Infratil manager Morrison toasts Tilt deal
A $3bn takeover deal for Tilt Renewables underlined strong interest among investors for developed wind and solar assets
A $3bn takeover deal for Tilt Renewables capped an impressive five years since the business floated, but the seeds of the deal were sown several decades earlier.
Infratil, managed by Australasian infrastructure fund Morrison & Co, first took a stake in New Zealand’s Trustpower in 1994 and the business slowly moved into becoming a pure-play renewables generator in hydro and then wind farms. It crossed into Australia in the early 2000’s before eventually listing in 2016 with Infratil owning a 65 per cent stake.
“In the early 2000s we took that capability to Australia which was just in the early stages of moving away from coal and introducing renewable energy targets,” Paul Newfield, Morrison & Co’s head of Australia and New Zealand, told The Australian.
“We secured options over bits of land for wind farms and built our first wind farms in South Australia in Snowtown. Eventually the way to make the most of that was to spin it out to become its own business which was Tilt Renewables.”
Tilt, listed on both the ASX and NZX, has kept growing since with a portfolio including 1313 megawatts across seven wind and solar farms, a further two wind farms nearly complete and a 3500MW pipeline of projects across wind, solar, battery storage and peaking capacity.
Infratil received interest in Tilt from investors and following a strategic review the clean energy player was put on the market sparking a fierce takeover battle.
PowAR, owned by AGL, the Future Fund and QIC ultimately prevailed with a $8.10 a share deal fending off competition from gas pipeline operator APA Group, Canadian pension giant CDPQ and France’s Engie with Infrastructure Capital Group.
“It was a very hotly contested process and on the final bid date we had multiple bidders within a few per cent of each other,” Mr Newfield said.
The Morrison & Co executive puts part of Tilt’s success down to backing itself in the market but also having the confidence to turn down renewable projects that led to other newer entrants becoming unstuck.
“It was certainly not without risk. We committed to some of the Tilt wind farms before we had revenue contracts in place knowing that if we started to build them we were confident people would want to buy the power. We then found long-term contracts once we had committed to build. We dealt with issues on grid instability and managing transition risk,” Mr Newfield said.
“In the solar area there were a bunch of opportunities we looked at that management encouraged us not to invest in which is quite unusual when you have management looking for capital. Then often we’ve seen others invest in them and those risks come to bear. So a lot of credit there to the Tilt management team.”
Morrison & Co also prides itself on doing its own homework.
“What we’ve benefited from is experience and capability at multiple levels. Most infrastructure fund managers look like ex-investment bankers and we have a few of those but we also have people with PhDs in electrical engineering who have spent their career looking at transmission issues and forecasting energy prices. So that allows us to avoid a few risks, but also act with confidence early so we do have a view rather than rely on external advisers for the next 20 years of energy prices.”
In addition to Infratil, Morrison & Co manages multiple client mandates with total funds under management of around $17bn. Half are New Zealand-owned and the remainder by Australian and international investors.
Its clients include The Future Fund, for which it manages manage Perth Airport and CVC Data centres, as well as Sunsuper and the Commonwealth Super Fund. AustralianSuper made a $5.1bn play for Infratil late last year, but the offer was swiftly rebuffed by the company.
At the end of October a consortium of Morrison & Co and Infratil offered to take a controlling interest in the 70-plus-clinic Australian diagnostic imaging businesses Qscan Group, valuing the company at $735m.
Future investments for Morrison are likely to focus on decarbonisation opportunities and dealing with the growing healthcare cost burden of an ageing population.
“We identify the biggest problems that society has to solve over the next decades and then try and find a way to invest in solving the problem,” Mr Newfield said.