Star Energy seals Croatian sale, focus shifts to UK and debt repayment

Star Energy Group PLC on Wednesday said it had completed the sale of its Croatian subsidiary IGeoPen doo for an initial EUR1.5 million.

The Lincoln, England-based energy producer in the UK had agreed to sell the business back in April. The buyer is Enna Geo doo.

Star Energy had owned 71% of A14 Energy Ltd, which is the direct parent of IGeoPen. The remaining 29% is held by joint venture partner Peninsula International PTE Ltd.

Of the initial cash consideration, Star Energy's share is £1.3 million. A further £500,000 earn-out per licence is payable once a geothermal power plant begins operating on each of the three licences, taking Star Energy's total potential share of earn-out payments to EUR1.5 million.

Star Energy sees this disposal as part of a broader repositioning of the company, "allowing management to concentrate on its oil and gas and UK geothermal activities".

According to Star, the sale releases EUR5.2 million of restricted cash, in addition to removing future capital commitments related to the licences in Croatia.

The company plans to use the sale proceeds to repay a EUR2.7 million Kommunalkredit facility, reducing the outstanding balance to EUR6.9 million, when taking into account an amortisation payment scheduled in December. The balance is payable semi-annually through 2027 and 2028.

Star Energy also noted that it has £258 million of tax losses, with "potential to create material value through accelerated realisation of these".

Going forward, it plans to argue for policy changes in the UK which it sees boosting investment in geothermal energy, whilst continuing to pursue opportunities in oil and gas.

Star Energy Chief Executive Ross Glover commented on Wednesday called the Croatian sale "an important step in the reshaping of Star Energy".

"At our interim results, we said that our priority was to convert our stronger financial position into profitable growth and long-term shareholder value. Completion of this transaction strengthens that platform further. We will continue to be disciplined in how we deploy capital, with the objective of translating a simpler, less leveraged and more focused business into sustainable returns for shareholders," the CEO said.

Last month, the company reported that pretax profit fell to £633,000 in the first half compared to a restated £4.5 million a year ago, which removes the impact of now-discontinued operations. Revenue rose to £23.2 million from £18.3 million, though the company swung to a loss on derivative financial instruments of £5.0 million from a £1.3 million gain last year.

Star Energy shares fell 5.0% to 19.00 pence each on Wednesday afternoon in London.

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