Sky Solar Holdings (SKYS) on Q1 2016 Results - Earnings Call Transcript

| About: Sky Solar (SKYS)

Sky Solar Holdings Ltd (NASDAQ:SKYS)

Q1 2016 Earnings Conference Call

June 17, 2016, 08:30 AM ET

Executives

Armin Seifart - VP Corporate Counsel

Andrew Wang - CFO

Sanjay Shrestha - Chief Investment Officer

Analysts

Philip Shen - ROTH Capital Partners

Christine Carballo - Oppenheimer

Operator

Thank you for standing by and welcome to the Sky Solar Holdings Limited First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by the question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, 17th of June, 2016.

I would now like to hand the conference over to your first speaker today, Armin Seifart Vice President Corporate Counsel for Sky Solar. Please go ahead.

Armin Seifart

Thank you and welcome to Sky Solar's first quarter 2016 earnings conference call. Joining us today on the call from the Company are Sky Solar's Chief Financial Officer, Mr. Andrew Wang and Sky Solar's Chief Investment Officer and President of Sky Capital, Mr. Sanjay Shrestha.

Before we begin the formal remarks, I would like to remind you that certain statements on today's call, including statements regarding expected future financial and industry growth, development and construction of projects, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

Further information regarding these and other risks are included in Sky Holdings filings with the U.S. Securities and Exchange Commission, including its final perspectives pursuant to rule 424-D4 [ph]. Except as required by law, the company does not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Now, I'd like to turn the call over to our Chief Investment Officer, Mr. Sanjay Shrestha. Could you please?

Sanjay Shrestha

Thank you, Armin, and thank you everybody for joining our conference call today. I would like to begin our call by essentially recapping our key accomplishments here during first quarter of 2016, and I would like to provide you with some updates on key initiatives that are important for us during 2016 and beyond.

During the first quarter as we highlighted during our last earnings call, management and the board have initiated a strategic review to unlock shareholder value. This remains our key focus throughout 2016 and again as a quick recap we are exploring ways to maximize value with our portfolio of operating assets and pipeline, particularly as it relates to our operating assets in Japan. We increased our operating portfolio in Japan from 79.1 megawatt to 82.5 megawatt during the quarter, and I would like to note that the relatively small incremental capacity addition is generally reflective of our ongoing review of strategic auction in this market. We currently have additional 24.1 megawatt under construction in Japan.

Now according to our comments from the last earnings call, we continue to see an increasing attractive opportunity in the U.S. market. Along these lines, as some of you might have already seen, we recently announced the definitive agreement to acquire a total of 22 megawatt of operating assets in California and Massachusetts. We plan to close on this transaction during the third quarter of 2016, I would like to highlight that the solar parts have an average of 15 years of PPA left on them and our acquisition price reflects a cash-on-cash yield in the low-double digit. We’re very pleased with this definitive agreement as a first major announcement in the U.S. market since establishing the presence in 2015. Furthermore, in the U.S., we’re also negotiating to acquire a 100-megawatt-plus pipeline that are at various different stages which will be an exciting new development once we complete this transaction.

And in light of everything going on here in the U.S. solar market, I thought it would be worthwhile to take a moment to talk about our overall U.S. expansion strategy. As you may be aware, capital remains abundant for mechanically completed assets in the U.S.; however, capital is very fast sparse for permits that are not yet at the shovel [ph] ready stage. We have planned to capitalize on the opportunity that allow us to take this pre NTP permits to NTP as a way to generate attractive returns from this assets rather than this acquiring mechanically completed assets as a way to expand in the U.S. market.

We believe we have the right technical and financial underwriting capabilities to take advantage of what we see as somewhat of a dislocation in the U.S. solar market at this point in time.

Now, shifting gears a little bit and looking at Latin America, which remains a very important geographic region for us, we remain positive on our overall outlook in this market. Again, our focus is really in Uruguay and Chile as it relates for Latin America. We expect sustained growth with attractive returns in Uruguay backed by government PPA and a very strong relationship that we have with local partners in that market. We are also evaluating the right timing to further develop our products in Chile as we believe we can generate attractive returns with an optimized design and cost structure despite somewhat of a challenged current spot pricing environment.

