority shareholders will have no other rights to Megatuuli’s distribution of profit, nor will they have, subject to certain exceptions, any other rights related to Megatuuli. If the Share Transaction is completed, Enersense and the current shareholders of Megatuuli will enter into a shareholder agreement concerning Megatuuli, and the Articles of Association of Megatuuli will be amended to create the new share series. The current shareholders’ holding in Megatuuli will expire once Megatuuli has paid them the agreed dividends based on revenues from wind farms under development.

The Share Transaction is conditional on the Extraordinary General Meeting of Enersense, convened to be held on 11 January 2022, deciding to change the Articles of Association of Enersense and authorising Enersense’s Board of Directors to decide on a directed share issue concerning the issue of shares to be given as the consideration, as well as granting the authorisations related to the security arrangement included in the Share Transaction. The notice of the Extraordinary General Meeting will be published by means of a separate stock exchange release and on the Enersense website at www.enersense.com/investors

The Share Transaction is also conditional on certain of Megatuuli’s project development partners waiving their rights to the change of control terms included in the agreements between Megatuuli and these parties in connection with the Share Transaction, as well as on renegotiating the duration and certain terms and conditions of the cooperation agreement with Megatuuli’s key project development partner. The negotiations on the aforesaid contract amendments have been initiated between Megatuuli, Enersense and the said project development partner. In addition, the Share Transaction is conditional on amending the Articles of Association of Megatuuli to create a new series of non-voting shares for minority shareholders and on negotiating the related shareholder agreement, as well as on certain other customary terms and preconditions.

Subject to the completion of the Share Transaction, Megatuuli’s total of 13 owners will become new shareholders in Enersense. The total share of Megatuuli’s largest owners (LOE Invest Oy, Mapps Global Invest Oy, Blin Ab and Summer Island Oy) of the new shares given by Enersense as the consideration is around 72,57 per cent.

In connection with the Share Transaction, Megatuuli’s shareholders will agree, subject to certain terms specified in more detail in the contract of sale, to comply with the lock-up restrictions and security arrangement concerning the new shares in Enersense that they receive through the Directed Share Issue. The lock-up and security restrictions will concern 50% of the shares provided as consideration to Megatuuli’s shareholders, and the restriction will be lifted 24 months after the completion of the Share Transaction.

The Share Transaction, if completed, will have no impact on Enersense’s financial guidance for 2021. Subject to the completion of the Share Transaction, it is expected to improve Enersense’s financial position in 2022 and the company’s performance over the long term. The revenues from certain wind farms under development by Megatuuli which are the subject of the series of non-voting Megatuuli shares, are expected, subject to the completion of the Share Transaction, to have an EUR 20-40 million impact on Enersense’ EBIT by the year 2025. In terms of distributable net profit, Enersense’s share of the said amount is expected to be around one third and the share of the non-voting shares held by the sellers around two thirds.  The first projects are expected to provide revenues during 2022. For other projects, which are expected to provide revenues from 2024 onwards, Enersense’s share of net profit is 100 per cent.

If the Share Transaction is completed, it will have an impact on Enersense’s long-term numerical targets, which the company will update accordingly during the first quarter of 2022.  Megatuuli will, subject to completion of the Share Transaction, be reported as part of Enersense’s Power segment.

Important notice

This release is not an offer for sale of securities in the United States. Securities may not be sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended. The Company does not intend to register any part of the share issue in the United States or to conduct a public offering of securities in the United States.

The distribution of this release may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restrictions. The information contained herein is not for publication or distribution, in whole or in part, directly or indirectly, in or into United States, Australia, Canada, Hong Kong, Japan, New Zealand, Singapore, South Africa or any other jurisdiction where such publication or distribution would violate applicable laws or rules or would require additional documents to be completed or registered or require any measure to be undertaken in addition to the requirements under Finnish law. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This release is not directed to, and is not intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction.

This release does not constitute a prospectus as defined in the Prospectus Regulation and, as such, it does not constitute or form part of, and should not be construed as, an offer to sell, or a solicitation or invitation of any offer to buy, acquire or subscribe for, any securities or an inducement to enter into investment activity in relation to any securities. No part of this release, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The information contained in this release has not been independently verified, does not purport to be full or complete and may be subject to change. No representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. The Company or any of its affiliates, advisors or representatives or any other person, shall have no liability whatsoever (in negligence or otherwise) for any loss however arising from any use of this release or its contents or otherwise arising in connection with this release. Each person must rely on their own examination and analysis of the Company, its securities and the transactions, including the merits and risks involved.

This release includes forward-looking statements that are based on present plans, estimates, projections and expectations and are not guarantees of future performance. They are based on certain expectations and assumptions, which, even though they seem to be reasonable at present, may turn out to be incorrect. Investors should not rely on these forward-looking statements. Numerous factors may cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied in the forward-looking statements. The Company or any of its affiliates, advisors or representatives or any other person undertakes no obligation to review or confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this release. Further, there can be no certainty that the transaction will be completed in the manner and timeframe described in this release, or at all.

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