New Zealand utilities firm TrustPower is aiming to spin off Tilt Renewables, its wind power business in Australia and NZ (to be based in Melbourne). Tilt Renewables comprises TrustPower's 582 megawatts of operating wind farms in NZ and Australia and more than 2000MW of potential wind farm projects and also plans to pursue solar ventures in Australia.
Deutsche Bank analysts have estimated an enterprise value for Tilt of $NZ1.34 billion-$NZ1.6 billion ($1.22 billion-$1.5 billion).
Tilt's 582 MW of operating assets and 2000 MW of development pipeline is similar in size to IFN's 536 MW operating assets and 1200 MW of development pipeline.
Because Tilt and IFN are similar in size, let's take Detusche's lower of estimate of $1.22 billion and apply it to IFN by dividing this by 722.5 million IFN shares on issue to get an implied $1.69 per share.
Cutting this lower estimate further by say 15% (because IFN is smaller) and we still get a value of $1.44 per share.
The current dip in share price is clearly due to the idiotic comments from government officials blaming wind power for the recent energy grid problems in South Australia. It is becoming clearer that these comments are ridiculous. The high winds that pulled out transmission lines were the main reason for the problems and that should've been obvious to everybody immediately.
This is a great opportunity to buy into the weakness caused by the unfounded blaming of wind farms for damage caused to the South Australian energy network by a freak storm. I see IFN recovering to $1+ very soon and I doubt it will ever be sub $1 again. IFN is a fairly straightforward cash generating business that is easily comparable to similar businesses (kind of like property). All of the above comparable valuations make it clear that IFN is a very good investment at these prices.
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