Investors run eye over Squadron Energy

Andrew Forrest’s Squadron Energy is still fielding calls about a potential sale.

Squadron Energy – the private renewable energy company of Andrew Forrest – is continuing to field calls about a potential sale of the business through its advisory firm Highbury Partnership, despite the billionaire yet to formally kick off a sale process for the operation.

It comes after Squadron last year beat a long list of renewable energy investors and heavyweight pension funds to buy CWP Renewables, the country’s largest renewable energy generator, for $4bn.

Sources say at the time that the competition played out, talks were held between Squadron and Spain-based underbidder Iberdrola, the world’s largest renewable energy investor, about taking a stake in Squadron.

However, no deal ever eventuated from the discussions.

The problem for Squadron is that it has a pipeline of about $10bn worth of renewable energy assets to develop and cannot afford to carry out all of the development itself.

Sources believe discussions are taking place with parties around the market, many of which are pension funds, and Forrest has previously flagged that an investment partner will likely be sought.

But with the CWP deal only closing in March and the focus being the construction of new renewable energy farms, a sale process may not be imminent.

CWP Renewables has a portfolio of assets in operation or construction generating 1.1GW of power in NSW and Victoria, and a 5GW development pipeline.

Its portfolio is skewed to NSW and the business has $150m of cash. Its annual earnings before interest, tax, depreciation and amortisation were believed to be about $250m.

CWP’s customers include Sydney Airport, Snowy Hydro, Telstra and Transurban, with 70 per cent of revenues contracted to 2030 and an average contract length of 13 years.

Sources have told DataRoom that Squadron paid between $4bn and $4.1bn for the business, and next behind him in the competition was Spanish firm Iberdrola, which was understood to have offered $300m less than Squadron.

There is a suggestion that Iberdrola was to be asked to reconfirm its bid to determine whether it could top Forrest’s offer. But sources have indicated that Forrest, who amassed his fortune through Fortescue Metals, had the approvals in place, – unlike Iberdrola, which did not have approval from the ACCC and the Foreign Investment Review Board.

Sources say Tilt Renewables, which counts AGL, QIC and The Future Fund as investors, did not lob a final offer, so the funds may be interested in backing Squadron, as could Brookfield, the new owner of Origin Energy, or CDPQ.

Origin had been bidding early on for CWP Renewables with Canadian pension fund CDPQ but became subject to a $15.5bn buyout by Brookfield and EIG.