Infigen Energy acquires Smithfield OCGT to tap into stable energy markets

Infigen Energy (ASX: IFN), an Australian Securities Exchange listed renewable energy player, announced on 23rd May 2019 that the company has acquired a 109 megawatt flexible, fast-start Smithfield Open Cycle Gas Turbine (OCGT) in New South Wales for a cash consideration of $60m.

The company also mentioned that the expected half-yearly payment of one cent a share with respect to the second half of the financial year 2019 is subjective upon the determination of the company’s Boards in June 2019 and would be notified to the public following ASX Listing Rules.

IFN paid total cash of $60m on the closing of the deal, and an additional cost of $14m would be paid by the company, which would mark an expense of $1m for each megawatt of re-rated capacity by AEMO from 109 megawatts to 123 megawatts received by the company before November 2019, with a maximum payment of $74 million. Infigen funded the purchase by cash on the balance sheet.

The company recently reported that the total asset production of the company for April 2019 inched up to 138Gwh.

The economics of the Smithfield OCGT includes:

Source: Company’s Report

The Smithfield OCGT is strategically located close to one of the best load corridors in the National Electricity Market (NEM), which provides direct access to city gate gas hub- Sydney Short-Term Trading Market (STTM) for reliable gas supply.

The firming capacity of the Smithfield turbine positions the company to significantly grow its Commercial and Industrial customer base in New South Wales (NSW) and the acquisition is expected by the company to facilitate a substantial increase in contracting into higher priced, long-tenure, and stable market, which would deliver high-quality of earnings.

The company is swiftly moving towards its stated strategy of acquiring the Smithfield OCGT, which contains the potential to get expanded till 123 megawatts and is a platform for 300-400MW of growth of intermittent renewable generation.

The transaction summary of the transaction is mentioned below:

Source: Company’s Report

The Smithfield acquisition is a key milestone as Infigen delivers its strategy:

Source: Company’s Report

As per the current Managing Director and Chief Executive Officer, Rose Rolfe, The Smithfield Open Cycle Gas Turbine acquisition and the expected reintroduction of distributions on a sustainable basis, determine two significant milestones in the implication of the company’s business strategy.

Mr Rolfe also mentioned that the acquired firming capacity in New South Wales would enable the company to substantially increase renewable energy selling for the company with high reliability.

The firming process adds a value of low cost, intermittent renewables through margin, contracting, and growth opportunity.

Source: Company’s Report

The Margin opportunity enables the company to contract high price, long-term and stable market contract. The contracting enables the company to enter into firm contacts that supply electricity to customers at prices that reflect the value of reliability while managing market risk. Further, the growth opportunity supports accretive growth of additional intermittent renewable generation into the INF’s portfolio.

The shares of the company are trading at A$0.460 (as on 23rd May 2019, AEST 02:03 PM), up by ~7% as compared to its previous close.


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