Greg Smith: Generate investment specialist on Infratil selling Contact Energy stake to fund future growth

Infratil says it has agreed to sell 53.53 million shares - representing a 5 percent stake - in Contact Energy through a fully underwritten block trade.

The sale is at $9.25 per ordinary share, generating expected gross proceeds of about $495.17 million, and taking Infratil’s shareholding down to 9.08 percent.

The sell-down is expected to complete on May 25.

Generate investment specialist Greg Smith says Infratil will have other opportunities they'll want to take advantage of, like data centres. 

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Episode Transcript

Speaker 1 (00:00):
Now Infratil has announced today that it's selling about a
third of its Contact Energy shares. The infrastructure business is
selling more than fifty three million shares in total. That's
five percent of Contacts total. They should share capital. Contact's
gone into a trading holt while this trade takes place,
and after the trade Inverttel will still own about nine percent.
Greg Smith is an investment specialist and generator and he's
with us Now, Hi Greg.

Speaker 2 (00:20):
Hi, Heather.

Speaker 1 (00:20):
Why the saildown?

Speaker 2 (00:23):
Well, yeah, it's not really about Contact. You know, they've
got the state less than a year ago through the
man of a deal. I don't think it was ever
a long term cornerstone holding. They're now selling around about
a third of it. I think basically it's because of
lots of opportunities alsehere, particularly high growth areas like data centers,
potentially renewables offshore, and this gives them the flexibility to

(00:43):
fund those and basically contacts not where they see the
highest returns going forward.

Speaker 1 (00:47):
Yeah, and they've only committed I mean the remaining shares,
they've only committed to hold them until after the field
around about the full year results in August. Now, if
they need the money for something else. Why are they
sticking around to August?

Speaker 2 (01:00):
You know, they haven't sort of said one way or another,
but yeah, they have for now sell down the state
from fourteen percent to nine percent. They've got their four
years olds next week. They're not going to sell down
before August, as you say, So we'll have to see
how that plays out, but yeah, it does you know,
with the reduction in the state, tell you that this
isn't a cornerstone position for them. Yeah, they're selling obviously

(01:22):
quite a big block, you know, half a billion dollars.
Basically they've made a bit of a profit on that.
They're having to take a seven percent discount to get
it across the line. So we'll have to see where
it goes from there. But certainly the signaling is around
recycling have what have a solid mature set and redeploying
it elsewhere.

Speaker 1 (01:38):
Yeah, and where do you think they're going to redeploy it?

Speaker 2 (01:40):
Well, you know, obviously data centers has been a really
great business for them, so you know, I suppose that
is a future AI as we know, it's sort of
gaining a momentum. But they've got some great renewable their
assets offshore as well, so you sort of feel that
where it's going to be going, you know, sort of
high growth opportunities and look and all, this is not
sort of under mining the assets that contact have, which

(02:02):
are great in their own right. And I'm sure there'll
be plenty of buyers for that stake and we'll see
more about that tomorrow.

Speaker 1 (02:08):
Now, just in general, re you know, the electricity market
and the upcoming election, how high are you rating the
chances that New Zealand First actually goes through with one
of its policies and breaks up some gent tailors.

Speaker 2 (02:21):
Well, yeah, it's going to be one of the major
sort of election sticking points. Is along with US arguably
changes the key US over. But yeah, asset sales, you
know are obviously again there's certainly been a big election topic.
I mean the government has sort of ruled out selling
down more the gentiles. Obviously that's been a highly successful

(02:41):
privatization or part privatization. New zeald First sort of wants
to push ahead further of that. So I'm sure there'll
be healthy debate not just about the gentails either. I'm
sure there'll be plenty of debate about other assets that
could be sold and sort of fund our fund our
debts sort of challenges.

Speaker 1 (02:58):
Yeah, thank you very much, well said, I appreciate your
time as Greg Smith investment specialist to generate.

Speaker 2 (03:03):
For more from Hither Duplessy Allen Drive.

Speaker 1 (03:06):
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