Infratil hails its global reach in renewable energy as it launches Asian venture Gurin

Infratil has floated the idea of rolling together its global renewable energy development business, as it launched a new Singapore-based venture to develop wind and solar generation across Asia.

The Wellington-headquartered fund, which earlier this year realised around $2 billion from the sale of Australasian wind farm business Tilt Renewables, announced the establishment of Gurin Energy on Friday.

Initially staffed by around 30 staff from an existing renewables company, Gurin has a commitment of $331 million of capital from Infratil, a combination of cash and credit notes.

The company will focus on both developing markets in South East Asia, mature northern Asian countries and the “large and complex” Indian market, Infratil said.

It has a development pipeline of 600 megawatts across wind, solar and battery storage and Infratil said demand for electricity was growing more quickly than in Europe and North America.

As well as data centres, telecommunications, airports and recently medical scanning businesses, Infratil has long been an investor in renewable energy, dating back to its listing in 1994 on the back of a cornerstone investment in Trustpower.

Tilt, which was sold for $3.1b earlier this year, was formed when Trustpower demerged its Australasian wind farm development business.

Gurin is Infratil’s third global renewables business, joining US-based Longroad Energy and European Galileo, which was formed in early 2020. Longroad and Galileo are both owned jointly with other investors including the Super Fund.

“We see these businesses as, essentially, future Tilts in the making,” Infratil chief executive Jason Boyes said, adding that the new business would create greater efficiency in development.

“It means we’ll have truly global reach in this space.”

Boyes said the company was unlikely to launch new international renewables businesses this year, but would continue to look at opportunities elsewhere.

Analysts asked when Longroad, which has an independent valuation of US$1.28b ($1.8b) might reach a size when it could be put up for sale.

Boyes said Infratil did not make sales decisions on size, but whether the valuations exceeded growth prospects others were willing to pay for.

“These are really long themes in these markets. So, I can’t see divestment in our minds at all.”

Boyes suggested the global businesses could be tied together.

“What we’re really trying to signal here is the potential to try and create a kind of global business through having it all together, rather than thinking of them as separate pockets that you would deal with separately. That’s a potential option Infratil’s created by doing it this way.”

Boyes told the Herald this could see the renewables businesses brought together.

“There is the potential to, in some way, link all these up and present a global prospect which will have greater interest for more people.”

Renewables ‘under-appreciated’

Tilt was put up for sale after Infratil received offers for its shareholding and was eventually sold at a valuation of 28 times its ebitda, excluding debt.

Previously Longroad has sold off assets once they are completed, but is now retaining more.

“What we might have thought of as a bit of a drag on returns, through holding a lower risk generating asset, is not necessarily the case because it allows people to value more years forward of development.”

Infratil’s investor presentation included a slide comparing Longroad’s independent valuation to the Tilt sale.

“The recent Tilt transaction illustrates that this platform value is currently under-appreciated.”

The slide suggested the valuation was based on a multiple of 14-19 times earnings, compared to 28 times for the Tilt transaction.

Boyes said the Longroad valuation was commissioned to calculate the fees to be paid to Infratil’s manager Morrison & Co “so it’s in no one’s interest for it to be an aggressive valuation” but the market was “hugging around” the valuation.

“It’s only got one year’s worth of development in it, whereas Tilt had multiple years,” Boyes said.

Some of Tilt’s price might have been unique to the process but Infratil had seen other transactions at similar valuations and it was possible Longroad would see stronger demand.

“It’s in a bigger market, with more potential and a higher development cadence than Tilt was.”

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