Contact Energy to take over electricity generator Manawa Energy
Contact Energy's Te Mihi power station (file photo). Photo: Contact Energy
Two large power companies are proposing a near $2.3-billion merger.
Contact Energy, a full power generator and retailer, said it reached an agreement to take over electricity generator Manawa Energy.
Contact would pay a combination of cash and its own shares to the equivalent of $5.95 for each Manawa share, which last traded just over $4.00, valuing the deal at just under $1.9b.
It would also pay off Manawa's current debt of about $400m, which was reported as $81m in bank loans and $372.7m in bonds as at 31 March 2024.
Contact's chief executive Mike Fuge said the merger would make Contact more resilient and diversify its generating portfolio.
"Our hydro assets are complementary, with different seasonal generation profiles, which will help Contact to better manage dry year risk and to sell larger volumes of fixed price electricity into the market than we could independently," Fuge said.
Manawa is a renewable power generator which was left over after the former Trustpower sold off its retail power business.
Manawa chair Deion Campbell said it was an attractive offer and was supported by the board.
"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," Campbell said.
Manawa shareholders were expected to own about 18.5 percent of Contact shares post completion of the takeover scheme of arrangement.
Campbell would join the Contact board following implementation of the scheme of arrangement.
Manawa was 51 percent owned by infrastructure investor Infratil, which supported the takeover offer.
Infratil chief executive Jason Boyes said the offer represented about a 48 percent premium to the Manawa share price prior to the announcement.
"If the Scheme proceeds as announced, and subject to any pre-completion dividends, Infratil's gross cash proceeds from the sale will be approximately $186m and following completion we will own approximately 9.5 percent of Contact," Boyes said.
The deal is subject to a number of conditions, including Commerce Commission, High Court and shareholders approval.
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