DGAP-News: SUMMIQ AG preparing for IPO
DGAP-News: SUMMIQ AG / Key word(s): IPO
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SUMMIQ AG preparing for IPO
- SUMMIQ to become a fast-growing and independent green power producer with full control of the electricity generation value chain
- Stringent strategy to build a gigawatt portfolio of renewable energy plants within five years
- Cooperation with Green City AG - an established German developer of renewable energy projects - gives SUMMIQ preferential access to a project pipeline and enables SUMMIQ to reach the target portfolio capacity of one gigawatt
- Investments in modern onshore wind and solar farms with comparably low energy generation costs following a clear investment strategy to build a portfolio with an attractive risk-return profile
- Creating value based on stable cash flow generation with a long-term target portfolio internal rate of return of 6% - 8% p.a.
- Direct marketing of produced energy and selling guarantees of origin to create further upside to portfolio returns
- Listing planned this year on the open market (Freiverkehr) segment m:access of the Munich Stock Exchange (Börse München)
- SUMMIQ intends to generate gross proceeds of between EUR 75 million and EUR 100 million in a primary offering of new shares from a capital increase against contributions in cash
- SUMMIQ management intends to participate in the IPO to underscore its commitment
Munich, 09 November 2019 - SUMMIQ AG (the "Company" or "SUMMIQ") is preparing for an initial public offering ("IPO") in Germany together with the listing of its shares on the open market (Freiverkehr) segment m:access of the Munich Stock Exchange (Börse München).
Given the fundamental change in the structure of power generation, the strong growth of the renewables and the Sustainable Development Goals agreed in 2015 in Paris, the Munich-based SUMMIQ follows the strategy to build a gigawatt ("GW") portfolio of renewable energy plants from a secured pipeline within five years. Moreover, the Company will facilitate the marketing of the produced electricity by making use of digital technologies and energy storage. Thus, SUMMIQ is to become a fast-growing independent European green power producer covering the full value chain from the acquisition of energy projects to the marketing of the energy produced. For this purpose, the Company will acquire, finance and operate onshore wind and solar parks with capacities mainly between 5 and 50 megawatts ("MW") in the core countries Germany, Italy, Spain and France. In the Company's view, these medium-sized projects have the advantage of a diversified portfolio generating renewable energy from different sources and permitting comparably low generation costs estimated at approximately 0.05 EUR/kWh on average for the entire portfolio.
SUMMIQ is building up its portfolio of renewable energy plants following a clear investment policy and without having to take material project development risks. SUMMIQ offers investors an opportunity to participate financially in the European energy transition. The Company acquires only renewable energy plants that are already in operation or renewable energy projects for which the use of land and all material public permits required for the construction and operation of the plants have been obtained or are imminent to be granted ("Ready-to-Build"). Sourcing and development of renewable energy projects up to the time when the projects are Ready-to-Build will be executed solely by third parties. In terms of types of energy and technology, the Company will focus on solar and onshore wind projects and at least 80% of its portfolio is planned to be comprised of these types of projects. Up to 20% of investments may also be made in other types of renewable energy (e.g. hydro) or new technologies (e.g. storage). SUMMIQ intends to invest in projects to achieve an internal rate of return ("IRR") on portfolio level of between 6% - 8% p.a. after leveraging.
