Potential shares benefit for Marubeni as Mainstream Renewable Power exits US

Japanese company Marubeni Corporation could receive additional shares from its proposed €100 million investment in Mainstream Renewable Power if the Irish company does not sell its North American business before March 31st for an enterprise value of $44 million.

This has emerged from a document sent to Mainstream shareholders last week and seen by The Irish Times.

It says the “absence of an effective support regime and, in particular, the presence of shale gas, has led to continued depressed market pricing, making the development of new wind and solar energy production facilities [in North America] unviable for Mainstream”.

Investors were told the company would “dispose of its remaining projects and will withdraw” from North America. If this does not yield a value in excess of $44 million, the share price being paid by Marubeni will drop to €4 from €4.50. This would result in Marubeni receiving 25 million shares for its investment rather than the 22.22 million currently planned.

Investors were also told that if the price paid by Marubeni fell to €4 a share, Mainstream would have to issue an additional 2.4 million warrants to Macquarie Capital Group Ltd under the terms of an investment agreed in September 2012.

This is to compensate Australia’s Macquarie for any dilution created by the issue of additional shares to Marubeni. The €40 million Macquarie facility announced last year has been drawn down in full.

The document states that Marubeni’s investment comprised €20 million at closing and a further €80 million committed for 18 months and available in four equal tranches on specific conditions.

Marubeni is entitled to anti- dilution protection up to February 28th, 2018, if Mainstream issues shares at below its purchase price. It will also have a right of veto on certain operational matters.

Marubeni will receive a minimum 25 per cent equity stake in Mainstream. Founder Eddie O’Connor and other members of the board currently own 65 per cent of the business.