AGL sells most of its stake in Tilt, to use windfall gain to focus on batteries and peaking gas

AGL Energy has agreed to sell almost all of its 20 per cent stake in Australian wind giant Tilt Renewables to its existing majority shareholders, led by the state-owned Queensland Investment Corporation and the federal government-owned Future Fund.

AGL said on Monday that the agreement – subject to approvals – will see the gentailer divest 19.9 per cent of its stake in Tilt, which owns and operates a 1.9 gigawatt (GW) renewables platform across 12 assets and has more than 1.6GW of new projects awaiting final investment decision (FID).

The two companies say the $750 million deal kicks off a “new era” of strategic partnership that will focus on underwriting new renewable energy and storage projects through power purchase agreements.

For the now QIC-led Tilt, the “next phase” focus will include energy storage development in Queensland and Australia and breaking Australia’s wind farm financing drought, with two projects pushing to reach Final Investment Decision before the end of 2025.

These are the 108 MW Waddi project about 150 km north of Perth, which AGL just last month signed up to take 100 per cent of its output for 15 years, and the 275 MW Palmer project, east of Adelaide, which is also backed by a PPA with AGL.

All up, Tilt provides 1.6 GW of renewable generation capacity to AGL under long term power purchase agreements, including the Palmer and Waddi projects. 

AGL managing director Damien Nicks said AGL will continue to hold its remaining stake in Tilt following completion of the transaction and work with Tilt, QIC and the Future Fund as Tilt delivers its development pipeline.

It is expected to make a windfall gain from the sale, given that the 20 per cent stake in Tilt was valued at $322 million at the end of the last financial year. 

“The transaction demonstrates our commitment to realising value in our portfolio and recycling capital to invest in flexible, dispatchable capacity as we work towards our expanded 6 GW target of new firming and renewable projects by FY30,” Nicks said in a statement. 

For AGL, flexible and dispatchable capacity means a combination of battery storage and peaking gas plants. It is already building the 500 MW, 1000 MWh Liddell battery, has committed to the 500 MW, 2000 MWh Tomago battery and is pursuing battery projects in NSW and Queensland.

It has also committed to a major expansion of a peaking gas plant in Western Australia, where it has also signed an off take deal with Tilt’s Waddi wind farm.

QIC head of global infrastructure Ross Israel says the proposed acquisition further strengthens QIC’s position as a market leader in Australia’s energy transition.

“Structural shifts in Australia’s renewable energy build out continue to present compelling and differentiated opportunities to deploy capital at scale,” Israel said in a statement.  

“With wind anticipated to account for approximately 70 per cent of new utility-scale generation through to 2030, Tilt is one of the few platforms that can deliver at the pace and scale the market is demanding.

“By extending ownership, QIC and the Future Fund will have the ability to capitalise on Tilt’s growth potential, supported by strong policy momentum and a clear runway of development optionality.

“When it comes to portfolios of scale, operational expertise and development pipelines, Tilt Renewables is differentiated in Australia.”

Tilt Renewables was sold and split down national lines in 2021 after agreeing to a joint $2.75 billion acquisition by the AGL-backed Powering Australian Renewables fund and New Zealand utility Mercury NZ.

At that time in Australia Tilt operated the Snowtown North and Dundonnell wind farms in South Australia and Victoria, respectively, and had a 3,500 megawatt (MW) development portfolio including the 1,000 MW Liverpool Plains and 250 MW Rye Park wind projects.

The Powering Australian Renewables fund was established in 2016 as an investment vehicle for AGL Energy and QIC to drive new investments and acquisitions into large-scale renewable energy projects.

Five years later, it had little in the way of a pipeline, until the acquisition of Tilt – AGL (20 per cent), QIC (40 per cent) and Future Fund (40 per cent) – gave it access to the one of the biggest pipelines in Australia.

Tilt CEO Anthony Fowler says the commitment of long-term sovereign investors has provided a strong foundation for the company to capitalise on the shift to renewables in Australia. 

“Tilt Renewables is leading from the front with two projects expected to reach Final Investment Decision in 2025, potentially the first large-scale wind projects to reach this milestone in Australia this year,” Fowler said on Monday.

“It follows completion of New South Wales’ largest operating wind farm, Rye Park, in 2024 and our first BESS project in the Latrobe Valley coming online earlier this year, demonstrating Tilt’s proven track record of delivering new generation and storage on time and on budget.”

Completion of the transaction is subject to satisfaction of conventional conditions precedent.

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