Cooperation with Green City as a strategic partner with a gigawatt project pipeline to facilitate sustainable growth
A cornerstone of SUMMIQ's business strategy is close cooperation with Green City AG ("Green City" and together with its direct and indirect subsidiaries the "Green City Group"). SUMMIQ has entered into a Cooperation Agreement (the "Cooperation Agreement") with Green City. Green City is a German developer, financing arranger and operator of renewable energy projects with almost 20 years of experience on the renewable energy market. Since its foundation, Green City completed about 350 solar, wind, biogas and hydropower projects in Europe with an installed capacity of more than 244 MW with a team of around 90 employees. The investment volume amounted to approximately EUR 500 million, including EUR 268 million raised with investors. Green City develops and operates renewable energy projects in Germany, France, Italy and Spain and offers its consulting services throughout Europe. SUMMIQ's competitive position will benefit in multiple ways from its cooperation with Green City. Under the Cooperation Agreement, the Company and Green City will work together to identify market segments for the production, marketing and storage of renewable energy in Germany and abroad. Green City will develop renewable energy projects in accordance with the jointly determined investment criteria. SUMMIQ, however, may also source projects from other project developers than Green City. Once projects reach the Ready-to-Build status, Green City will offer renewable energy projects from a project pipeline jointly agreed upon by Green City and the Company (the "Project Pipeline") exclusively to SUMMIQ. Moreover, the cooperation provides SUMMIQ with access to Green City Group's knowledge and experience regarding the technical management. To keep the Company's structure lean and efficient SUMMIQ outsources selected activities related to the operation and the commercial and technical management of the power plants.
Secured pipeline of PV and wind projects which will be Ready-to-Build by end of 2021 and additional land bank of projects - targeting a 1 GW portfolio within 5 years
The Project Pipeline, to which SUMMIQ has preferential access through the Cooperation Agreement with Green City, currently contains renewable energy projects with a planned total capacity of around 1,000 MW within five years. So far, SUMMIQ has signed share purchase agreements for the acquisition of three initial project companies of the Green City Group operating onshore wind parks in Germany and Italy with a total installed capacity of 28 MW (the "Initial Projects"). In addition to the Initial Projects, in the first phase SUMMIQ has already secured for acquisition nine additional renewable energy projects in Germany, France, Spain and Italy that are already under construction or are planned to be Ready-to-Build by the end of 2020. SUMMIQ intends to pay the purchase price for the Initial Projects and to acquire additional nine projects with a total planned additional capacity of 162 MW from the IPO proceeds. In the second phase, the Project Pipeline includes projects that are intended to be Ready-to-Build by the end of 2021. During this second phase, the Company intends to purchase up to 22 further renewable energy projects with a total planned additional capacity of approximately 525 MW in Germany, Italy, Spain and France from the Project Pipeline. In the third phase, the Project Pipeline includes other projects with a planned capacity of 222 MW that Green City Group currently develops with a planned commercial operation date ("COD") until 2024. For all projects of phase 3, most of the land required for the project development of each project has already been secured.
Strong growth in renewable energy markets driven by competitive generation costs and fundamental changes in the electricity generation mix
SUMMIQ's growth strategy is backed by fundamental market and technology trends. Today, the world is in the midst of a change in power generation. Large conventional power plants are being replaced by local renewable energy plants. Government-backed compensation systems are being replaced by free market systems. Intelligence, flexibility and the smart linking of generation and consumption are the cornerstones of a new energy system. These structural changes in the energy markets benefit renewables, while global electricity demand is expected to increase significantly over the next decades. Moreover, the competitiveness of electricity generation from photovoltaic ("PV") and onshore wind in the current electricity generation mix increased over the past few years. PV and wind power generation have been benefiting from efficiency increases in industrial production thus taking advantage of economies of scale. As a result, both PV and wind power generation have become competitive compared to conventional sources of power generation. Between 2009 and 2018, the costs of unsubsidised energy from PV fell by around 88% from 359 USD/MWh to 43 USD/MWh, while costs of unsubsidised energy from wind decreased by around 69% from 135 USD/MWh to 42 USD/MWh (Source: Lazard 2018). In light of this development, both power generation based on PV and wind in the EU is predicted to increase substantially in the next decades according to the World Energy Outlook 2018 of International Energy Agency. The projections have been based on the impact of the Sustainable Development Goals ("SDGs") on the global electricity sector. The SDGs were agreed by 193 countries in 2015 as a result of the Global Climate Conference by the United Nations Framework Convention on Climate Change (UNFCCC) in Paris.
