GLO.L Regulatory News (GLO)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

20 January 2022

ContourGlobal plc

Successful sale of Brazil hydro-electric generation business to Patria Investments for 1.73 Billion BRL

· Sale of Brazil hydro business at a valuation of 1.73bn BRL ($313m 1 USD) including the assumption of net debt and other customary adjustments

· Creates compelling value for plc shareholders and bondholders with an implied valuation of 9.7x LTM Q3 2021 EV/EBITDA and is cash flow and credit accretive

· Net proceeds to ContourGlobal of approximately $110m USD

· Execution of strategy to close the discrepancy between share price and private market value of the Company's assets

· Wind assets under exclusivity with buyer and expected to be sold in 1H 2022

Kani Lux Holdings S.à r.l., a majority-owned subsidiary of ContourGlobal plc ("ContourGlobal" or the "Company"), has signed a definitive agreement with Infraestrutura Brasil Holding XVII S.A ("Pátria Investments") to sell its Brazilian hydro power plants (the "Brazil hydro business") for a total cash consideration of 1.73 billion BRL ($313 million USD) including the assumption of net debt and other customary adjustments (the "Transaction"). The Transaction is expected to complete in 2Q 2022. 

The Brazil hydro business generated 178.4 million BRL ($33.4 million USD) of adjusted EBITDA for the 12 months ended September 30, 2021. The Company expects proceeds from the transaction net of tax and reflecting the Company's underlying share of ownership of approximately $110 million USD.

The Transaction creates compelling value for ContourGlobal shareholders with an implied valuation for the Brazil hydro business of 9.7x LTM Q3 2021 EV/EBITDA. In 2021, ContourGlobal announced that it had started the process of monetizing its renewables business in Brazil, in addition to considering further transactions with respect to other renewable assets, in order to unlock value for shareholders and close the gap between its share price and the intrinsic value of the Company's assets as valued by the private market. The sale of the Brazil hydro business represents a first step in this direction and the Company expects to sell its wind power generation assets in H1 2022, and has granted exclusivity to Patria Investments to enter into a transaction for those assets. The Company will determine whether to re-invest the expected proceeds into new growth opportunities or return capital to shareholders consistent with its capital allocation strategy and circumstances when the transaction closes, expected in Q2 2022.

The Transaction is classified under the Listing Rules as a Class 1 transaction and therefore requires the approval of ContourGlobal's shareholders.

Strategic rationale

· Unlocks value for shareholders reflecting value in excess of that implied for the business in GLO's stock price

· Strengthens ContourGlobal's balance sheet and enables more effective capital allocation

· Major step in the exit of the only meaningful non-EUR or USD currency exposure for the Company

· Transaction is cash flow and credit accretive from a parent company perspective: the Brazilian assets, including the hydro assets being divested, do not meaningfully contribute to the ContourGlobal plc's cash flow available for debt service, "CFADS", the key credit metric under the parent company's bond indenture. In 2021, CFADS for the ContourGlobal group was approximately $367 million USD of which 8% represented the Brazil hydro contribution to the Company's total CFADS. The Debt Service Coverage Ratio under Contour's indenture based upon 2021 CFADS is a robust 7.5x.

Transaction highlights

· Sale of hydro-electric power generation plants for 1.73 billion BRL ($313 million USD) including the assumption of net debt and other customary adjustments, with an implied valuation of 9.7x LTM Q3 2021 EV/EBITDA

· The Company intends to use the expected net proceeds to either re-invest in attractive new growth opportunities in low carbon power generation or return capital to shareholders

· Non EUR or USD adjusted EBITDA currency exposure for the Group will decrease from 14% to 10%

Joseph C. Brandt, President and Chief Executive Officer of ContourGlobal, said:

"We are pleased to have agreed the sale of our hydro assets in Brazil to Pátria Investments following a competitive process. Patria is the leading private equity investor in Brazil and has built an impressive business based upon careful long-term investing. They are a strong owner of this business.

This sale is consistent with our drive to unlock value from undervalued assets in our portfolio and deliver further attractive risk adjusted returns for our shareholders, and demonstrates that value differential for our assets in the public and private markets."

Brazil hydro business 

The hydro assets in Brazil comprise nine run-of-river hydro-electric generating businesses operating under long-term contracts with 168MW of gross capacity. The assets in the portfolio were developed, constructed or acquired by ContourGlobal. As of September 30, 2021 the Brazil hydro business had a gross asset value of $105.4 million USD.

For the 12 month period ended September 30, 2021 the Brazil hydro business generated:

Summary of key terms of the Transaction

On January 20, 2022 Kani Lux Holdings S.à r.l. (the "Seller"), an indirect majority-owned subsidiary of the Company, and Pátria Investments entered into an agreement in respect of the Transaction (the "Sale Agreement"). Pursuant to the Sale Agreement, Pátria Investments has agreed to acquire the entire issued capital of Contour Global do Brasil Participações S.A. (the "Target") for consideration of 897,923,000 BRL ($162.7 million USD) for 100% of the equity, subject to certain customary post-closing adjustments in respect of net debt and working capital. The Sale Agreement is governed by Brazilian law. 

Closing of the Transaction is conditional upon the satisfaction or waiver of certain conditions under the Sale Agreement, including: (i) the approval of ContourGlobal's shareholders; (ii) certain regulatory approvals in Brazil; (iii) completion of a pre-sale reorganization; and (iv) certain consents or waivers being obtained from third parties who are counterparties to various agreements with the Target or its subsidiaries (the "Target Group"). 

