Infratil considering sale for the entire Tilt Renewables

Final bids are due on March 12, with suitors encouraged to bid for the entire company.

The share price of the Tilt Renewables has been drifting lower in recent days, following its strong rally late last year, when the company announced its major shareholder, Infratil, was selling its 65.6 per cent interest in the highly prized renewable energy owner.

Now Tilt, worth $2.26bn, is considering a sale for the entire business, but the thinking is shareholders have readjusted their expectations on price.

One explanation of this is that two of the bidders through to the second round of the contest, APA and AGL Energy, would typically raise equity to pay for the business.

However, both have stumbled at their half-year results, which has most expecting that an equity raising will be out of the question for both groups limiting their ability to pay up.

This month, AGL Energy announced a $2.28bn loss for the first half, hit by a $2.7bn writedown driven by unprofitable wind-farm deals.

The company’s share price has halved in the past year, making an equity raising difficult.

APA, meanwhile, on Tuesday announced an $11m loss for the first six months of the financial year, with a $249m writedown over delays and extra costs at its Orbost gas processing plant on Victoria’s Bass Strait coast.

APA has also seen its shares trade lower.

Other offshore bidders shortlisted, such as Engie, which is partnering with local infrastructure investor ICG and is advised by Azure Capital, and Canada’s CDPQ, advised by ICA Partners, will need to gain clearance from the Foreign Investment Review Board.

Separately, there has been much focus on the intentions of existing shareholder Mercury Energy, advised by Citi, which is bidding for Tilt as part of a consortium with AGL Energy and QIC’s PARF fund, advised by Bank of America.

Early in the auction, the understanding is that Mercury was only keen on owning the New Zealand assets in the Tilt Renewables portfolio, which also has assets in Australia.

However, others say Mercury may now be willing to jointly bid for the all the assets.

Mercury initially bid for Tilt with Infratil.

Infratil launched a review of its stake in Tilt late last year after it rebuffed a $5.1bn takeover proposal from Australian Super.

Goldman Sachs is the Infratil defence adviser, but Lazard is working for Tilt and is involved in the sale process.

Final bids are due on March 12, with suitors encouraged to bid for the entire company.