He sees the risk of a $2 billion-E24 Aker Horizons strike

The green company in Kjell Inge Røkke’s Aker group may have to take new write-downs in the billions range on its Mainstream renewable energy project, analysts at Pareto believe.

Mainstream renewable energy projects have run into problems in Chile, but the company has now managed to restructure its debt, according to majority owner Aker Horizons.

Cleaning up debt is a positive for Mainstream, but after the recent increase in interest rates, a new round of writedowns may be imminent for Aker Horizons, Pareto Securities asserts in a note.

Barreto believes the value of equity in Chilean businesses has long been lost.

– As expected, we see no and no equity value for the platform after the restructuring, while higher interest costs will likely lead to a new write-down for Mainstream from Aker Horizons, the brokerage house wrote.

I think jumps in interest rates can cause a stir

Aker Horizons wrote down values ​​at Mainstream by NOK 4.2 billion in the first half of the year, and the company is now providing more information on the valuations and assumptions related to the write-down.

Although it is difficult to gain meaningful insight into most of these matters, given the initially severe lack of information, we note the potentially significant impact of changes in assumptions on valuation, Pareto analysts wrote.

Analysts particularly highlight the impact of interest on valuation.

They point out that the ten-year government interest rate in the United States was about 3.8 percent at the end of June, before it rose by about 0.7 percentage points.

Such an increase in Aker Horizons’ cost of capital would mean a new write-down of NOK 2 billion, analysts wrote.

Mainstream has a number of solar and wind power plants operating in Chile with several under development, but the company has struggled with difficult market conditions.

In the third quarter, Mainstream posted an after-tax loss of €65 million after a loss of €440 million in the second quarter.

The restructuring includes, among other things, a new capital injection in the form of loans from Mainstream worth US$145 million, deferral of interest and installments and a new loan facility for Mainstream worth US$220 million supported by DNB shareholders.

Value collapse

Kjell Inge Røkkes Aker listed several renewable companies during the green euphoria on Oslo Bors, but investor interest has slowed since then.

This year alone, the price of Acre Horizons has fallen by more than one percent, while the decline in the past two years has approached 90 percent.

Following Aker’s latest quarterly report, CEO Øyvind Eriksen did not speculate on whether it would be appropriate to take the rolling investment Aker Horizons off the stock exchange following the collapse in value.

– I don’t want to speculate about that. This quarter, Aker’s focus was to help Aker Horizons with the changes implemented and in this way to re-establish a more robust starting point for restoring shareholder value over time, Eriksen said.