WALL, N.J. - NJR Clean Energy Ventures (CEV), the clean energy subsidiary of New Jersey Resources (NYSE: NYSE:NJR), has completed the sale of its residential solar portfolio to Spruce Power Holding Corporation (NYSE: SPRU). The transaction, involving a 91 megawatt (MW) collection of solar assets, is valued at $132.5 million.
The deal, announced today, will see the transfer of approximately 9,800 residential solar lease agreements from CEV's program, known as The Sunlight Advantage®, to Spruce Power. Homeowners currently participating in the program will experience no change in their service as Spruce assumes full responsibility for the existing lease agreements.
NJR anticipates that the sale will result in a gain to be recorded in fiscal 2025. The proceeds from the sale are earmarked for reducing corporate debt and bolstering general working capital.
Steve Westhoven, President and CEO of New Jersey Resources, stated that renewable energy investments are central to NJR's long-term growth strategy. Post-sale, CEV will concentrate on expanding its commercial solar portfolio, which includes a pipeline of nearly 1 gigawatt (GW) of diverse investment opportunities.
Since 2009, CEV has invested over $1.2 billion in solar projects and is recognized as the largest owner-operator of commercial solar in New Jersey. The company has also expanded regionally, owning assets in several other states including New York, Connecticut, Rhode Island, Indiana, and Michigan.
New Jersey Resources, a Fortune 1000 company, operates through various subsidiaries, offering natural gas and clean energy services. These services range from natural gas transportation and distribution to solar project investment and residential home services.
This strategic move is based on a press release statement and reflects NJR's focus on strengthening and streamlining its clean energy portfolio while maintaining its commitment to providing low-carbon solutions to its customers.
In other recent news, Spruce Power reported a third-quarter revenue of $21.4 million and an operating EBITDA of $17.7 million. Despite a GAAP net loss of $53.5 million, largely due to a non-cash goodwill impairment charge, the company remains positive about its growth trajectory. Notably, Spruce Power has announced plans to acquire approximately 10,000 home solar systems, with the deal expected to close in the final quarter of 2024.
The company's full-year 2024 operating EBITDA guidance was adjusted to a midpoint of $60 million, a decrease from the previously projected $68 million. This adjustment is attributed to unexpected operations and maintenance costs and corporate expenses. However, Spruce Power continues to pursue growth through mergers and acquisitions and servicing, and plans to resume stock repurchase activities.
These are recent developments in the company's operations, as reported in its Third Quarter 2024 Earnings Conference Call. Despite facing challenges, Spruce Power maintains a strong balance sheet and a strategic growth plan, indicating the company's resilience and adaptability in the solar market.
InvestingPro Insights
The recent sale of NJR Clean Energy Ventures' residential solar portfolio to Spruce Power Holding Corporation (NYSE: SPRU) for $132.5 million provides an opportunity to examine Spruce Power's financial position in light of this significant acquisition.
According to InvestingPro data, Spruce Power's market capitalization stands at $42.6 million, which is notably lower than the value of the acquired portfolio. This discrepancy highlights the potential impact of the transaction on Spruce Power's balance sheet and future operations.
InvestingPro Tips reveal that Spruce Power "operates with a significant debt burden" and "may have trouble making interest payments on debt." These factors could be critical considerations as the company integrates the newly acquired solar assets. On a positive note, the company is "trading at a low Price / Book multiple" of 0.29, which might suggest undervaluation in light of the recent acquisition.
The company's revenue for the last twelve months as of Q3 2023 was $77.58 million, with a revenue growth of -5.7%. This context makes the $132.5 million acquisition particularly significant for Spruce Power's scale of operations.
It's worth noting that Spruce Power is "trading near 52-week low" and has seen its "price fall significantly over the last three months" (-23.67%). These market trends could reflect investor uncertainty about the company's ability to effectively manage and profit from this large acquisition.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Spruce Power, providing a deeper understanding of the company's financial health and market position.
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