In addition, we recently filed a universal shelf, and it became effective as of June 15. This allows us to be opportunistic in terms of our access to the capital market as we continue to build our presence in the U.S. and Latin American region. We look forward to updating you all on our latest operational and corporate initiative in the coming months.

Now with this, I would like to turn the call over to Andrew, our Chief Financial Officer for a more detailed review of our first quarter 2016 financials. Andrew?

Andrew Wang

Thank you Sanjay. First, I would like to note that we encourage you to review our financial results on an adjusted non-IFRS basis by looking at ongoing elements and removing the effect of what we expect to be one-time items. You can evaluate the company in a similar way in which we look at it. We believe this will give you the best understanding, both of our historical results and the prospect going forward. Also note unless I state it otherwise, all financial figures refer to the first quarter of 2016, any comparison characterized as year-over-year is comparing to the first quarter of 2015 and any characterized as sequential is compared to the fourth quarter of 2015.

Okay, now onto the results. Electricity sales in this quarter were 9.9 million, an increase of 94% year-over-year and 25.9% sequentially. The year-over-year growth in electricity sales was primarily due to the increase in the company’s operational IPP assets globally. The sequential increase in electricity sales was due to the seasonal high solar irradiation across the company’s major geographic markets.

Electricity sales in Asia were up 143.5% year-over-year and 28.6% sequentially, primarily due to revenue contributed by the solar parts in Japan that was connected during the year. Electricity sales in North America were up 34% year-over-year and 19.2% sequentially primarily due to the seasonality. Electricity sales in Europe were up 6% year-over-year and 7.9% sequentially as a result of better system performance. Revenues from system and other sales was down 65% year-over-year and 58.3% sequentially. The year-over-year and the sequential decrease in revenue for our system and other sales was primarily due to the company’s continued shipping business model towards IPP electricity sales.

Total revenue was 11.7 million, increasing by 14.5% year-over-year but down 3.8% sequentially. Cost of sales and service was 6.4 million, compared to 3.1 million in the same period of 2015. This increase is in line with increased IPP capacity. Gross profit, which was 5.3 million this quarter, was down 25.7% year-over-year and gross margin decreased to 45.4% this quarter from 70% in the same quarter of 2015. This decrease was mainly due to non-recurring permit sales that had higher margin in the first quarter of 2015.

SG&A expenses were at 4.8 million, up 10.6% year-over-year. This increase was primarily due to project financing activity in South America. Other operating income was 1.9 million, compared to 42,000 in the same quarter of 2015. The increase in other operating income was due to income from the disposal of 1.8 megawatt solar power in Japan during the fourth quarter of 2016.

Operating income was 2.4 million, compared to operating income of 2.8 million in the first quarter of 2015. Finance costs were 1.3 million, compared to 0.9 million in the same period of 2015. The increase in finance costs was primarily due to the increased balance of loan -- bank loan in the first quarter of 2016. Other non-operating expenses were 1.6 million compared to non-operating income of 485,000 in the same period of 2015.

The increase in other non-operating expenses was primarily due to 0.8 million in fair value charges of financial liabilities and also non-cash evaluation losses from loan interest hedging of -- which is about 1 million. Net loss was 823,000 compared to a net income of 2.6 million in the same period of 2015. Basic and diluted loss per share was $0.02, basic and diluted loss per ADS was $1.07. Adjusted EBITDA was 5.4 million. Keep in mind that adjusted EBITDA is a non-IFRS measure. Our calculation removes the effects noted above as well as other items.

Please be sure to study the reconciliation table include in the press release for full details on how we arrived at this adjusted EBITDA calculation. The use of adjusted EBITDA has limitation as analytical tool and you should not consider it in isolation or as a substituting for analyze of the company’s financial results as reported in IFRS.

