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Tilt advances Waverley, withholds dividend

Thursday 9th May 2019

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Tilt Renewables says it expects to execute an off-take agreement for the 130-megawatt wind farm it plans at Waverley within weeks.

The Melbourne-based developer has been in talks with Genesis Energy on the southern Taranaki project since October.

Today Tilt said the “investment grade” off-take contract and the pricing certainty provided will underpin a debt package for the project. Credible contractors have been shortlisted for the project and an investment decision is expected in the December quarter.

“With Waverley wind farm project progressing towards an investment decision in CY2019 and other near-term opportunities currently in the market, the Tilt Renewables board has determined it is in the best interests of all shareholders not to pay a final dividend and to retain the cash within the business for anticipated project equity requirements.”

Tilt shares last traded at $2.36 and are up about 4 percent so far this year.

The company, majority-owned by Infratil and Mercury NZ, has a pipeline of wind and solar development projects across Australia and New Zealand. It commissioned the 54 MW Salt Creek wind farm in Victoria last year and in late 2020 raised A$260 million from shareholders for the 336 MW Dundonnell project it is aiming to commission in Victoria.

Chief executive Deion Campbell says the company had hoped to have concluded its deal with Genesis by now. But he said both firms are looking for a relationship beyond Waverley and are keen to get an agreement that reduces “disputation risk” as much as possible. Its 20-year term also makes it one of the largest power purchase agreements in New Zealand.

On the dividend, Campbell told investors that the firm is a development company and will need to manage paying dividends against its calls on shareholders for capital.

Given the scale of the raising undertaken last year for Dundonnell, holding back the first-half dividend didn’t really make much difference, he said. With Waverley progressing, and other potential opportunities, the board wanted to retain that equity.

“You shouldn’t assume there is a dividend every time,” Campbell said.

Tilt, split out of Trustpower in 2016, earlier today reported a net profit of A$12.2 million for the year ended March 31, down 28 percent from the year before, due to higher depreciation costs since the completion of Salt Creek and the effect of changes in financial instruments. Excluding the latter, underlying net profit was A$14.2 million, against an $A9.3 million loss the year before.

Revenue increased by 22 percent to A$193.3 million, reflecting higher prices and increased production.

The company has five wind farms in Australia and operates the Tararua and Mahinerangi projects here. It generated 2,054 GWh of electricity in the period, 14 percent more than a year earlier and slightly ahead of long-term projections.

Output was boosted by the completion of Salt Creek in July and a return to more normal wind conditions throughout the year.

Earnings before interest, tax, depreciation, amortisation and changes in financial instruments climbed 30 percent to A$134.8 million, in line with previous guidance.

It has signalled ebitdaf of A$122-129 million in the current year, given the business is not expected to materially benefit from any contribution from Dundonnell until the 2021 financial year. The forecast assumes long-term average wind conditions.

Tilt has built out a pipeline of almost 3,440 MW of solar, wind and battery projects to take advantage of the swing towards renewables in Australia and New Zealand.

Campbell said the firm needs a range of consented projects that are ready to execute and fundable as soon as the market signals a need.

Tilt’s strategy is to “rack ‘em and stack ‘em and build them when we can,” he said on a conference call, and will need to spend about A$7 million a year to maintain a baseline of development activity.

In New Zealand, Tilt has consent for a 240 MW wind development at Kaiwera Downs near Gore and a 160 MW expansion of its Mahinerangi wind farm west of Dunedin.

It is also in the very early stages of investigating a 70 MW wind project at Omamari in Northland. The site, owned by Landcorp, was previously investigated by Meridian Energy.

Tilt is also thinking about options for repowering the 20-year-old first stage of its Tararua wind farm near Palmerston North.

In March, Mercury announced it was proceeding with a $256 million, 119 MW wind development at Turitea, south of Tararua. Work there is due to start in August.

Campbell said having a major shareholder developing its own wind farm doesn’t really affect Tilt. Each firm has its own development pipeline and Mercury had been sitting on the Turitea option for some time.

Output from Tilt’s current New Zealand wind farms is contracted to Trustpower for the operating life of the turbines. Trustpower was offered the chance to take-up the output from Waverley but felt it had sufficient wind exposure, Campbell said.

Tilt has started thinking about what to do with the first stage of Tararua, commissioned in 1998.

While the turbines have a design life to 20 years, they are still available 95 percent of the time and he thought 25 years was “probably the right number” for that earlier generation of machine. New turbines are expected to operate for 30 years.

Campbell said Tararua remains one of the best wind sites in the world and could deliver a material boost if it can be repowered.

That output could be offered to the market generally and Trustpower doesn’t have any pre-emptive rights, he said.

(BusinessDesk)

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