Infigen takeover battle looms

A $777m takeover offer for Australia's largest listed wind power generator, Infigen Energy, by Philippines-backed UAC Energy may draw out rival bidders.

A $777m takeover offer for Australia's largest listed wind power generator, Infigen Energy, by Philippines-backed UAC Energy may draw out rival bidders looking to boost their renewables exposure at a cheaper rate than building new greenfield projects.

UAC, which has bought a 12.82 per cent stake in Infigen, lobbed a 80c a share offer for the clean energy operator which represents a 43.4 per cent premium to the stock's one-month average price.

It comes after an earlier UAC raid on Infigen’s share register, reported by The Australian’s DataRoom column.

Infigen said its board was still considering how to respond to the tilt while noting the proposal was “subject to very detailed conditions”.

Infigen shares jumped 36 per cent to close just over the offer price at 80.5c.

UAC is 75 per cent owned by AC Energy Group, a subsidiary of the $14bn conglomerate Ayala Corporation which is listed in The Philippines. The other 25 per cent is owned by Asian developer UPC Renewables, an Australian venture between AC Energy and UPC which is working on a host of solar, battery and pumped hydro projects.

Infigen's largest shareholder, The Children's Investment Fund, owns 33 per cent of the company, handing it an influential role in the success of UAC's bid. Counterbidders could emerge given deals for contracted wind farms have been double or $4m per megawatt compared with the $1.8m MW price implied by the UAC bid.

“This is not an apples-to-apples comparison, with recent wind farm transactions based on newer wind farms with long-term PPA contracts versus Infigen’s mix of older wind farms and revenue mix of long-term power purchase and sales agreements, commercial and industrial sales, and merchant revenue deserving a discount,” RBC analyst James Nevin said.

“Nevertheless, we think that Infigen could force out counterbiddersbidders looking to acquire an interest in operating wind farms, particularly given recent difficulties faced by new wind farms in getting developed.”

One potential suitor could be energy giant Shell as it looked to build on its electricity ambitions in Australia, JPMorgan said.

“It is possible that the actions prompt competition for Infigen's renewable assets,” the broker said, noting the implied value for the company was well below the cost of building new plants.

“We estimate that Infigen is implying a value for its wind farms of $1669 per kilowatt. This is almost 20 per cent below the cost of new build: 90 per cent of new farms built over the last two decades have cost more than $2000kW,” analyst Mark Busuttil said.

UAC may boost its stake further to 19.9 per cent via a swap agreement and said its offer would not be subject to any minimum acceptance.

“The offer has taken the off-market takeover bid route rather than a scheme of arrangement,” RBC noted. “Structured as an off-market takeover offer with no minimum acceptance condition allows UAC to simply acquire as large a stake as possible and it may just be looking for effective control through an interest over 50 per cent.”

Infigen owns seven wind farms in Australia and has about 70 per cent of its output contracted over the next three years.