valentinrussanov/E+ via Getty Images
A quick introduction to MN8 Energy
MN8 Energy, Inc. (MNX) has filed to raise $100 million in an initial public offering of its common stock, according to an S-1 registration statement.
The company is a big operator of solar energy and associated battery storage facilities in the United States.
As we learn more about management’s pricing and valuation assumptions for the IPO, I will provide an update.
MN8 overview
MN8 Energy, Inc., based in New York, NY, was formed as a unit of Goldman Sachs Asset Management to develop, acquire and operate solar energy assets and storage capacity in the United States
As of June 30, 2022, the Company had over 850 solar projects in operation or under construction in 27 states totaling 2.3 gigawatts of capacity and 270 megawatts of battery storage projects.
Management is led by President and CEO Jon Yoder, who has been with the company since August 2022 and was previously a managing director and head of the Renewable Power Group at Goldman Sachs Asset Management.
The company has more than 200 enterprise customers who use the company’s energy as part of their decarbonization efforts.
As of June 30, 2022, MN8 has booked a fair market value investment of $1 billion as of June 30, 2022 from investors including The Regents of the University of California and Goldman Sachs Asset Management and affiliates.
MN8 – customer acquisition
The company strives to build customer relationships with power users, be they corporate or public utilities.
The chart below shows the company’s current footprint and related metrics:
Company footprint (SEC EDGAR)
G&A expenses as a percentage of total revenue have changed as revenue has increased, as shown in the following figures:
|
General and administrative |
Expenses vs. Income |
|
Period |
percentage |
|
Six months ending June 30, 2022 |
5.5% |
|
2021 |
14.1% |
|
2020 |
12.3% |
click to enlarge
(Source – SEC)
General and administrative efficiency multiples, defined as how many dollars of additional new revenue generated by each dollar of general and administrative expenses, increased 3.3-fold over the most recent reporting period, as shown in the following table:
|
General and administrative |
efficiency rate |
|
Period |
Several |
|
Six months ending June 30, 2022 |
3.3 |
|
2021 |
0.5 |
click to enlarge
(Source – SEC)
Market & Competition by MN8
According to a 2022 market research report by Precedence Research, the global solar energy market was estimated at US$197 billion in 2021 and is projected to reach US$368 billion by 2030.
This equates to a projected CAGR of 7.2% from 2021 to 2030.
The main drivers for this expected growth are increasing demand for renewable energies and government incentives for the use of solar technologies.
Also, the chart below shows the historical and forecast future growth path of the global solar energy market up to 2030:
Global solar energy market size (priority research)
Key contestants or other industry participants include:
-
Arevon
-
Berkshire Hathaway (BRK.A, BRK.B)
-
EN Shaw
-
EQT
Financial performance of MN8 Energy
The company’s recent financial results can be summarized as follows:
-
Increasing topline earnings
-
Variable gross profit and gross margin
-
Uneven operating income
-
Reduced cash flow from operations.
The following are relevant financial results arising from the company’s registration statement:
|
total revenue |
||
|
Period |
total revenue |
% variance vs. before |
|
Six months ending June 30, 2022 |
$178,310,000 |
22.1% |
|
2021 |
$294,441,000 |
8.0% |
|
2020 |
$272,684,000 |
|
|
Operating Profit (Loss) |
||
|
Period |
Operating Profit (Loss) |
operating margin |
|
Six months ending June 30, 2022 |
$52,296,000 |
29.3% |
|
2021 |
$66,204,000 |
22.5% |
|
2020 |
$81,909,000 |
30.0% |
|
net income (loss) |
||
|
Period |
net income (loss) |
net margin |
|
Six months ending June 30, 2022 |
$51,169,000 |
28.7% |
|
2021 |
$174,636,000 |
97.9% |
|
2020 |
$18,240,000 |
10.2% |
|
Cash flow from operations |
||
|
Period |
Cash flow from operations |
|
|
Six months ending June 30, 2022 |
$56,618,000 |
|
|
2021 |
$125,760,000 |
|
|
2020 |
$140,763,000 |
|
|
(Glossary of terms) |
click to enlarge
As of June 30, 2022, MN8 had $242.3 million in cash and $3.2 billion in total debt.
Free cash flow for the twelve months ended June 30, 2022 was negative ($902.2 million).
MN8 Energy IPO details
MN8 intends to raise $100 million in gross proceeds from an initial public offering of its common stock, although the final figure could be higher.
No existing shareholder has expressed an interest in buying shares at the IPO price.
Management says it will use the net proceeds from the IPO as follows:
We intend to use the net proceeds from this offering to fund approximately $175.0 million to $225.0 million in development and construction activities for our renewable energy, battery storage and EV charger pipeline projects through the end of 2025. We intend to use any remaining net proceeds for general corporate purposes, which may include opportunistic financing of solar arrays, battery storage, energy acquisitions and other strategic opportunities.
Immediately upon receipt of the net proceeds of this offering, management may use a certain amount to temporarily repay the balance of the new revolver – including amounts drawn under it to repay the underwriting facility prior to this offering – in order to more efficiently manage the Company’s liquidity and minimize interest expense.
(Source – SEC)
Management’s presentation of the company’s roadshow is not available.
With respect to pending lawsuits, management said it is not aware of any lawsuits that would have a material adverse effect on its financial condition or operations.
The listed bookrunners of the IPO are Goldman Sachs, BofA Securities, JP Morgan and other investment banks.
Commentary on MN8’s IPO
MN8 Energy, Inc. is seeking public capital market investment for new project development and debt service.
The company’s financials show increasing revenue, volatile gross profit and gross margin, volatile operations, but lower cash flow from operations.
Free cash flow for the twelve months ended June 30, 2022 was negative ($902.2 million).
General and administrative expenses as a percentage of total revenue have changed as revenue has increased; its multiplier for general and administrative efficiency has increased by 3.3 times over the last reporting period.
The Company currently plans not to pay dividends to holders of its common stock.
MN8’s trailing 12-month CapEx ratio was 0.14x, indicating that it has spent heavily on investments as a percentage of its operating cash flow.
The solar energy market opportunity is large and is expected to grow significantly in the coming years as companies and individuals seek to reduce their reliance on carbon-producing fuels.
Goldman Sachs is the lead underwriter. IPOs conducted by the company in the last 12 months have generated an average negative return (41.3%) since its IPO. This is a lower performance for all major underwriters over the period.
The main risk to the company’s prospects is the recent increase in the cost of capital, which has had a significant impact on its heavily capital-dependent approach.
As we learn more about management’s pricing and valuation assumptions for the IPO, I will provide an update.
Estimated IPO Price Date: To be announced.
Comments are closed.