Hungarian energy service company E-Star Alternative on Monday said it signed an agreement to acquire EETEK Group for EUR 21 million, doubling its size, facilitating its entry onto the Polish energy market and boosting revenue by EUR 40 million.
The acquisition of 100% of EETEK Group enables E-Star to get access to energy generation capacities of Mielec and Gorlice as well as to control the electricity trading services of Euroenergetyka. E-Star also acquires FondElec Polska in Poland and two Hungarian projects.
The deal is expected to boost E-Star's EBITDA by EUR 5.1 million.
The transaction is to be closed by May 31, 2011 at the latest . Under the purchase agreement E-Star will assume liability for and benefits of the business activity of EETEK Group retroactively from January 1, 2011.
EETEK Group has a diversified alternative energy portfolio, including wind, solar, biogas and CHP-based heat and electricity production with projects in six countries. E-Star said it would "create significant value with restructuring and slimming EETEK's diverse operations", divesting projects that do not fit into current strategy and keeping mainly heating projects in Poland and Hungary.
With the restructuring, E-Star aims to reduce EETEK’s regulatory risk due to high exposure to projects dependent on government support.
The restructuring will be completed in 2011 at an estimated cost of EUR 5 million.
The acquisition "fits perfectly into E-Star's strategy", the company said. E-Star enters Poland and gets access to a blue chip clientele in the industrial segment while setting strong feet in the residential heating business. E-Star gains 258 MWt heat generation capacity in Poland as well as 13.5 MWt heat capacity in Hungary.
By co-generation, E-Star gains 31 MWe of electrical energy generation capacities in Poland.
With the acquisition of the subsidiary Euroenergetyka, E-Star will establish its presence on the Polish electricity trading market.
In addition to the Polish companies of the EETEK portfolio, we see significant value in Hungary at the RESZ, which provides outsourced energy generation services for industrial customers, including vehicle parts maker RABA, Audi and Dana, and at EPV Biogaz, a Hungarian project company that has the license of starting a biogas project near Pecs (SW Hungary), the company said.
The transaction is a "huge step" toward achieving E-Star's target to raise the contribution of its businesses in Poland to 40% of EBITDA by 2015, E-Star said. Already this year, the Polish businesses are expected to generate 39% of EBITDA, with business in Hungary accounting for 26% and those in Romania for 35%.
The acquisition will raise E-Star's headcount by 340, including 260 in Poland and 80 in Hungary.
E-Star upgraded its forecasts, raising the EBITDA projections to EUR 13.2m for 2011 and EUR 20.5m for 2012. Net income is seen reaching EUR 8.1m in 2011 and EUR 10.1 million in 2012. Consolidated equity is set to climb to EUR 39.1 million by the end of 2011.
The forecasts include acquisition and restructuring costs of EETEK Group in 2011 and also assumes more conservative forecasts for growth of ventures in Romania.
In line with the increased business activity, E-Star's overhead costs will rise to EUR 4.9 million in 2011.
Under a decision by the board, E-Star will start reporting its consolidated business data in euros after the acquisition is closed.