Mercury NZ agreed to buy 19.99 percent of Tilt Renewables from the Tauranga Electricity Consumer Trust for $144 million, or $2.30 a share, a 24 percent premium to its last trading price.
Auckland-based Mercury said it has a six-month option to buy the trust's remaining 6.8 percent holding in Tilt at the same price, in a transaction it says must be compliant with the New Zealand Takeovers Code. Under the code, a full takeover offer is typically triggered if an investor wishes to lift its stake above 20 percent. The deal would make it Tilt's second-largest shareholder after Infratil, with a stake of 50.8 percent.
Tilt, the wind and solar generation facilities which split from Infratil-controlled Trustpower in 2016, "is an established business operating power plants in a growing renewables market, with a quality development pipeline, good governance, and a strong management team with a proven track record," Mercury chief executive Fraser Whineray said in a statement.
"The investment will allow Mercury to meaningfully participate in Australia’s accelerating transition to renewable energy sources," he said. "The investment may provide further opportunities for Mercury to deploy funds to capitalise on Tilt’s established Australian position as projects are developed."
Last week Tilt posted an annual loss of A$2.8 million, reflecting below-average wind while earnings before interest, tax, depreciation, amortisation and fair value movements dropped 16 percent to A$103.8 million. It forecast a recovery in 2019 financial year ebitda to between A$120 million and A$127 million, reflecting the 54-megawatt hour Salt Creek Wind Farm coming on stream in July and growing appetite for renewable energy in Australia.
Tilt also said last week that the outlook in New Zealand has improved since it secured a consent for a North Island option at Waverly in South Taranaki, and on greater national demand with increased production at the Tiwai Point.
"Tilt has established a robust portfolio of operating wind farms in both Australia and New Zealand, as well as consented renewable generation projects which it can bring to market when conditions are right," Whineray said. "For Mercury shareholders, this transaction is aligned with our signalled strategy for economic growth, and follows the exploration of other opportunities related to the electricity sector in Australia."
Tilt's shares last traded at $1.85 and have fallen 14 percent in the past 12 months. Mercury shares last traded at $3.18 and are down 0.5 percent in the past 12 months, while the S&P/NZX 50 Index gained about 16 percent.