Mercury buys into Tilt for $144m

Power generator and retailer Mercury has paid $144 million cash for a 20% stake in wind power company Tilt Renewables, with an option to buy a further 6.8% in the next six months.

The shares were acquired off-market from Tauranga Energy Consumer Trust at $2.30 apiece, a 24% premium to Friday’s closing price.

In a statement, Mercury chief executive Fraser Whineray said Tilt had an established business in a growing market for renewable energy.

“Tilt has established a robust portfolio of operating wind farms in both Australia and New Zealand, as well as consented renewable generation projects, which it can bring to market when conditions are right.”

Tilt, which was spun out of Trustpower in October 2016, has seven wind farms in operation and one under construction.

Of the seven, two are in the Tararua ranges, one at Mahinerangi near Dunedin, two at Snowtown in South Australia and two small installations at Carcoar Lake and Goulburn in New South Wales.

A 54MW wind farm at Salt Creek in Victoria is due to be completed in July. The facility has a deal to sell its energy to Meridian, in support of Meridian’s retail operation, Powershop.

Tilt also has several wind and solar projects in development.

Mr Whineray said the acquisition would allow Mercury to take part in Australia’s transition to renewable energy and offer opportunities for Mercury to invest further in Til’s Australian business.

“Together with its other shareholders, we look forward to being part of Tilt’s contribution to growing renewable electricity generation,” he said.

The deal values Tilt at $720m, about $20m shy of its peak value in January 2017.

For the year to March Tilt reported revenue of $158m and operating earnings of $103.8m.

The company reported a net loss for the year of $2.8m, mainly driven by depreciation charges of $80m.

Tilt’s net assets at balance date were $508m.

Under the Takeovers Code Mercury cannot acquire more than 20% of Tilt without shareholder approval or making a takeover offer for at least half the company.

Tilt is 51% owned by NZX-listed utility investor Infratil.