HMC Capital made play for Tilt Renewables: sources

Demand for data centres, which are needed to power AI, is strong.

HMC Capital is understood to have earlier made attempts to wrestle a stake in the Tilt Renewables business out of the hands of one of its owners as part of its ambitions for its $2bn energy transition fund, say sources.

AGL Energy and its backers purchased the owner and operator of Australia and New Zealand wind and solar farms in 2021 for $2.8bn.

The consortium funded the acquisition of Tilt Renewables, which has energy capacity of 1.3 gigawatts, with help from Queensland Investment Corporation (owner of 40 per cent), The Future Fund (40 per cent) and Mercury Energy.

HMC Capital managing director David Di Pilla hired former QIC executive Angela Karl to run the HMC energy transition fund, and sources suggested Ms Karl could have influence when it came to convincing QIC to sell out of the Tilt Renewables investment.

However, the efforts came to nothing and HMC Capital continues to work on its plan to raise $2bn for the fund, which is already seeded by energy storage systems developer StorEnergy.

It is all part of HMC Capital’s plans to identify assets in sectors where there is strong investor demand and capitalise on the upward momentum.

It’s done so with healthcare, buying the hospital properties operated by Healthscope for $1.2bn, and now, data centres, capitalising on the strong demand demonstrated by the $24bn that Blackstone and its backers paid for AirTrunk.

Next will be the fund exposed to the energy transition.

HMC said in July it remained on track to start fund raising up to $2bn in the second half of this year for its Energy Transition Platform.

Some believe that backing HMC Capital’s strategy could be considered a gamble, where assets in some instances are being bought at the top of the market.

But HMC Capital been attracting some big name investors onto its register such as Cooper Investors, which has $13.2bn of funds under management and holds 6.4 per cent.

This as one of HMC’s original backers, retailer Spotlight, has sold down to 27 per cent from 30 per cent.

On the latest acquisition for its DigiCo Infrastructure REIT, the Australian data centres HMC Capital transaction settles in the first quarter of next year, which would provide HMC Capital time to set up its initial public offering to raise about $2bn to pay for the acquisition ahead of handing over the money.

The deal has captured plenty of attention around the market, given that other parties such as Stonepeak and Partners Group considered an acquisition of the Global Switch Australia assets and passed on the opportunity, deeming it too expensive.

Key tenants such as the Australian Tax Office and the Department of Defence have moved or are in the process of moving due to national security concerns linked to the assets being Chinese owned.

The structure is akin to HMC’s HealthCo and Wellness REIT that holds the Healthscope hospital assets, where the REIT which would be controlled by HMC Capital alongside a new institutional unlisted fund that would own part of the assets.

While no timing has been offered on the float, most expect it to happen this year.

As first flagged by DataRoom, Goldman Sachs and JPMorgan are working on the deal, along with UBS and Macquarie Capital.

Their first assignment has been to raise $300m for HMC Capital, which, announced on Thursday, is a fully underwritten institutional placement at an issue price of $8.75 a share, a 5 per cent discount to the last traded price of $9.21.

Most in the market are betting that next will be a list of retail brokers to be placed on the deal, in what will be one largely attracting retail money, as has been the case with his other listed vehicles.

HMC Capital said in a statement it had other assets secured or under exclusive due diligence, and there had been talk in the market that Mr Di Pilla was the last group in the contest to buy iSeek’s data centres for $400m and may also buy the Fujitsu data centres for sale in Australia.

But he said HMC had identified seed assets, predominantly based in the United States, which were under exclusive due diligence.

HMC said after the raise, it will have about $3bn of balance sheet underwriting capacity to support the acquisition and establishment of DigiCo REIT.

Global Switch Australia has been up for sale through investment bank UBS.

On offer have been two major data centres on the western edge of Sydney’s central business district comprising 73,000 sqm of space, owned by Global Switch.

They have 86 customers with an average lease length of 3.4 years.

The data centre sector is forecast to need $US1 trillion of capital spending by 2028 with the growing usage demands from artificial intelligence.

HMC Capital’s medium-term target overall is having $20bn of assets under management – almost doubling from its current level of $12.7bn.

HMC Capital was launched and floated with the former Masters Hardware properties sold by Woolworths before branching out with a listed healthcare real estate fund and daily needs fund.

It embarked on a $2.5bn merger with bulky goods operator Aventus.