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Sofame Technologies (SDW.V) - cancellation of acquisition a blessing in disguise
Comment by Objective Capital , Apr 24, 2009
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Sofame has decided not to proceed with the proposed acquisition of TPE in California which it announced in Feb. Sofame was to acquire TPE for C$250,000 in a proposed share swap for all the issued share capital of TPE.
Objective's view:
TPE’s technology permits the efficient transformation of energy from heat sources such as solar, geothermal, flue gases, grey water and ocean warm waters to electricity at temperatures as low a 85°F and as high as 800° F. TPE’s organic rankine cycle turbine uses proprietary refrigerant mixtures that are claimed to deliver significant thermodynamic efficiency and less energy destruction performance compared to alternative fluids.
In 2008, TPE had entered into a power generation agreement to finance, build, own and operate a small power station for a regional California electric utility. Revenues from TPE’s 5-year contract were estimated at US$1.8m per annum, or US$9m over the life of the agreement. TPE indicated to Sofame that the capital required to deliver the completed project to be about US$4.3m.
Sofame has now announced that it has decided not to proceed with the proposed acquisition as it was not able to agree to satisfactory commercial terms. This was despite fulfilling the due diligence criteria. We understand that because of the extra investment required for the project there was a fundamental disagreement as to who would finance this extra investment, i.e. the existing shareholder(s), or Sofame.
The cancellation of the acquisition of TransPacific Energy Inc. is probably a blessing in disguise. Management already has enough on its plate in developing an effective SMR network and it is likely that this would have provided a distraction, even though the technology involved (organic rankine cycle turbine using proprietary refrigerant mixtures) looks to have wide applications in an emerging market.
