Infigen’s future up in the air as Iberdrola closes in on target

Infigen is a supplier of clean energy in Australia, with 670 megawatts of owned renewables. Picture: AFP

With Infigen Energy looking set to be acquired for $840.6m by Spain’s Iberdrola, some are wondering what the future looks like for the company once it is in the hands of the world’s largest wind energy producer.

On face of it, Iberdrola looks like it could be snaring a bargain, buying shares at 86c each in a takeover bid, when higher offers to the major shareholder were said to have earlier been rejected.

But some say that challenges with merchant pricing could arise in the future.

The major shareholder in Infigen, The Children’s Investment Fund, holds 33.1 per cent of the company and has fielded plenty of approaches.

It has been suggested that offers for the stake worth more than $1 per share were made earlier, but were rebuffed by the fund.

However, TCIF has now accepted the Iberdrola offer and agreed to sell 20 per cent of its shares to the renewable energy giant. The takeover bid has a minimum acceptance of 50 per cent.

One view is that it could now be taking a pragmatic stance on the company’s future.

While Infigen’s wind and solar assets are contracted with a fixed price, they offer a variable level of demand so customers do not have to buy up all of the power on offer.

With disruptions to industry on the back of the coronavirus pandemic, the thinking is that demand for renewable energy could be on the decline in the months ahead.

However, it appears that investors do not share such an outlook, with the stock closing above the offer price at 88.5c per share on Thursday.

Private equity firm Brookfield purchased shares in Infigen around 2018 and is understood to have held talks about a capital partnership, but the parties parted company in 2019.

It is understood Brookfield made an approach to TCIF to buy out its stake.

Infigen last week recommended the bid from Iberdrola, which was a 45.8 per cent premium to the unaffected Infigen share price on June 2.

Iberdrola wants to consolidate its presence in the Australian market and is understood to have had a long and friendly relationship with Infigen.

Infigen is a supplier of clean energy in Australia, with 670 megawatts of owned renewables and more than 1 gigawatt of pipeline, combined with 268MW of highly valued firming assets and additional 246MW of contracted renewables capacity.