Mergers and acquisitions have come to a grinding halt this year. But activity in the renewable energy sector is heating up with a number of deals.
According to Bloomberg data, in the wider market, Australia’s deal activity dropped to $13.8 billion in the first quarter of 2020, a 32 per cent drop from the 12 months prior.
There have been multiple takeover offers and divestments of assets recently for renewable companies including Infigen, Windlab and New Energy Solar.
Infigen Energy is one of the largest renewable energy generators in Australia with a fleet of seven windfarms and sources renewable energy from third parties.
It received takeover offer from Iberdrola Renewables Australia in addition to the offer from Philippines based UAC Energy a few weeks ago.
Infigen has recommended that shareholders accept the takeover offer from Iberdrola rather than the “hostile” offer from UAC.
UAC Energy has taken up a stake of more than 12 per cent and intends on making an all cash takeover bid of 80 cents per Infigen share. It values the company at $777 million.
The Iberdrola bid values Infigen Energy at around $835 million and represents a 45 per cent premium on the market cap of the company immediately prior to the announcement of the initial takeover offer.
The offer price of 86 cents per security is a 7.5 per cent premium to UAC’s offer price of 80 cents per security.
Iberdrola is the number one producer of wind power, and one of the world’s biggest electricity utilities by market capitalisation. It has over 55GW of installed capacity with leading market positions in Spain, the UK, the US and South America.
“The Board unanimously recommends investors reject the UAC offer at 80 cents per security. The UAC offer is at a lower price with terms that may never be capable of being satisfied,” Infigen Energy said in an announcement.
The takeover offers will be subject to approval by the Foreign Investment Review Board, which recently received strengthened powers to block transactions that will see crucial infrastructure wind up in under foreign ownership, including key assets in the energy sector.
Shareholders of renewable energy developer Windlab approved the takeover offer made by Federation Asset Management and Squadron Energy, a subsidiary of Andrew Forrest’s Tattarang Group.
Windlab will become 75 per cent owned by Squadron Energy and 25 per cent by Federation which will act as funds manager and adviser.
The offer comes after Federation secured an 18.4 per cent stake in Windlab last year. The bid values Windlab at $68 million.
Cameron Brownjohn chief executive of Federation Asset Management says: “The renewables sector is an asset class with growing demand from the wholesale and institutional market, and we will be working with investors to take advantage of the opportunities that Windlab offers the market.”
Brownjohn says investing their clients’ capital in a sustainable way offers more protection and a higher return as he believes there is a strong correlation between ESG investing and positive returns.
“We are trying to prosecute what we think is a profound opportunity in Australia and that is with renewable energy.
“The first thing we are doing in sustainable infrastructure is building a Sustainable Australian Real Asset Trust (SARA) and we are doing that our initial investment in Windlab. We think this is Australia’s preeminent developer of wind farms.”
The Federation and Squadron Energy joint proposal offered shareholders $1 in cash for all outstanding shares in the company, which had been trading just over 70 cents at the time.
Federation and Squadron agreed to provide Windlab with a $20 million loan to provide a capital injection for the company with the delays on the Kennedy Energy Park project.
Stuart Johnston chief executive of Squadron Energy says: “We are committed to the transition to a low carbon energy future. Our investment in Windlab is consistent with that commitment and we look to the continued growth of Windlab as electricity from wind energy is affordable, reliable and clean.”
New Energy Solar, which is managed by a subsidiary of Walsh & Company Asset Management, has announced it is selling a 50 per cent stake of its Mount Signal 2 solar plant in California to NextPowerIII (NPIII) for US$52 million ($75.3 million).
NPIII is a private solar fund established to invest in the international solar sector and managed by UK-based NextEnergy Capital Group.
New Energy Solar and NPIII are working toward transaction close early in the second half of 2020 but due to COVID-19 and the fact that Mount Signal 2 is in its early stages, the deal will be an upfront payment of US$47 million ($68.1 million) and a performance-linked payment of US$5 million ($7.2 million) 12 months after the transaction.
The performance-linked payment is based on performance studies to be throughout the 12-month period.
In addition, the pandemic restrictions made it difficult for NPIII to undertake due diligence on the site.
New Energy Solar chief executive John Martin says: “The difficult circumstances of this asset sale could not have been anticipated when we embarked on the process in November last year, but reaching this agreement with a reputable renewable energy investor reinforces what we have been saying about our solar assets since listing at the end of 2017, that is, our net asset values are real and realisable.
“Also, this transaction demonstrates that the transition to renewable generation is a market transformation that won’t be easily derailed.”