Star Energy Group acquires A14 Energy Ltd

This transaction further develops the company's strategy to transition into a geothermal developer, owner, and operator, diversifying regulatory risk and providing an entry into the electricity generation sector.

The geothermal sector is a fundamental component of the energy transition, with the ability to provide long term baseload electricity and heat generation. Star Ener-gy, has decades of experience of sub-surface analysis, onshore drilling, well management, and environmental control from its portfolio of oil and gas operations in the UK. These skills and experience, coupled with those of the IGeoPen team, mean that Star Energy is well positioned to deliver geothermal energy in Croatia, a member of the EU, with a liberalised, well established, and attractive energy market.

Transaction details

The interest in A14 Energy has been acquired by the Company's subsidiary, GT Energy Croatia Limited (GTEC), from Peninsula International Pte Ltd for a total cash consideration of €1.3 million. Additionally, Star Energy will pay €100 000, relating to the provision of cash backed guarantees to the Croatian Hydrocarbon Agency, plus €200 000 million in back costs relating to the ongoing appraisal of the Ernestinovo licence.

In addition, GTEC has entered into a shareholders' agreement with Peninsula in order to jointly develop and submit bids, and thereafter to own, construct and operate geothermal projects in Croatia.

GTEC and Peninsula, through IGeoPen, have jointly submitted three bids for geothermal licences to the Croatian Hydrocarbon Agency as part of the current licensing round and expect the results of the bids by December 2023. A further aggregate amount of up to €1.5 million is payable upon the successful award of these licences.

The re-entry of an existing well on the Ernestinovo exploration licence and the drilling of any new appraisal wells, on the successful award of licences bid for in the current licensing round, will be financed by GTEC and Peninsula through shareholder loans and externally sourced finance. GTEC has agreed to carry Peninsula for up to €13.2 million over the five-year exploration licence period. The GTEC carry is repayable from free cash flow generated from the licences.

Key highlights

• The vast Croatian geothermal resource is well understood, with extensive data available from over 4000 exploration and appraisal wells drilled during a period of hydrocarbon exploration in Croatia. In addition, 2D and 3D seismic surveys that cover approximately 20 000 km², including the Ernestinovo licence and the three licence areas that the parties have applied for in the current licensing round. All data is available to the licence holder.
• Characteristics are well suited for electricity generation with a geothermal gradient proven to be 60% higher than the European average and electricity can be sold bi-laterally throughout the EU.
• Nearby electricity transmission infrastructure provides immediate access to pan-European power markets.
• The Croatian government is highly supportive and is actively promoting the sector internationally. The Croatian electricity market is liberalised and well established and it offers an attractive market premium (CfD) for a 12-year period.
• The acquisition brings a small team of highly regarded geothermal and geological experts with a recognised track record in the Croatian energy sector, with key personnel having led the development of Croatia's first geothermal power plant (Velika 1).
• The Ernestinovo licence already has existing wells in situ, one of which will re-quire re-entry and a well test to validate the resource, after which a 20-year development licence will be awarded.
• Bids have been submitted, through IGeoPen, for three further highly prospective licence areas.
  

Star Energy CEO, Chris Hopkinson, commented: “We are very pleased to announce our first overseas investment in geothermal as we look to build momentum in this part of our business.

“Whilst the business has, and continues to build, a material pipeline of business opportunities in the UK, we identified a significant opportunity in Croatia which will allow faster development and diversification of Star Energy's geothermal interests.

“The Croatian government is actively promoting the sector with a focus on electricity production which should allow accelerated development.

“The acquisition brings with it a small, but highly respected team with years of experience in Croatia including developing the Velika 1 power plant and we look forward to working with them bringing complementary skills from our existing business.

“This is an important next step in our strategy to transition over time into a significant player in the geothermal market and to deliver future value for our shareholders.”

Dragutin Domitrovic, Director of A14 Energy, added: “We are excited to be working with the team at Star Energy. The combination of our understanding of Croatia's geology and Star Energy's successful track record of operating projects onshore will be mutually beneficial to both companies. This represents a significant opportunity to accelerate the development of geothermal projects in Croatia.”

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