Now let me turn to our balance sheet. At end of Q1, we have bank balance and cash of $38.4 million. The increase of cash balance compared to the end of 2015 reflect additional project financing completed in Japan. Cash including received cash was 39.8% of equity [ph] compared to 28.2% at the end of 2015.

The carrying amount of IPP solar parks was 288.8 million or 72.4 million of our total assets of 398.9 million. Total borrowings of 123.2 million represented 30.9% of our capitalization. Long-term borrowings of 104.8 million were primarily non-recourse project financing. Short-term borrowings of 18.4 million were deployed for working capital.

Finally, we have EBITDA positive and the balance sheet remains healthy. We look forward to updating you with our overall updates as we undertake key strategy initiatives to unlock shareholders value.

Now I will turn the call over to the operator for the question-and-answer session. Operator?

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. We will now take our first question from Philip Shen from ROTH Capital Partners. Please go ahead.

Philip Shen

I think in the last quarter, you guys talked about having 20 megawatts in progress in Japan with the expectations of connection in Q1. My guess is with the strategic review of assets in Japan, perhaps we saw that delay as I think you guys had a net 4 megawatt of capacity addition in the quarter, so can you just help us understand what happened there?

Sanjay Shrestha

Again Phil, that’s exactly what it is, right. See I think one of the things we would love to be able to do frankly is come out and give you guys a lot more detail about all the things that’s going on there. But unfortunately, we’re not at the point where we can really talk about these things because obviously needless to say we’re working on it. And in this regard, I think we’d very much appreciate it if you guys were to give us some more time here, we’ll obviously come back and try to give you guys more update as we report our Q2 earnings call.

But I think your assumption here of why the connection was lower is strictly related to all the strategic review that we are going through as we just want to unlock shareholder value, but too much more than that, I think frankly it is a little pre-mature for us to give you that, any further guidance, and we’ll obviously comeback to you guys once we have something more concrete to share.

Philip Shen

Great, yes. We appreciate that it’s an ongoing discussion and negotiation. Shifting, well I guess my next question here may be impacted by or have a similar answer. But in terms of connections and additions in Q2 and Q3, can you give us some loose sense of what to think about there?

Sanjay Shrestha

Sure. I think, so in terms of Q2, I think as you know right, I think while we have additional 24.1 megawatt under construction in Japan, that's obviously something we talked about here, but I think the amount of that exact connection will be somewhat frankly dictated by exactly what ends up happened with the strategic review. What we can tell you, however, is we are continuing with our construction work in Uruguay, which as you recall we have about 9 megawatt of operating asset there and a total of 82 megawatt portfolio. We are moving forward very, very aggressively trying to close up our IPP financing, right, we are now at the final stages of actually getting all the documentation done. Our expectation is to get that IPP financing closed by sometimes this summer. And then as you know we also have -- I mean our equity partner is already in place that is actually giving us other equity required for that.

So you should expect that the full-fledged construction start of our remaining of that 82 megawatt in Uruguay should really commence sometime by August of this year. But again, it is important to note that we are doing all the necessary infrastructure related work like building the necessary transmission line to make sure that the connection gets done on time. So, please look out for ongoing construction of that 82 megawatt in Uruguay as we go into really a latter part of the Q3 of 2016.

Philip Shen

Okay. Great. Margins in the quarter were a little bit lighter than we had though, perhaps due to seasonality, perhaps due to some other factors, I think one of them was, may be fewer permit sales, but can you help us understand in Q2 and Q3, should we continue to expect margins to be in that 45% range? Everything, all else equal assuming there aren't additional permit sales in Q2 or Q3?

Sanjay Shrestha

Well, we don't expect it as -- I mean there is continuously permit sales in Q2 and Q3. Actually the permit sales which happened in Q1 last year, 2015, is not in Q1 this year. So this is why these have a very high one-time non-recurring margin recorded in 2015. We didn't foresee that certain sales of permits will continue in the next few quarters. On the other hand, we're expecting some relation in Q2 and Q3 normally will represent the highest during the year. So, basically we believe we will continuously report at least I mean basically similar margin in the next few quarters.