These growth expectations are also reflected accordingly in SUMMIQ's four core countries Germany, France, Spain and Italy: In Germany, the share of renewable energy is intended to be increased from its present total level of around 32% to up to 40% - 45% in 2025 and to up to 65% in 2030 (Source: Bundesregierung). Given that the German Government plans to step out of coal-fired generation by 2038 (and under certain conditions even by 2035), there is increased pressure to grow the power generation from solar and wind assets (Source: Bundesregierung)3. In France, the government has announced targets for additional renewable energy capacity to be installed by 2023. Hence, the deployment of new solar and onshore wind energy sources is to increase annually from a capacity of 1 GW to 2 GW, respectively, from 1 GW to 1.8 GW. In addition, France will reduce the share of nuclear power in electricity production from about 75% to 50% by 2025. The gap is to be compensated by investments in solar and wind energy (Source: Ministère de la Transition écologique et solidaire). In February 2019, the Spanish Government published a draft of its National Integrated Energy and Climate Plan ("NECP 2021-2030") (Source: Gobierno de España), which aims at 120 GW of installed renewable energy capacity by 2030. According to the NECP 2021-2030, Spain will target a 100% renewables share in the electricity sector by 2050, in line with the climate-neutral strategy set by the EU. The NECP 2021-2030 stipulates an increase of wind capacity to 40.2 GW in 2025 compared to 22.9 GW in 2015. Energy capacity generated by PV is planned to grow to a level of 23.4 GW in 2025 compared to 8.4 GW in 2015. In January 2019, the Ministry of Economic Development ("MISE") presented the Italian National Integrated Plan for Climate and Energy 2030, which contains details of the future expansion of renewable energy in order to reach a 30% share in gross final consumption by 2030. According to this plan, PV generation capacity is to increase from 19.6 GW in 2017 to 26.6 GW in 2025 and 50 GW in 2030. The installed capacity of wind generated energy is projected to grow from 9.7 GW in 2017 to 15.7 GW in 2025, reaching 18.4 GW in 2030.
Leveraging all distribution channels to attain best-possible energy prices, including a future participation in a virtual power plant concept
SUMMIQ will use two different marketing methods for the electricity it generates. It will sell electricity predominantly through (1) unsubsidised marketing channels, e.g. market-based power purchase agreements ("PPAs") or energy exchanges, or (2) subsidised marketing mechanisms, e.g. feed-in-tariffs ("FiTs"). Prices today are typically guaranteed for five to ten years in the case of long-term PPAs and for a fixed term of between 12 and 20 years in the case of subsidised marketing schemes. The Company will also sell electricity generated in projects eligible for subsidised marketing mechanisms via market-based PPAs in order to ensure steady long-term revenues but at the same time generate possible upsides on the free market.
The Company expects to increasingly focus on power generating assets that sell the produced electricity under freely negotiable market-based PPAs to off-takers with an adequate credit rating rather than under subsidised marketing mechanisms (e.g. subsidised direct marketing). The advantage of this shift is a significant reduction of political risk related to all forms of subsidised marketing mechanisms. Ultimately, the risk of arbitrary, retroactive changes in a given tariff or other incentive schemes will be replaced by a much more common assessment of off-taker's long-term creditworthiness as well as the corresponding hedging policies and instruments.
SUMMIQ believes that further upsides from the marketing of the energy produced can be created by its participation in a virtual power plant ("VPP") concept. The dependency on wind and sun conditions and the resulting intermittency of production constitute the main disadvantages of renewable energy. A VPP addresses this problem by establishing a digital network of power generating assets in combination with an energy storage infrastructure. The network is coordinated using a remote-control unit that establishes data transfer between the central control system and the participating units. The central control system is then able to monitor, forecast, and dispatch the networked units, allowing it to control the output (e.g. by aligning power production and power consumption on short notice for frequency control) and enabling the most efficient use of production and power deliveries. The financial upside resulting from the implementation of the VPP solution has not been factored into the current financial planning and the Company therefore expects that it will create upside potential.
Furthermore, new PV and wind installations can also create an additional revenue stream by selling guarantees of origin ("GOO") to corporate customers and to aggregators that serve retail and mass customers. Each GOO is related to energy from renewable sources in the amount of one MWh and is granted by the respective competent national authority, e.g. the German Federal Environment Agency (Umweltbundesamt). The prices paid for GOOs can be up to 3 EUR/MWh for new wind installations in Europe (Source: Oslo Economics).
