Esplanade Capital Issues Open Letter to the Board of New Energy Exchange Limited Urges the Company to Reregister with the SEC to Maximize Value for Shareholders
Esplanade Capital LLC, a significant shareholder of New Energy Exchange Limited (
April 25, 2017
New Energy Exchange Limited (f.k.a. Renewable Energy Trade Board Corp.)
Board of Directors
Shun Tak Centre West Tower
168-200 Connaught Road
Central, Hong Kong
Dear Members of the Board of Directors (the “Board”):
Esplanade Capital LLC (“Esplanade” or “We”) urges New Energy Exchange Limited (the “Company”, “EBODF”, or “NEX”) to reregister with the U.S. Securities and Exchange Commission (the “SEC”) in order to maximize value for shareholders.
Having exercised extensive due diligence since 2013, We have verified that EBODF retains a $54 million equity position in a liquid $3 billion enterprise value, publicly traded company in Hong Kong. This stake compares to EBODF’s current microscopic market capitalization of $3 million. In addition, We can also confirm that EBODF owns two Italian solar assets worth at least ~$32 million.
While we believe EBODF is carrying significantly more asset value, including operating solar power plants in China, Europe, and the US, and indeed some, albeit potentially modest, liabilities, we cannot fully corroborate these balance sheet items precisely due to EBODF having deregistered and “gone dark” in 2013. By reregistering, EBODF will provide shareholders an accurate inventory of its assets and liabilities while likely revealing an even greater mismatch between market and book value.
Through the management of Esplanade Capital Partners I LLC and Esplanade Capital Electron Partners LP, We and our affiliates have maintained a significant position in EBODF since 2013. As background, Esplanade was founded in 1999 and has been investing in the solar sector since 2004.
In fourteen years of solar investing, We have never encountered an opportunity as obscure and undervalued as EBODF. After discovering EBODF, an unregistered (since March 2013) but U.S. publicly-traded company, through our deep, global solar network, we conducted multidimensional due diligence through management meetings in New York, Hong Kong, and Shanghai, analysis of EBODF legacy SEC filings, and careful dissection of Stock Exchange of Hong Kong Limited (“HK Exchange”) filings from sister-company United Photovoltaics Group Limited (686 HK), a leading solar independent power producer controlling ~1.4 gigawatts of solar power plants in China and the UK and wielding an ~US$3 billion enterprise value.
As context, We define the verifiable assets as EBODF’s 335,683,070 share stake in 686 HK validated through HK Exchange filings as of April 19, 2017 and two Italian solar power plant assets acquired in June 2014. To wit, shares of 686 HK, EBODF’s largest verifiable asset, have appreciated ~71% in 2017 while the Company’s shares remain largely unchanged.
After privately imploring management to reregister with the SEC and file updated financials to no avail, We have exhausted our patience and are forced to bring this matter to the public. The status quo cannot persist as shareholder value is being squandered.
For the sake of transparency, we are including details on the verifiable assets since most investors likely haven’t reviewed the HK Exchange filings outlining EBODF’s 686 HK stake and industry press detailing EBODF’s acquisition of two Italian solar power plants in June 2014.
EBODF owns 335,683,070 shares of 686 HK (~4.5% of shares outstanding) as confirmed by a HK Exchange filing on April 19, 2017 (see page 5).
EBODF’s stake in 686 HK is worth ~US$54 million at current market values. Other major holders of 686 HK include China Merchants New Energy Group (a massive China state-owned enterprise controlling 26.8% of 686 HK and ~17% of EBODF), ORIX Asia Capital (a US$95 billion Japanese asset management company controlling 14.4% of 686 HK), and the Asian Development Bank’s Asia Climate Partners (the US$150 billion regional development bank controlling 4.5% of 686 HK) all of whom invested ~US$167 million alongside EBODF in 686 HK in March 2017.
In that March 2017 686 share subscription, EBODF purchased 68,799,449 shares of 686 HK at HK$0.5814 per share (see “subscription price” on pages 18-21) versus 686 HK’s current share price of HK$1.25 thereby creating ~$6 million of equity value for EBODF shareholders in this single transaction (greater than twice the entire market capitalization of EBODF today).
In terms of the Italian solar power plant assets, EBODF acquired two projects comprising 13.1MW in June 2014. Based on the remaining subsidies and cash flow for each project, we estimate these two assets are worth at least ~US$32.0 million.
Whether simply a US Dollar denominated tracking stock for 686 HK or a solar independent power producer, EBODF is deeply undervalued and must reregister to maximize shareholder value and minimize the valuation gap.
Esplanade welcomes the opportunity to discuss the path forward directly with the Board.
Shawn W. Kravetz
cc: Alan Li Shan (electronically), Maggie Qiu Ping (electronically), Lu Zhenwei (electronically)
ABOUT ESPLANADE CAPITAL LLC
Esplanade Capital is a Boston based investment management firm founded in 1999 to manage capital for a small number of like-minded families, private investors, and institutions