Philip Shen

So, we could see similar margins in Q2 and Q3 relative to Q1?

Sanjay Shrestha

That's [Multiple Speakers].

Philip Shen

Okay. And that's 100% range. What was the -- is, go ahead.

Sanjay Shrestha

We expect it could be a little bit higher than Q1 giving us -- that's a little bit higher.

Philip Shen

A little bit higher, okay. And what was the ASP on the Japan sale?

Sanjay Shrestha

So, basically you can see that from the sales of Japan, we are generally recorded more than $1 per watt, is the gross profit.

Andrew Wang

That was from the sale of department [ph].

Sanjay Shrestha

I mean during the quarter, the sales are of 1.8 megawatts plus.

Philip Shen

Right. So you said a $1 over a $1 per watt gross profit, can you tell us what the ASP was?

Sanjay Shrestha

Well basically, the ASP is representing between as a four plus/minus per dollar, U.S. dollar plus/minus.

Philip Shen

So, plus or minus $4 per watt?

Sanjay Shrestha

Yeah.

Philip Shen

Okay. Great. In terms of operating expenses should we continue to expect kind of the $4.7 million, $5 million level or should we expect -- should we see operating expenses or G&A specifically increasing to kind of back to $7 million level?

Sanjay Shrestha

While we believe in the following quarters, the SG&A expenses could help somewhat a little bit, I mean changes compares to the first quarter, given the company obviously we are doing the restructuring for the region in America. So basically, that’s what we’re trying to consolidate existing resources, we have in different countries so they could be in basically of the existing accounts, and we eventually will believe our -- I mean the SG&A expenses could be somehow basically even lower than Q1 margin -- Q1 level, but I mean it could have -- may be during the -- I believe in Q2 and Q3, we will have some additional costs because of certain restructuring activities we are going to prepare.

Philip Shen

Okay. Great. I will jump back in the queue. Thanks.

Operator

[Operator Instructions] Your next question comes from the line of Colin Rusch of Oppenheimer. Please go ahead.

Christine Carballo

Hi this is Christine in for Colin. Thank you for taking my questions. I know that there is not a whole lot you can say about your ongoing conversations in Japan, but as you assess this options are you seeing any risks to the portfolio in terms of feed in tariff permits?

Sanjay Shrestha

No, we’re not because I think one of things, again this might be a good time to sort of give you guys a quick update, right. One, we now have almost 84 megawatt connected freight and most of these are FIT1 and most of our, again we’ve got and I think a pretty good breakdown of only the shovel-ready permit, what is in the advanced stages so we have well over another 100 megawatt that is franking in the shovel-ready status, some at IT1 and some at IT2. So going forward in the beginning process what happens to overall policy outcome is it FIT5, is it an auction mechanism, overall return in that market that I think is a different topic, but as it relates to what we view as our shovel-ready permits and our operating assets in Japan, we do not see any risks associated with that.

Christine Carballo

Okay and then do you believe that you could complete a securitization like some of your competitors have on that 20 year financing?

Sanjay Shrestha

Again, I think short answer is yes and [indiscernible] one of the things I hope everybody on the call can appreciate it, we really would like to talk a lot about this and unfortunately given where we are, we have been somewhat quite on it, right that’s because we have to right now given everything that’s going on, but the short answer is yes. And again I think these are basically the FIT1 assets we have which are one of the most attractive portfolio that is operating and there is more as a shovel-ready permit even under FIT1 trial. So the short answer to your question is if that is the direction we chose to go, yes we could certainly do that.

Christine Carballo

I appreciate that, I understand there is only so much you can say at this stage. Switching over to the U.S., you mentioned that there is an opportunity for 100 megawatts pipeline acquisition, do you think any other acquisition opportunities there and how much competition are you seeing for this?

Sanjay Shrestha

That’s a really good question; I was hoping somebody would ask that because I think with a lot going on in the U.S. market with some high profile stuff and again extension of the much better long-term from a policy standpoint. What we’re really seeing here is as follows.

