TPG and Co power up Alinta Energy for float

Alinta’s management and its advisory team have fronted prospective investors globally.

Alinta Energy will be pitched to equity investors in the weeks ahead as a business with a market value somewhere between $3.3 billion and $5.2bn as it returns to life as a reborn public company when it launches its initial public offering in November.

On an enterprise value, which includes the company’s $1.2bn debt load, the power generator and energy retailer is expected to be worth between $4.5bn and $6.4bn, according to documents obtained by DataRoom.

After earlier attempts were made to sell the business that controls 85 per cent of the West Australian retail energy market, it is now heading for a listing through joint global co-ordinators UBS, Goldman Sachs and Macquarie Capital and joint lead managers Credit Suisse and Morgan Stanley.

The company is owned by a consortium that includes TPG Capital, which controls 20-30 per cent, a raft of hedge funds and other investors.

It was a business that was previously controlled by the Babcock & Brown investment banking empire before it spectacularly collapsed amid the global financial crisis and TPG and its backers soon after rescued what was an eclectic portfolio of assets through a recapitalisation plan.

Almost two years ago, the asking price for Alinta was said to be as high as $6bn but the expectations around value have since been adjusted for what is a relatively high-yielding operation that may prove popular among retail investors at a time of persistently low interest rates.

To lure retail investors, two firms will be appointed as co-lead managers, with Bell Potter, Ord Minnett, Morgans and Patersons Securities all said to be in the running.

Already, Alinta’s management and its advisory team have fronted prospective investors globally as part of a non-deal roadshow ahead of analyst briefings that will be held within the next month and a listing during the back end of November.

It is understood that as part of those meetings, investors were told of the improvements made to the business in recent months, including the extension of the length of its contracts with clients from about two years to eight years, and the divestment of coal-fired power stations within the offering.

There are six contracted power assets — three in Western Australia, one in NSW, one in Queensland and another in New Zealand with capacity to drive further growth. On the east coast, the share of the retail market is about 2 per cent.

Fund managers have so far been impressed by company management, which includes Jeff Dimery, who is chief executive, chief financial officer David Goldsmith and Jim Galvin, the executive director of retail.

Mark Johnson will remain as Alinta’s chairman but new board members will be selected before the company’s public debut.

Alinta Energy’s earnings before interest, tax, depreciation, amortisation and fair value adjustments for the 2016 financial year are expected to be about $370 million.

AGL Energy trades on nine times its earnings, but Alinta has a larger amount of contracted revenues, with higher margins on its retail business, which makes up about half of its earnings, and higher barrier to entry.

It will also offer a higher dividend to AGL.

APA Group and Duet, which trade closer to 14 times their earnings, offer a dividend yield of between 5 per cent and 7 per cent, and Alinta’s is expected to fall in that range.

For that reason, it is expected that Alinta’s annual EBITDA multiple will fall somewhere between nine and 14 times.