Renewable energy company Solegreen (TASE: SLGN), controlled by Generation Capital (TASE: GNRS), reports that it will consider the closure of its US subsidiary Kuubix Energy by the end of this September, unless it finds a buyer for the company. The acquisition of Kuubix in April 2021 has turned out to be a very poor investment, after more than NIS 300 million were invested in the company, money that rapidly went to waste.
Solegreen has notified the stock exchange that in its second quarter financial statements it will record a write down (after tax) of NIS 184-199 million of the fair value of Kuubix, following which the business will be valued at just NIS 18-33 million. Solegreen’s share price, which was down 87% from its February 2021 peak, fell a further 2.14% today, giving the company a market cap of NIS 321 million.
Solegreen says that its board has decided to try to exhaust all possibilities of selling Kuubix, which operates in the installation of solar energy systems in the US, but that if a buyer Is not found, the company will be shut down. In any event, Solegreen is "shutting off the tap", and does not intend to inject any more capital into Kuubix. In the past year, Solegreen has attempted to improve the profitability of Kuubix’s business, cutting its workforce and taking action to improve its business.
The latest negative developments at Kuubix came last April, in the shape of new regulation that came into force in California, the company’s main market. The changes led to a 60-70% decline in solar panel sales in the state, Solegreen said.
This caused a sharp drop in Kuubix’s second quarter revenue, which put it off course in its work plan for this year. Kuubix’s management presented Solegreen with a demand for injections of cash in order for it to meet its target for balanced EBITDA by 2025. Kuubix’s auditors attached a going concern qualification to its second quarter financials.
Solegreen itself recorded an increase of 267% in first quarter revenue to NIS 49.7 million, thanks to higher electricity sales. It posted a net loss of NIS 42.2 million for the quarter, versus a loss of NIS 10.1 million in the first quarter last year. In 2022, the company made a net loss of NIS 239 million, partly because of a write-down of goodwill in Kuubix of NIS 120 million.
Solegreen CEO Dror Sharon said, "After a prolonged and intensive examination of Kuubix’s business and the company’s investment, and bearing in mind the material changes for the worse in the regulatory environment in which Kuubix operates in the US in recent months, together with the other challenges with which it is contending, Solegreen’s board of directors has decided that it would be right to part with the company’s holding in Kuubix. We are acting to exhaust efforts to sell this business no later than the end of this September, but we are also prepared for the eventuality of its closure."
Published by Globes, Israel business news - en.globes.co.il - on August 23, 2023.
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