One, I think there is an unbelievable amount of capital as I briefly mentioned in my prepared remarks chasing after mechanical completed and field [ph] assets and despite what it might look like in the public market, the competition for those assets are pretty strong and there is a lot of financial buyers, there is a lot of players looking after the return expectation have actually continues to go down in the private market transaction up, so that’s one thing, right.

But from our standpoint what we see here is we would look to do two things right, if there is an asset where we are actually in fact meet our return hurdle rate where the cash-on-cash yield is in, as we’ve said in this recent transactions similar to that, we would certainly go after that and we’re not looking at like 50 megawatt, 100 megawatt type of an operating asset, that is not an area where we can compete at all, that is still brutally competitive, not a place where we want to be. We’re really going after most of distributed generation due to these scale type project where there is a little more work to do, right, where we can actually bring in our technical in-house resource to really optimize the asset and that is a type of the operating asset we would go after if we were to go after an operating asset, number one.

And number two, the area where we feel like we could really add a lot of value where there seems to be a little bit of a scarcity of the capital chasing after this opportunity is that really in the pre-shovel-ready stage of permit, right and you know one of things is there is a lot of developers and they tend to sort of take it up to a point, but before you really go all the way to the shovel-ready status, there is an interconnection deposit which can be very expensive sometimes, there was basically a detailed engineering study that has to be done.

So really in that space, 6 months before permits kind of get to the NTP status is where we think we can play because we have an in-house technical capability, procurement capability, financial underwriting capability, legal underwriting capability and this 100 megawatt plus that I mentioned you guys about here that we are negotiating right now, is reflective of that and that’s where we can actually go and acquire this permits and frankly get the kind of the return that will end up double-digit versus high single-digit type of a return that you can get by acquiring only an operating asset.

Christine Carballo

I appreciate that color. So the other thing that we’re noticing is we continue to see modular and inverter prices decline substantially. As you work through your cost expectations, are you seeing any material change in the profitability of your portfolio?

Sanjay Shrestha

There are 2 factors in play here, right. You know one of things is solar and you might recall I briefly touched on we’re sort of evaluation, we will choose to do with some of our projects in Chile, right. So you saw that the spot market, reflective of what’s happening with the price of energy and oil on a global basis have corrected quite a bit and if we’re sitting here talking about what to do 12 months ago or even 6 months ago when we spoke on the last earnings call we had decided to put that project on hold because the return did not make any sense.

But in light of what you just mentioned here with an undergoing decline in the price of every single component focused towards building a solar plant, we do think we can optimize the cost, we can optimize the design and even with this somewhat of a challenged stock market, we can actually meet our internal criteria. So the short answer to your question is yes, we do see that being an offsetting factor for basically continuing to decline if you would in either the PPA or the price of electricity that you can bid for on some of this project and that is clearly becoming more of an offset in terms of at least maintaining the returns on these assets and potentially even making them better.

Christine Carballo

Great. Thank you so much. We’ll take the rest offline.

Operator

Your next question comes from the line of Carter Driscoll of [indiscernible]. Please go ahead.

Unidentified Analyst

Good morning. Thanks for taking my question. So it sounds like in, if I can fairly characterize that, you’re seeing some opportunity in the U.S. to be somewhat more of EPC player in certain pockets like you just discussed. Is there a fair characterization of part of the opportunity that you’re seeing in the U.S. in terms of the breadth the [indiscernible] can provide and were you see an opportunity to really get this type of returns that are inherent?

Sanjay Shrestha

Almost, but not quite EPC though Carter. Because I think we outsource EPC, what we do have however in-house is the E part of that EPC, the engineering capabilities, as well as the procurement capabilities as well, but we’re not going to do to C the actual construction. That’s not what we’re good at, we don’t want to do that and that’s something we would work with a lot of different partners to do.

But what I was more specifically referring to is, you basically have a lot of develops who secure the land, secure the leads, secure the apartments, get in getting the PPA. But as a goal from really building this project organically all the ways of NTP, unfortunately for a lot of the -- maybe not well capitalize developer, there is a bit of value [indiscernible], where you go up three NTP, you’re six months away from really getting it to NTP and you can’t take all the way across.