Highly experienced management team capable of planning the factors that drive the revenue side with high precision, resulting in a high degree of reliability of net profits and returns
The members of the Company's Management Board and Supervisory Board have significant experience in the renewable energy industry, investments in infrastructure, real estate development, trading and marketing of renewable energy as well as asset management and finance.
SUMMIQ is managed by a strong Management Board that combines over 48 years of experience in renewable energies and finance. CEO Dr. Torsten Amelung, has been specializing in the field of renewable energies since 1991, while CFO Frank Wolf has over 20 years of professional experience in finance and in the renewable energy sector, including at Green City. The Supervisory Board is chaired by Arwed Fischer with more than 20 years of experience as CEO and/or CFO of several publicly listed companies. Together with him, Eberhard Holstein and Jens Mühlhaus form the Supervisory Board of SUMMIQ. Mr. Holstein has more than 35 years of experience in the renewables sector. He also advised the Federal Ministry of Economics and Technology (Bundesministeriums für Wirtschaft und Technologie; BMWi). Mr. Mühlhaus has been with Green City and Green City e.V. since 1992. In 2011, he became a member of the Management Board of Green City.
Given the longstanding experience of this management team with the targeted scope of investments and the underlying asset class as well as the jointly agreed project pipeline due to the Cooperation Agreement, the Company is confident to be able to plan the factors driving the revenue side, especially the realistically produced amount of electricity and the OPEX of the acquired assets, with a high degree of precision. Predictability of cash flows is further enhanced by the stability of prices given by subsidised marketing schemes (12 to 20 years) or, increasingly, long-term PPAs (five to ten years). SUMMIQ intends to increasingly use unsubsidised PPAs instead of subsidised marketing to be able to generate higher prices while the revenue from PPAs is still relatively stable due to the typically long contract periods. In combination with the stable costs and expenses of each of SUMMIQ's solar and wind parks, this is expected to result in steady and predictable cash flows per project over large parts of their economic life and lead to a high degree of reliability of SUMMIQ's net profits and returns on investment.
Overview of the offering, use of proceeds and dividend policy
In connection with the IPO, SUMMIQ intends to generate gross proceeds of between EUR 75 million and EUR 100 million in a primary offering of new shares in the range between 7,500,000 to 10,000,000 from a capital increase against contributions in cash. Prior to the completion of the IPO, the Company is a wholly-owned direct subsidiary of Green City. Following completion of the IPO, the current sole shareholder Green City is expected to hold less than 1% of the Company's post-IPO share capital. To underscore their commitment to the project, CEO Dr. Amelung and CFO Mr Wolf intend to purchase new shares at the offer price during the IPO. The offering is planned to be concluded by the end of this year subject to market conditions.
SUMMIQ intends to use the proceeds from the offering mainly for the acquisition of the Initial Projects as well as the additional nine renewable energy projects allocated to the first phase of the Project Pipeline, totalling 190 MW capacity.
The Company intends to distribute a substantial portion of its annual net profit to its shareholders and to use the remaining part of its profits for financing further growth of its business in the coming financial years.
M.M.Warburg & CO (AG & Co.) KGaA is acting as
Global Coordinator and Bookrunner.
SUMMIQ is establishing a growing portfolio of wind and solar power plants in Europe. The aim is to build up a digitally managed gigawatt portfolio in order to be able to profitably market electricity from renewable energies in the future and provide it in line with demand. SUMMIQ pursues a strategic cooperation approach with Green City AG, a German developer of renewable energy projects. This cooperation enables SUMMIQ to invest in an existing project pipeline with an output of several hundred megawatts by 2021.
SUMMIQ focuses on the development and operation of a portfolio of wind and solar power plants balanced according to regions and technologies as well as electricity storage facilities in the European core markets of Germany, France, Italy and Spain in the medium term. SUMMIQ aims to become an independent, integrated and strongly growing European electricity producer with long-term predictable cash flows and a product with increasing demand: renewable energy.
09.11.2019 Dissemination of a Corporate News,
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