Federation Asset Management has made a bid to acquire all remaining shares in Australian wind farm development and management company Windlab, just months after Federation acquired an 18.7% stake in the company.
The offer is pitched at a near 40 per cent premium to the most recent share price of Windlab, but around half of its 2017 listing price, reflecting the connection and development problems that Windlab has been facing with its world-leading Kennedy Energy Hub and the Lakeland wind farm.
As reported by RenewEconomy in September, Federation acquired its initial, significant, stake in Windlab from early investors Innovation Capital. The move led to immediate speculation that it was just the first step towards acquiring Windlab outright, speculation that proved accurate with today’s announcement.
According to an announcement to the ASX, the Federation’s offer to acquire Windlab outright follows Windlab’s strategic review of the company’s operations commenced in late 2019, and a period of due diligence from Federation following the purchase of its initial stake in the company.
Federation has offered to acquire all remaining shares in Windlab at $1.00 per share, which is a 38 per cent premium on the Friday closing price of Windlab shares, of 72 cents per share.
The offer price, however, comes in well below the initial listing price of Windlab shares. The company listed on the Australian stock exchange in 2017 with an initial public offering at $2.00 per share.
Through the ASX listing, the company successfully raised $50 million, the proceeds of which were effectively shared between the initial early investors in Windlab, Innovation Capital and Lendlease Ventures, and put towards the development of the Kennedy energy hub.
On the news of the acquisition offer, Windlab shares were up around 35 per cent in early trading on Monday, to trade just below the offer price at 97.0 cents per share.
The offer values Windlab at around $68 million.
Windlab CEO Roger Price told RenewEconomy that the company was happy that Federation understood the long-term value and strategy of Windlab, and that the acquisition offer was not expected to have any material impact on the operations of the company. Windlab is likely to remain operating as an independent brand.
The acquisition is in part an outcome of a strategic review initiated by the company in August last year, with Price confirming that any further decisions flowing from the review, including decisions that may impact the operations of the business, are to be put on hold until the acquisition process is concluded.
The offer is subject to Federation completing its due diligence assessment, which it has until 21 February to complete, and will need approval from current Windlab shareholders, and will need to be approved by the courts as part of a scheme of arrangement.
Windlab directors have indicated their intention to recommend that shareholders approve the deal, seeing the offer as an attractive opportunity for shareholders to retain value from their investments.
While the current market for renewable energy projects has been strong, with high wholesale electricity prices and Large-scale Generation Certificate prices, the company has struggled to get new projects off the ground, including significant delays at the Kennedy energy hub.
The initial stage of the Kennedy energy hub, which includes 42MW of wind generation, 15MW of solar, and 4MWh of battery storage, was to be the first stage of a much larger project but has encountered disputes with contractors, and the Australian Energy Market Operator, over uncertainties concerning the project’s completion.
Last week, the company also announced the closure of its North American office, located in Michigan, citing deteriorating market conditions for wind energy projects in the United States, for the company’s decision to withdraw from the North American market.
“Windlab has been unable to achieve sufficient scale in the North American market to execute the Company’s desired business model. Furthermore, the board anticipates a downturn in the US market from 2020 onwards as the Production Tax Credit incentive begins to reduce,” Windlab CEO Roger Price said at the time.
The Canberra headquartered company has completed a portfolio of almost 1,100MW of wind generation projects across Australia, Africa and North America.
Projects that Windlab’s Australian development portfolio includes the 206MW Collgar Wind Farm, 453MW Coopers Gap Wind Farm and the 63MW Oaklands Hill Wind Farm, each of which have been subsequently sold off to new owners.
Windlab was initially formed as a technology spin-off of the CSIRO, seeking to commercialise and apply the WindScape modelling platform developed by CSIRO scientists.
WindScape allows for highly detailed modelling of wind resource availability, and has significantly advanced the identification of high prospect wind generation sites, and ultimately facilitated Windlab’s transition to becoming a wind farm developer and operator in its own right.
Projects that it identified, and were developed and bought by others include the 206MW Collgar Wind Farm, 453MW Coopers Gap Wind Farm and the 63MW Oaklands Hill Wind Farm.
The company also sought to utilise its expertise in the operation and management of wind farm projects to provide asset management services to other projects.
Federation Asset Management has made a range of investments in the clean energy space after forming in 2018, including in peer-to-peer lending provider RateSetter, which offers low interest loans for households to install rooftop solar and battery energy storage systems.