And that’s really where we step in and it’s not a place for a financial buyer to typically feel comfortable enough to come in. Simply because, I mean they’re looking at it more from a cash flow standpoint, that cash flow doesn’t until you have already built the project. Which is why, there is a lot of competition for already completed and a mechanically completed asset.

So the area where we feel like we play and we have actually played really well and get the returns better than what a financial buyer return would be is really by getting involved in that six months early stage, three to six months before NTP, because we have an in-house engineering capability apart from having similar financial as well as the legal underwriting capability.

Unidentified Analyst

Excellent. Thank you for that. And then just looking back to one of your earlier comments about dislocation or maybe you could drill down a little bit more deeply into how you characterize that particular U.S. market you’re talking about, obviously a large bankruptcy that maybe scared away some of the financial players and/or developers, you’re talking about dislocation at certain levels of the development chain. What are you referring to specifically and why is that there is the opportunity or is it back to what you just talk about in terms of the opportunity going to kind of the NTP from a land acquisition phase?

Sanjay Shrestha

Right. And that was what I was more referring to, right. And maybe I can clarify a bit more or maybe reiterate some of my, maybe sort of reemphasize some of my prior comments, right. I mean despite what has happened here with -- as you mentioned right, I mean, I think what has happen with the larger players, private market remains very attractive in terms of buying assets of COD. I don’t think there is a market capital for that frankly speaking.

If anything, I think it’s gotten more competitive because this cash was a pretty stable cash flow, there is a level of comfort I think in the margin with this asset class, right this renewable asset class, backed by the very attractive PPA and things like that. But one of the things however there is, when you have big developers that actually run into trouble and they would become say a little bit sort of somewhat of a scarcity of capital just going into the development efforts.

One of the things that I think is important to keep in mind is while everybody wants to assets of COD somebody still has to be doing organic development and having to have enough permits to take these assets to COD, they can be a mismatch. You really don’t have enough permits to be built to take it to COD and all the capital is just chasing things at COD and that’s what I was referring to when I said there is a dislocation in the market, too much money on one end and not enough money on the other end.

And rightfully so, as a financial buyer, you don’t know how really handicap some of the technical risk here and especially as a financial buyer given some of the things that have happen to a larger player you’re concern about a drilling a lot of dry holes as a developing capital, it is an expensive capital, fully so. But we feel like we’re not taking a risk very, very early on, but we feel like there is a play and a point where you can get involved. Again as I said call it about like six months pre-NTP and by doing that work with our in-house technical team we feel like we can still get to that double-digit equity return after leverage at COD, which is meaningfully higher than what you would get if you were to just go and look for assets at COD.

Unidentified Analyst

Is there a project size for which you see the competition really meaningfully increase? I mean is it 40 megawatts, 50 megawatts, I think you kind of alluded to, is it a greyer area than that? Can you kind of bracket the opportunity set from a rate of capacity that you think is the sweet spots for you?

Sanjay Shrestha

Simpler the better and that’s where the competition is. And typically when you have assets, so which is why, I think when you have sort of like 40 megawatts, 50 megawatts, 100 megawatts block of assets, the amount of the work involved acquiring that assets versus acquiring 10 megawatts, but made out of half a megawatt each. I mean, I think would be substantially higher, to actually acquire that 10 megawatts.

So short answer is I think larger scale project tends to attract more buyer and therefore the returns are lower, right. That's number one.

Number two, I think, but for the COD assets I think even for smaller assets if there are buyers there so I won't say that there is more buyer for larger assets versus smaller assets I think assets of COD there is enough of capital going after that opportunity. But one of the points that I think might be worthwhile mentioning though, in terms of our overall strategy even when we go after this pre-NTP permits, I think our focus still is smaller scale distributor generation utility type stuff not so much 100 megawatt type of opportunity or even 50 megawatt type opportunity. What we are exclusively focused on is really think that a sub 10 megawatt.

