Solar Alliance Energy Inc. (TSXV: SAN) gains strong technical knowhow, which is expected to grow its revenues and net income
SmallCapPower | July 11, 2017: Solar Alliance Energy Inc. (TSXV: SAN) announced on July 10, 2017, that it has signed a Letter of Intent (“LOI”) with Thompson Machinery Commerce Corporation to acquire Aries Solar along with its pipeline of commercial projects with potential revenues of ~US$18 million. Aries is an established Tennessee based commercial solar company that is licensed to operate in four Southeast U.S. states.
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Aries has strong technical knowhow on commercial solar projects and they have a seasoned team that will benefit Solar Alliance Energy. The synergies from the acquisition of Aries will help Solar Alliance Energy grow its revenues and net income. This acquisition bodes well with the management’s vision to build market share in the energy system sales and installations through organic and inorganic growth opportunities.
Solar Alliance Energy Chairman and CEO Jason Bak said, “This acquisition accelerates our expansion plans in the commercial solar sector and brings us significant revenue potential, commercial project expertise and geographic diversification.”
Under the terms of the LOI, the purchase price for 100% of Aries Solar LLC is a contingent payment of US$1 million. Solar Alliance Energy will allocate 20% of net income from the current Aries project pipeline to Thompson Machinery until such time as the contingent payment is fulfilled. Commercial projects signed after the acquisition is not subject to the net income allocation described above.
Following the news of potential acquisition of Aries, the shares of Solar Alliance Energy rallied 16.67% to close at $0.105, posting an intraday high of $0.13. In terms of valuation, Solar Alliance Energy currently trades at price to TTM sales of 1.22x.
On Tuesday, Solar Alliance Energy provided further details to the transaction, saying there are 45 projects at various stages including prospecting, proposal, and contract negotiations. The total potential revenue from all projects if built is about US$18,838,000. The potential net profit that may be derived from the projects if built is approximately US$3,790,000.
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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