This is part of a broader analysis of Vivopower's subsidiaries. For more, click here.
Innovative Solar Systems
Founded in 2011 in Asheville, North Carolina, Innovative Solar Systems under the leadership of brothers John and Richard Green. During the last eight years, ISS has developed 2.4GW of clean, sustainable solar farms, harnessing enough energy to power more than a million and a half homes. Ever vigilant, the ISS team of 26 employees continues to develop some of the nation’s most efficient solar farms from an industry-leading 13GW development pipeline.
ISS complicated relation with Vivopower
Until recently, VivoPower did not outright own any of the solar projects that it had in the United States. Rather, the company was into a 50/50 joint venture with Innovative Solar Systems and it was this joint venture that was constructing the solar facilities.
In late July 2021, both companies announced that Innovative Solar Systems (ISS) has been fully acquired by Vivopower (VVPR).
VivoPower International PLC (NASDAQ: VVPR) is pleased to announce that the Company has secured a settlement resulting in it gaining full ownership of the remaining 50% of the equity interest in its solar development portfolio in the United States (the “Portfolio”). Ownership of the Portfolio was previously shared 50/50 with the Company’s former joint venture partner, Innovative Solar Systems LLC (“ISS”). Ownership of the remaining 50% interest in the Portfolio was acquired by the Company from ISS for nominal consideration under the terms of the settlement between the Company and ISS.
However, the road that lead to VVPR owning 100% of ISS has been a bumpy one. As we can see they weren't too explicit publicly on the terms of this settlement and we will do our best to go through the public information available to us to decipher the situation. But first, let's expand a bit on what the "portfolio" consist of:
VivoPower’s portfolio of U.S. solar projects is held by Innovative Solar Ventures, LLC (“ISS Joint Venture”), a joint venture with an affiliate of ISS Joint Venture. The ISS Joint Venture originally provided a 50% ownership in a diversified portfolio totaling 38 solar projects in nine states across the U.S.A., with a combined potential electrical generating capacity of 1.8 GWdc.
At first sight, this impressive portfolio give the impression of a well run company accumulating a healthy amount of deals, but if you keep reading deeper in the last financial report this follows:
Over time the economic attractiveness of projects is continually evaluated to ensure that resources are focused on projects within the portfolio with the greatest opportunity for return. Accordingly, from inception through December 31, 2020, 22 projects totaling approximately 963 MWdc have been discontinued due to interconnection costs, unfinanceable power purchase regimes, landowners being unwilling to extend leases, and other issues.
Because of the high number of projects being cancelled, Vivopower management came to the conclusion that the ISS team wasn't fulfilling their part of the agreement.
Because of the aforementioned problems with Innovative Solar Systems. As a result of the problems, VivoPower has been pursuing legal claims against Innovative Solar Systems, but it has agreed to drop the lawsuit if Innovative Solar Systems agrees to sell its stake in the joint venture for $1. Thus far, Innovative Solar has been reluctant to do this, but if it ultimately concedes, then VivoPower will effectively own the entire joint venture and thus all of the generation capacity that it has instead of the partial ownership that VivoPower has now.
So, in June 2020, the Company announced that it had assumed management control of the ISS Joint Venture and taken over the Manager and Developer responsibilities of the ISS Joint Venture from ISS. This action was taken as the Company is of the considered view that ISS had materially breached the terms of the joint venture agreements and failed to cure that breach within a reasonable amount of time. In March 2021, ISS answered with:
Innovative Solar Systems, LLC (ISS) filed its counterclaim against VivoPower (USA)** Development, LLC ("Vivo USA") in the Court of Chancery of the State of Delaware on March 18, 2021. Damages as outlined in this action against Vivo USA could potentially exceed $100,000,000.00 USD. **Vivo USA initiated the original action in June 2020** on the same day it provided a settlement offer to ISS (extended by Vivo USA representative, Matt Cahir) and demanded ISS's reply within 24 hours; ISS accepted the settlement proposal, but Vivo USA later reneged.
Ultimately, this counterclaim by ISS didn't amount to anything. As of last news, Vivopower had acquired 100% of the JV with ISS. Terms of the settlement are unknown for now, but one could expect that the company paid $1 for the last 50%, as mentioned earlier.
Projects listed to sell on ISS's website
This is a non-exhaustive list of projects that ISS is currently selling
US projects appearing on last financials
Source: https://vivopower.com/wp-content/uploads/2020/09/VVP-Annual-Report-30-June-2020-final-executed.pdf
Disclaimer: We are long $VVPR, not investment advice, not a registered professional. You could lose everything, buy at your own risks.
2021-07-14 Burlap's Gambles
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