UK AIM-listed Star Energy has completed the sale of its Croatian geothermal subsidiary IGeoPen to Enna Geo, a further step in the company's strategy to streamline its portfolio and concentrate investment on its UK oil and gas and geothermal operations.
The transaction sees Enna Geo take ownership of IGeoPen, which holds interests in three Croatian geothermal licences with the potential to support power generation projects.
The deal includes an initial cash payment of €1.5mn, alongside a further €500,000 for each licence if a geothermal power plant reaches commercial operation.
Star Energy owns 71% of IGeoPen's parent company, A14 Energy, giving it a share of the initial consideration of €1.3mn and potential additional earn-out payments of up to €1.5mn.
The divestment places the development of the three Croatian licences in the hands of Enna Geo, with the earn-out structure providing a financial incentive linked to the delivery of operational power generation capacity.
Shift in focus
The disposal represents a change in geographical focus for Star Energy, which has been developing geothermal opportunities in both Croatia and the UK.
Following the sale, the company intends to concentrate its geothermal activities on maintaining a capital-efficient UK development platform, alongside its existing oil and gas operations, according to its CEO Ross Glover.
He said the transaction would allow the group to direct its resources towards areas where it sees the clearest opportunities to generate returns.
The sale also releases €5.2mn of restricted cash and removes future capital commitments associated with the Croatian licences.
Star Energy plans to use €2.7mn to reduce its Kommunalkredit debt, a loan facility used to finance its operations.
The comany also said that it would continue to advocate for policy changes needed to support greater investment in geothermal development within the UK.