| Toronto, Canada & Knoxville, Tennessee, May 18, 2023 – Solar Alliance Energy Inc. (‘Solar Alliance’ or the ‘Company’) (TSX-V: SOLR), a leading solar energy solutions provider focused on the commercial and utility solar sectors, is pleased to announce is pleased to announce that it has entered into an arm’s length Letter of Intent dated May 16, 2023 (“LOI”) to acquire a growing, profitable Canadian solar company (the “Target”) in a predominantly share-based transaction (the “Transaction”). The Target is a growing commercial and utility solar company based in Alberta with year-to-date unaudited 2023 fiscal year (July 31, 2023, year-end) revenue of $5,801,023. The Target has a backlog of contracted projects totaling more than $5.6 million and expects continued revenue growth this year and beyond. “This acquisition is financially transformative for Solar Alliance and will drive improved top- and bottom-line results,” said CEO Myke Clark. “The acquisition target is profitable, is experiencing strong growth and is well-respected in the Alberta solar industry. The transaction is expected to significantly increase the scale of Solar Alliance, be immediately accretive to Solar Alliance, provide access to the rapidly expanding Canadian solar market and create operational synergies while positioning the Company to be cash flow positive post-transaction. With the recent introduction of a 30% investment tax credit for renewable energy projects in Canada, the timing for expansion into Canada is ideal.” “The consideration for the transaction totals $6 million and is predominantly share-based, which creates long-term alignment with current shareholders. We are also aligned in our business models and desire to drive profitable growth as opposed to growth for growth’s sake. The combined management team, board and insiders will own approximately 54% moving forward. The addition of an experienced management team will also complement Solar Alliance’s competitive advantage when targeting increasingly larger solar projects to drive continued growth in Canada and the United States,” concluded Clark. Transaction Highlights - Target is a Western Canadian leader in solar for commercial and utility customers, with more than 33 MW of commercial and utility solar projects installed.
- Experience in commercial and institutional design and installation of solar systems since 2013.
- Strong forecasted growth supported by a strong sales pipeline and a contracted backlog of projects.
- Favourable timing for the Canadian solar market with the recent introduction of a 30% Investment Tax Credit in the March 2023 Federal Budget.
- Opportunities for operational synergies including shared engineering services, administrative and accounting services, and procurement optimization.
- Projected financing savings over time through increased buying leverage, decreased bonding costs, and decreased debt facility costs, owing to larger scale.
- Post transaction, on a fully diluted basis, the Target shareholders would hold approximately 25% of the issued common stock in Solar Alliance.
The non-binding LOI provides 90 days of exclusivity to complete due diligence, determine the final structure of the Transaction (based on advice from legal, tax and professional advisors and in accordance with applicable corporate, tax and securities laws) and to enter into a binding, definitive agreement. For commercial and confidentiality reasons, Solar Alliance will not disclose the name of the Target until definitive agreements have been executed. Total consideration to be paid by the Company in connection with the Transaction is $6,000,000, consisting of the following components: - $500,000 cash;
- $700,000 in unsecured convertible debt (five-year term, 10% interest per annum, convertible at a price of $0.16 per share);
- $4,800,000 in common shares of the Company, at a deemed price of $0.08 per share, for a total of 60,000,000 common shares; and,
- One half share purchase warrant for each common share issued, at a price of $0.20 per share for a period of two years, for a total of 30,000,000 warrants.
Closing of the Proposed Transaction remains subject to a number of conditions, including satisfactory completion of due diligence, the execution of a binding definitive agreement, shareholder approval and the approval of the TSX Venture Exchange. Myke Clark, CEO |