Star Energy buys majority stake in Croatian project developer

Star Energy announced the acquisition of a 51% stake in A14 Energy on Tuesday, through its subsidiary GT Energy Croatia (GTEC), for total cash consideration of €1.3m.

The AIM-traded firm, formerly known as IGas Energy, said the acquisition would provide Star Energy with ownership of the Ernestinovo geothermal waters exploration licence in Croatia's Pannonian Basin via A14's Croatian subsidiary, IGeoPen.

It described the acquisition as a critical step in Star Energy's broader strategy to diversify its energy portfolio and reduce regulatory risks.

Historically rooted in the UK's oil and gas sector, the company said it was aiming to become a key player in geothermal energy development.

The Croatian market, part of the European Union, presented a highly liberalised and established energy sector, making it an attractive investment opportunity.

Beyond the initial €1.3m, the deal included an additional €0.1m for cash-backed guarantees to the Croatian Hydrocarbon Agency and €0.2m for back costs related to the Ernestinovo licence.

GTEC and Peninsula International, the seller, had entered into a shareholders' agreement to co-develop geothermal projects in Croatia.

Both companies had jointly submitted three bids for additional geothermal licences, with results expected by December.

If successful, a total amount of up to €1.5m would be payable for the licences.

Star said the Croatian geothermal sector was still in its nascent stages, but had seen growing interest due to strong government support.

The Croatian Hydrocarbon Agency estimated the country's geothermal potential to be over one gigawatt.

It said the only operating geothermal plant, Velika Ciglena, currently had an installed capacity of 17.5 megawatt equivalent.

Croatia also boasted an extensive electricity transmission infrastructure that facilitated immediate access to pan-European power markets.

GTEC had committed to carrying Peninsula for up to €13.2m over the five-year exploration licence period, to be repaid from generated free cash flow.

The Ernestinovo exploration licence necessitated the re-entry of an existing well, with a broader plan for the development of a 10MW electricity generation plant.

Star said the plant was strategically positioned to connect to a major substation, offering distribution lines to Zagreb, Hungary, Serbia, and Bosnia.

“We are very pleased to announce our first overseas investment in geothermal as we look to build momentum in this part of our business,” said chief executive officer Chris Hopkinson.

“Whilst the business has, and continues to build, a material pipeline of business opportunities in the UK, we identified a significant opportunity in Croatia which will allow faster development and diversification of Star Energy's geothermal interests.

“The Croatian government is actively promoting the sector with a focus on electricity production which should allow accelerated development.”

Hopkinson said the acquisition would bring with it a small, but highly respected team with years of experience in Croatia including developing the Velika-1 power plant, with the firm looking forward to working with them, bringing complementary skills from its existing business.

“This is an important next step in our strategy to transition over time into a significant player in the geothermal market and to deliver future value for our shareholders.”

At 0944 BST, shares in Scancell Holdings were down 1.54% at 9.6p.

Reporting by Josh White for Sharecast.com.