Unidentified Analyst

Excellent. And then I realized you are under strategic review and there isn’t a lot you could add, but are there other geographies that either you are not currently in that you see potential attractive opportunities in I don't know Mexico, Turkey or other geographies you can talk at least high level that you think might be expansion opportunities that you could share with us with this time?

Sanjay Shrestha

Sure. We are again I think, we feel quite good about our presence in Latin America with what we think we have we really have a very, very strong development team and we feel like we really have an excellent local partnership as well as government relationships. So, if it were the decision we were to make of a lack of some of the other Latin American market we could. But having said that, I think what are the key criteria for us is we don't want to go and build a project and take a currency risk number one, number two we're not going to go build a project, we're taking a bit of a sovereign risk, we're not going to do that and I think it has to meet upper return threshold.

Just to give you an example, just to add more megawatt on the balance sheet we got to move forward with building a project in Chile, but we decided to put that on hold because it dint not meet our return criteria. Sometimes these are difficult decisions to make, but needs to be made. So, that's a little bit of a longer answer for your specific question.

Is there opportunities outside of Uruguay and Chile in Latin America? Yes. Are we actively pursuing them at this point in time actively? No. But are we aware of it? Yes. But if you -- I would just give you both the comfort that we're probably not going to go after any of these opportunity even if they are available unless we feel comfortable about the sovereign risk as well as meeting our return criteria.

Unidentified Analyst

Appreciate all the color. Thank you, I will get back in the queue.

Operator

[Operator Instructions] Our next question comes from the line of Ethan Zung [ph], a private investor.

Unidentified Analyst

So I have a question just regarding to your acquisition on the Greenleaf about a month ago. And just want to clarify that like based on my calculation you basically financed the whole transaction using roughly about $30 million of restricted ordinary shares and look at the value that's sort of puts your ADS around $7, is that roughly right?

Andrew Wang

May be I can give you some more color on that. So, basically that transaction include in total Sky Solar will pay $9 million in cash and also roughly 30 million ordinary shares to acquire the volume, but within the 9 million cash, actually 6 was to be paid to the Greenleaf as in the conservation [ph], another 3 million actually was paid on behalf of these -- basically the -- another partner. So in total conservation for this acquisition actually includes, should be 6 million cash in it and also there is also 30 million in shares. Another 3 million actually is a payoff of existing liability of the Sky Solar.

Unidentified Analyst

Right, right. But how [Multiple Speakers].

Andrew Wang

Share will be roughly $8 per share.

Unidentified Analyst

I see, okay. And just wondering could give us some color on how do you actually negotiate the term given that your share price is only about $3 at the moment, what's the negotiation like with the Greenleaf in terms of they are willing to accept $8 per ADS in this transaction?

Sanjay Shrestha

Right. So, let me try and give you a color on that. And as Andrew said there were the two components, stock component and the cash component of this acquisition. There are two parties involved, party in the U.S. and party in Asia that are the owner of these assets. And this is something we sort of kind of talked about in our ongoing effort to expand in the U.S. market for some time and this transaction actually first was initiated all the way back to like about a year ago. And then in light of that -- so yeah, one of the things is when we first started negotiating on this transaction our share price was actually well above $8 a share and so I think selling party were comfortable enough that even though the transaction had taken longer they were willing to at least not exactly honor the original terms but close enough to that, and luck having this was a deal that was actually in works for almost a year and our stock as you can sort of look back it was meaningfully higher than $8 a share at that point in time.

Unidentified Analyst

Okay, that makes sense. Thanks.

Sanjay Shrestha

No problem.

Operator

There appear to be no further questions. I’d like to turn the call back over to management for any closing remarks.

Armin Seifart

Thank you operator and I just want to thank everybody for listening to our call today, we look forward to updating you all in all of our ongoing initiative in the upcoming earnings call for the second quarter. Thank you again and have a wonderful weekend.

Operator

That does conclude our conference to today, thank you for your participation. You may all disconnect.

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