Stark Power Negotiates Major US Energy Project Acquisition
Stark Power is in advanced negotiations to acquire a significant energy portfolio in the United States, comprising a natural gas-fired power plant and an energy storage project. The power plant has a capacity of 250-300 megawatts, while the energy storage project offers 80 megawatts for four hours, totaling 320 megawatt-hours. Stark Power delayed the announcement of these talks, fearing premature disclosure could jeopardize the deal.
The company estimates that upon finalization, the combined projects will generate annual revenues of $43-47 million and an EBITDA of $30-33 million. The total enterprise value, including existing project debt and further investment in the storage facility, is estimated at $218-233 million, implying an EBITDA to enterprise value ratio of approximately 14%. Stark Power's initial payment is expected to be around $21 million, plus a reimbursement of $6.5 million for development expenses already incurred by the sellers, totaling approximately $27.5 million. An additional contingent payment of $3-15.5 million is possible, depending on grid connection costs for the storage project.
The power plant, a combined cycle gas turbine (CCGT) facility, has been operational for about three decades. It currently operates under a power purchase agreement (PPA) where the project company bears gas price risk. This agreement is set to expire in 2027, after which a new 15-year tolling agreement with a local, A-rated electric company is expected to commence. Under the new tolling agreement, the client will supply gas and assume its price risk, while Stark Power will receive payment primarily for the plant's availability. The new contract's tariff will be indexed to the US Consumer Price Index and is set at a significantly higher rate than the current agreement, promising a more predictable cash flow profile.
The energy storage project, a Battery Energy Storage System (BESS), is still under development and is slated for commercial operation in 2028. It will utilize the existing infrastructure and grid connection of the power plant. This project also has a 15-year tolling agreement with an A-rated utility client. However, Stark Power acknowledges risks associated with the storage project's development, including obtaining construction permits, environmental approvals, completing grid connection procedures, and securing an economically viable connection cost.
Stark Power is also in discussions with an Israeli banking corporation for a three-year credit and guarantee facility totaling $85 million, intended to partially fund this acquisition and future projects. The company, founded by former executives from Enlight and Noga Energy, focuses on developing and acquiring energy infrastructure and data centers in the US. The acquisition and financing are still subject to due diligence, internal approvals, and regulatory consent.
