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Tropical doubles down on solar

Energy storage company Tropical Battery is looking to boost income through further diversification into solar.

The segment is not entirely new, but it’s the reason behind the recent acquisition of a 50 per cent stake in KAYA, a solar solutions company operating in the Dominican Republic, in a cash-and-shares deal.

KAYA Energy Group is a Santo Domingo-based engineering procurement and construction company that has been providing renewable energy solutions to residential, commercial and industrial customers since 2010. Tropical Batter Company’s Deputy Managing Director, Daniel Melville, told the Financial Gleaner that the aim is for Tropical to do more business in a larger market.

Reporting to shareholders at the company’s annual general meeting on Wednesday, independent director and attorney Marc Ramsay said 3.75 million shares were transferred as part of the transaction. The company also secured an exemption under the Jamaica Stock Exchange rules, which allowed it to execute the transaction without having to seek shareholder approval.

“That share amount will not significantly dilute existing shareholders at all, but it puts Tropical in a good position to purchase this company,” Ramsay said.

With 1.3 billion shares in issue, the transferred shares would have accounted for 0.29 per cent.

The KAYA transaction closed on March 1.

It gives Tropical access to six markets in the Latin America, which Melville said meant it would also have a wider market for its batteries.

“Their economy, in terms of GDP, is over US$100 billion, well over five times that of Jamaica. That gives us access to a much larger market with a partner that views complete solar systems as their business,” said Melville.

Two members of Tropical Battery now have seats on KAYA’s board. Tropical Battery also has the option to increase its stake in the Dom Rep company to 80 per cent in two years.

Reporting to shareholders on Wednesday, Managing Director Alexander Melville gave a breakdown of the company’s revenue streams as 82 per cent from batteries, 13.2 from accessories such as brake fluid, deionised water, windscreen washer fluid and lubricants, while 3.4 per cent comes from exports, which involves the collection of used batteries and their packaging and shipment to a processing facility in Costa Rica. He estimates that the shipments amount to be about 100 metric tonnes per month.

The managing director also estimates that the Jamaican market for batteries is about 300,000 units, and that the company was targeting a more diversified revenue spread over the next five years, through new subsidiaries and partnerships.

Daniel Melville estimates that Tropical sells just under 200,000, representing 60 per cent of Jamaican market. The other 40 per cent is controlled by Tyre Warehouse and other auto accessories suppliers.

Over the last five years, according to Alexander Melville, revenues at Tropical grew from just under $1.47 billion in 2018 to $2.62 billion in 2022. Last year, sales grew by 31 per cent.

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