The battle for Australian wind farm operator Infigen Energy has heated up, with the consortium led by UPC Renewables and AC Energy telling Infigen shareholders that the company had “significantly underperformed” as it seeks to convince them to accept a takeover offer revealed last week.
In its formal “bidders statement”, the UPC/AC Energy consortium outlined why its 80 cents per share takeover offer represented good value for Infigen Energy shareholders, including that it believed the company had underperformed compared to the ASX200 Accumulation Index.
“The offer is particularly attractive in the context of recent falls in electricity prices as well as Infigen’s relatively high debt servicing costs, its limited track record in paying distributions and developing its growth pipeline, and decisions taken by Infigen to suspend investment in a number of projects and defer the delivery of its development pipeline,” the UPC/AC Energy statement said.
The statement largely talks down the Infigen Energy’s future prospects and is largely an attempt to convince shareholders to back the takeover deal, despite indications from Infigen Energy that a better offer could be found elsewhere.
The takeover offer being made by UPC/AC Energy values Infigen Energy at $777 million, and comes after the consortium already secured a 12.8 per cent stake in the company. The consortium boosted this holding to 13.4 per cent, after securing an additional 5.6 million shares following the takeover announcement.
Prior to the takeover offer being announced, Infigen Energy shares had traded at around 59 cents per share, while the wind energy company’s shares had traded at around 80 cents per share in February, just before the economic impacts of Covid-19 rattled the wider sharemarket.
The response from the UPC/AC Energy consortium follows a statement from Infigen Energy management advising Infigen shareholders not to take any action in response to the takeover proposal, saying that the offer was highly conditional, including being subject to the Foreign Investment Review Board, as well as questioning whether UPC/AC Energy had the funds to complete the transaction.
While both UPC Renewables Australia and AC Energy Australia are both Australian registered companies, they are both ultimately owned the Philippines based Ayala Group.
Infigen Energy reiterated that advice to shareholders on Monday, saying that “the proposed offer is highly conditional and includes some conditions that may never be capable of being satisfied.”
The Morrison government recently announced that it would work to strengthen the Foreign Investment Review Board powers, to protect against foreign controlled companies taking advantage of suppressed share prices to acquire control of nationally sensitive assets, including investments in the Australian energy sector.
The Foreign Investment Review Board has previously blocked the foreign takeover of Australian energy companies, including preventing the sale of distribution network company Ausgrid to a Chinese based consortium when it was privatised by the NSW government. A majority stake was instead sold to industry superannuation funds.
The Infigen board will prepare its own “target statement” to shareholders over the next two weeks, after further considering the terms of the UPC/AC Energy offer.
It appears that the UPC/AC Energy bid to takeover Infigen Energy is rapidly moving into “hostile” takeover territory.
Infigen Energy has been a long-time feature of Australia’s renewable energy industry, after being founded in 2003. The company oversaw the development of some of Australia’s earliest large-scale wind farm developments, including the 278MW Lake Bonney development completed in the mid-2000s.
The growth of company however stalled after accruing debt to finance the completion of the early projects, and following the Global Financial Crisis, the company was left primarily as an operator of its existing portfolio, with limited development of new projects.
More recently, Infigen sought to diversify its offerings by shifting into the commercial and industrial electricity retailer space, which included the acquisition of the 60MW Smithfield gas power station, which is used to ‘firm’ its supplies of power to customers.
UPC Renewables is progressing the development of two new projects in Australia, the proposed 1,200MW Robbins Island Renewable Energy Park and Jim’s Plain Renewable Energy Park on the north-west coast of Tasmania and the 720MW New England Solar Farm in central NSW.
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