The Seller and Pátria Investments have the right to terminate the Sale Agreement in certain circumstances, including: (i) if the Transaction has not closed by the date falling 9 months after the date of the Sale Agreement; (ii) if certain closing obligations have not been complied with; and (iii) in the case of Pátria Investments only, if certain warranties given by the Seller are breached before closing (or would be breached upon closing). 

The Seller has given covenants customary for a Brazilian-law governed acquisition of the size and nature of the Transaction regarding the conduct of the business of the Target Group between the date of the Sale Agreement and closing, including customary obligations on the Seller to procure that the Target Group does not do (or omit to do) certain acts prior to closing. The Seller has also provided warranties and indemnities to Pátria Investments that are customary for a Brazilian-law governed acquisition of the size and nature of the Transaction. The warranties and indemnities are subject to subject to customary qualifications and limitations. 

In addition, the Company has entered into an English law deed of guarantee, dated January 20, 2022, to guarantee the payment obligations of the Seller under the Sale Agreement. 

Irrevocable undertaking

ContourGlobal L.P., the Company's majority shareholder (holding, as at January 20, 2022, approximately 71.4% of the Company's ordinary share capital) has provided an irrevocable undertaking to vote in favor of a shareholder resolution to approve the Transaction.

1 Exchange rate 1 BRL = 0.181159 $

2 LTM September 2021 exchange rate 1 BRL = 0.18724 $

Enquiries

Investor Relations - ContourGlobal

Jose Cano

+44 203 626 9062

jose.cano@contourglobal.com

investor.relations@contourglobal.com 

Media - Brunswick

Charles Pretzlik / Will Medvei

Tel: +44 (0) 207 404 5959

Contourglobal@brunswickgroup.com 

The person responsible for arranging for the release of this announcement on behalf of ContourGlobal plc is Jose Cano, Senior Vice President Investor Relations. 

ABOUT CONTOURGLOBAL

ContourGlobal is listed on the premium segment of the London Stock Exchange (TKR: GLO). ContourGlobal is an international owner and operator of contracted wholesale power generation businesses with approximately 6.3 GW in operation in 20 countries. ContourGlobal operates a portfolio of 138 thermal and renewable power plants across Europe, North America, Latin America, and Africa utilizing a wide range of technologies.

ABOUT PATRIA INVESTMENTS

Patria is a leading alternative investment firm focused in Latin America, with over 30 years of history and managing products across Private Equity, Infrastructure, Credit, Public Equities and Real Estate. As of September 30, 2021, including the combination with Moneda Asset Management which closed on December 1, 2021, the combined platform managed nearly $25 billion of assets under management, with a global presence in 11 offices across 4 continents. Through its investments Patria seeks to transform industries and untangle bottlenecks, generating attractive returns for its investors, while creating sustainable value for society. Further information is available at www.patria.com.  

ADVISORS

BNP Paribas and Cantor Fitzgerald are serving as financial advisors to ContourGlobal in relation to the Transaction.

Pinheiro Neto Advogados and Slaughter and May are serving as legal advisors to ContourGlobal in relation to the Transaction.

IMPORTANT NOTICE

 This announcement has been issued by and is the sole responsibility of the Company. The information contained in this announcement is for background purposes only and does not purport to be full or complete. The information in this announcement is subject to change without notice. Subject to the UK Listing Rules, the UK Disclosure Guidance and Transparency Rules and the Market Abuse Regulation (596/2014) as retained in the UK (UK MAR), the issue of this announcement shall not, under any circumstances, create any implication that there has been no change in the affairs of ContourGlobal since the date of this announcement or that the information in this announcement is correct as at any time subsequent to the date of this announcement.

 Certain information contained in this announcement, including any information as to ContourGlobal's strategy, plans or future financial or operating performance constitutes "forward-looking statements". These forward looking statements can be identified by the use of terminology such as, "aims", "anticipates", "assumes", "believes", "budgets", "could", "contemplates", "continues", "estimates", "expects", "intends", "may", "plans", "predicts", "projects", "schedules", "seeks", "shall", "should", "targets", "would", "will" or, in each case, their negative or other variations or comparable terminology. Forward looking statements appear in a number of places throughout this announcement and include, but are not limited to, express or implied statements relating to ContourGlobal's business strategy and outlook; ContourGlobal's future results of operations; ContourGlobal's future financial and market positions; expectations as to future growth; general economic trends and other trends in the industry in which ContourGlobal operate; the impact of regulations on ContourGlobal and its operations; and the competitive environment in which ContourGlobal operates.

 By their nature, forward-looking statements are based upon a number of estimates and assumptions that, whilst considered reasonable by the Directors and the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those indicated, expressed or implied in such forward-looking statements. Forward-looking statements are not guarantees of future performance. Any forward-looking statements in this announcement reflect the Directors' and the Company's current view with respect to future events and are subject to certain risks relating to future events and other risks, uncertainties and assumptions. The forward-looking statements contained in this announcement speak only as at the date of this announcement. The Directors and the Company disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in their expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the UK Prospectus Regulation Rules, the UK Listing Rules, the UK Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and UK MAR. You are cautioned against placing undue reliance on any forward-looking statement in this announcement.

A copy of the any circular published in connection with the Transaction will be available from the registered office of the Company and on the Company's website at https://www.contourglobal.com. Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.