Durrant Pate/ Contributor

Jamaican energy company Tropical Battery is returning to the equities market seeking upwards of J$2.09 billion in its additional public offer (APO), which opens next week.

The company is seeking subscription of 954,545,455 ordinary shares with the ability to upsize to 1,122,994,652 shares priced at J$1.87 per share. The APO opens May 22 and scheduled to close on June 6,.

Sagicor Investments and NCB Capital Markets are the brokers engaged by Tropical Battery to assist with the implementation of the APO, having successfully tapped the capital market in September 2020 with its initial public offer (IPO) of up to 325 million ordinary shares at J$1 per share. The offer was oversubscribed, closing within seven hours due to high demand. 

Up to 267,379,679 ordinary shares are initially reserved for priority applicants falling within the key strategic investor pool at the price of J$1.87 per share. 

Use of proceeds

Tropical Battery intends to use the proceeds from the IPO to:

• To repay an existing US$9.5 million loan (approximately J$1.4 billion) owed to CIBC Caribbean Bank Jamaica (formerly FirstCaribbean International Bank Jamaica as a result of the acquisition of Rose Electronics Distributing Company. 

• To repay monies owed on outstanding bonds of approximately J$300 million. 

• To settle all transaction-related costs. 

• To be applied towards general working capital for growth opportunities. 

In the event that the company is only able to raise the minimum amount of J$1.0 billion, it will use the proceeds towards repaying the CIBC loan and settling all transaction-related costs. 

If the invitation is oversubscribed, the ordinary shares will be allocated on a pro rata basis, in which event, applicants may be allotted fewer shares than were the subject of their applications. Tropical Battery plans to have the new APO shares listed on the Jamaica Stock Exchange (JSE) and will make an application to the equities regulator to have this done in accordance with its rules within 15 days after the allotment of shares.

Planned migration to main JSE market

If the APO is successful, this will require Tropical to take steps to transition to the main market of the JSE from the junior market, where it is currently listed. This is due to the fact that the company’s share capital would have exceeded the Junior market limit of $750 million.

The company intends to make a market announcement to this effect on July 26, 2024. In the APO prospectus, which is now out, CEO Alexander Melville says the APO will give “shareholders the opportunity to benefit from the increased earnings as a result of the acquisition of Rose Batteries. The capital raised will retire the debt related to the bridge financing, ‘freeing up’ cash that would have otherwise been allocated to debt service. This is likely to boost net profits, enabling us to distribute higher dividends and reinvest in the business for further growth.”

He adds that the acquisition of Rose Batteries is not just a transaction but a strategic move promising immense value and returns. Tropical Battery completed its acquisition of the Silicon Valley-based Rose Batteries on January 31, 2024. 

Overseas acquisitions

Rose Batteries is a company with a remarkable US$22 million in revenue and US$3.7 million in net income for calendar year 2023. Thorough due diligence, combined with insights from the Rose Batteries team, Tropical Battery has solidified its belief that this acquisition presents a promising investment opportunity. 

The acquisition was made through bridge financing to capitalise on the time-sensitive opportunity. In addition to this acquisition, Tropical Battery successfully acquired a 51 per cent stake in renewable energy solution provider Kaya Energy Group in the Dominican Republic in fiscal year 2023.

Tropical Battery’s financial performance for FY2024 reflects exceptional growth, demonstrating strong operational execution, strategic expansion, and increased market penetration.

With a 100.7 per cent year-over-year revenue increase, the company has successfully leveraged organic growth, acquisitions, and market expansion to solidify its position as a leader in the energy storage and renewable energy sectors. 

Total revenue soared to J$5.62 billion, up from J$2.80 billion in FY 2023, driven by the successful expansion into the United States and increased demand in core markets like Jamaica and the Dominican Republic. Gross profit increased by 112.7 per cent to J$1.86 billion, reflecting efficiency improvements and more substantial margins. 

EBITDA doubled to J$519 million, while adjusted EBITDA reached J$596 million, reflecting a 130.7 per cent year-over-year increase. This growth underscores the company’s ability to scale operations efficiently while maintaining cost discipline.