Contact Energy [CEN] is set to take over fellow power generator Manawa Energy [MNW] in a shares and cash deal that values Manawa at around $2 billion.
The deal, to be consummated by a court-sanctioned Scheme of Arrangement may take as much as nine months to complete.
For Manawa's 51% shareholder Infratil [IFT] the deal nearly completes a full circle. Manawa - formerly known as Trustpower - was Infratil's first investment when it was initially listed on NZX 30 years ago. And it has been a fabulously lucrative investment for Infratil.
The deal will see Infratil become a 9.5% shareholder in Contact.
A statement from Manawa on NZX said the takeover deal valued the company at $5.95 per share, compared with a closing price of $4.03 on the market on Tuesday.
Manawa shareholders would receive 0.5719 Contact shares and $1.16 cash for each of their shares.
Manawa chairman Deion Campbell, who will join the Contact board, said this is "an attractive acquisition offer for Manawa and achieves a significant premium to Manawa’s recent share price for shareholders, reflecting the company’s high-quality hydro asset base and its strategic development portfolio".
"The combination of our hydro schemes with Contact’s generation assets, including its base load geothermal fleet, creates a unique generation portfolio, with significant diversification benefits. Contact will retain various funding options post implementation of the Scheme that mean it will be well-placed to accelerate the progression of Manawa’s development portfolio."
Manawa and Contact are targeting implementation of the Scheme of Arrangement in the first half of 2025, "although this is indicative and subject to change".
The Manawa statement said the Scheme implementation timing will depend on the timing of NZ Commerce Commission approval. Contact is starting the Commerce Commission application process this week.
In its statement to NZX about the deal, Contact said the cash consideration and repayment of outstanding Manawa bank debt and bonds will be funded via new committed Contact bank debt facilities.
"The choice of transaction structure to include scrip [shares] enables capital options to be maintained to ensure Contact has sufficient funding flexibility to execute on the combined entity’s identified development pipeline whilst maintaining a BBB S&P credit rating. Contact expects S&P to reaffirm Contact’s BBB credit rating on a stable outlook," the statement said.
Contact also released a presentation on the takeover.
In its statement, Infratil said if the Scheme proceeds as announced, and subject to any pre-completion dividends, Infratil’s gross cash proceeds from the sale will be approximately $186 million and following completion it will own approximately 9.5% of Contact.
Since 1994 Infratil says it has been involved in "a series of transformative transactions" with Manawa, including the demerger of wind farm company Tilt Renewables and the sale of its Australian hydro assets and retail business.
14 Comments
Makechange you are basically correct.
If you look at the load profile shown in the graphs here NZ Electricity Map (frenchsta.gg), you can see what the sum of the generators' outputs have to follow. There are 4 types of generation that has to be fitted within this profile. They are baseload, two shifting peaking and uncontrolled. Taking the last first, it is wind and solar, where their output is unpredictable and cannot be dispatched (as it generate a desired output in 2 hours' time). Base load is generating at a set level 24h a day. Look at the output of a station like Mokai to see that. As well as geothermal, there is some hydro (often some of the units at some dams that are last on the river like Waitaki or Karapiro). There are also thermal units like Huntly or the CCGTs which have a minimum load requirements to stay running. The sum of the generation is around 3000MW. The two shifting are those which ramp up about 6am, run that way to around 9am, back off a bit, then ramp up again aropund 4pm and ramp down or shut off about 10pm - two eight hour shifts. This is hydro and the big coal or gas units. Peaking are those generators which just come on to cover the very high loads at morning and evening. These can be gas turbines or hydros like Maraetai. Often the same dam can cover all three - For example say the eight units at Arapuni, two units are base load, 4 to 6 units covering the two shifting and two units the peaking. To this the unpredictability of wind complicates the issue and make it a lot more expensive to run. There might be a change in wind output of 2-300MW over the 2 hour pre-dispatch interval. What generation covers that? The hydros have to move water down the river which takes time. 3 days from Taupo to Karapiro. As well as generating, the dams provide water for next one down. If the wind picks up, they can have to spill water as the lakes have little storage and the downstream dams need water to generate for next ramp up.
That is why what is needed is more reliable dispatchable ramping generation. That is not baseload generators like geothermal. Really only just more hydro (it is currently too small to cover both the wind variability and two shifting) or fast start gas turbines like the peakers at Stratford or Junction Road.
To all the above you have to add reserves and limitations of the DC but that really complicates matters.
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