Tilt Renewables Ltd (NXC & ASX: TLT), currently under a full takeover bid from its two major shareholders, said yesterday it has accepted an offer from the Victorian Government to enter into a support agreement.
This relates to about 37% of the output from the fully permitted Dundonnell wind farm in Victoria.
Tilt says Dundonnell represents a significant milestone due to its quality and scale. In addition, securing this support agreement strengthens the relationship with the Victorian Government.
Tilt chairman Bruce Harker said under the support agreement, Tilt Renewables will have a 15-year contract with the Victorian Government to supply electricity to the network under a contract for “difference price mechanism.”
The contract relates to the generation output for 29 of the 80 turbines to be constructed at Dundonnell, providing sufficient revenue contracting certainty to progress the project to the point of a final investment decision.
Tilt Renewables’s chief executive Deion Campbell said the Victorian Government was working towards a target of having 25% of the State’s electricity coming from renewable sources by 2020.
Campbell said a final investment decision to proceed to financial close on Dundonnell is expected in late CY2018 with construction expected to begin early in CY2019.
Based on updated costings, Tilt expects construction costs to be about $A560 million ($NZ610 M) compared to its previously announced estimate of $A600 M.
As previously announced, Tilt has secured a fully committed debt package from National Australia Bank Limited and MUFG Bank Ltd which, following completion of standard conditions, will be available to fund about $A300 M of Dundonnell’s construction costs.
The balance of funding is expected to be provided via a pro rata entitlement offer of new shares by Tilt. The company has entered into a volume underwriting agreement with Citigroup Global Markets Ltd and Forsyth Barr Group Ltd in relation to a $A300 M equity raising.
The two major Tilt shareholders Infratil Ltd (NZX: IFT) (57.881%) and Mercury NZ Ltd (NZX & ASX: MCY) (19.99%) have each provided conditional commitments to subscribe for their respective entitlements in the equity raising.
They are also the two parties that are jointly making a full takeover bid for Tilt, with plans to privatise the company.
Tilt said upon completion in mid to late CY2020, Dundonnell will contribute annually about $A40-$A50 M of ongoing free cash flow after debt service for the company.