MELBOURNE (Reuters Breakingviews) – A trans-Tasman Sea M&A deal puts a high price on clean energy assets. On Monday New Zealand-based Tilt Renewables agreed to sell itself to two companies, one in its home market and one in Australia, which will then break it up. At almost NZ$3 billion ($2.1 billion), the buyers are paying a 99% premium to its undisturbed trading level in December, and 96 times next year’s estimated earnings for the coming financial year, using Refinitiv data. As puffed up as that sounds, the sale harnesses three viable power sources.
Only a dozen or so firms in Australia generate more than 400 megawatts each of green energy. The largest is the buyer of Tilt’s Aussie assets, PowAR, or Powering Australian Renewables, a joint venture between the country’s sovereign wealth fund, the Queensland Investment Corporation and AGL Energy. And it only generates 800 MW, barely 1% of Australia’s installed capacity from all energy sources.
But there is also a scarcity of targets. Virtually all the other big renewables players in Australia are owned by larger entities like Spain’s Iberdrola or France’s Neoen.
That dialled up the interest, with several companies still bidding at the end of last week. The winners had a couple of things going for them. The buyer of the New Zealand business, Mercury NZ, already owns almost 20% of Tilt, so knows it well. Moreover, the company is majority-owned by the New Zealand government, which is likely to help with any regulatory approvals. Similarly, PowAR’s ties to the Australian authorities are a plus.
What’s really prompting the buyers to stoke up the price for Tilt is the prospect of helping governments fulfil net-zero emissions pledges. They have a long way to go. New Zealand gets around 60% of its supply from fossils fuels, especially oil and gas. Australia relies on coal for some 70% of its needs.
Last week the Victorian government unveiled a deal to close Yallourn, a privately owned brown coal plant providing 20% of the state’s electricity demand, in favour of renewables. New South Wales last October talked up an A$32 billion ($25 billion) plan to green its energy system. Tilt’s buyers will need such big commitments to be kept, or their stakes will left blowing in the wind.
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