MCY Mercury NZ ( MRP Mighty River Power)

[Snoopy]

We thus have a total available for investment amount of: $682m (equity) + $307m (debt) = $989m dollars, while still staying within Mercury's own optimised balance sheet guidelines.

From this 'available for investment total', we can subtract the $144m paid to acquire a 19.9% stake in Tilt Renewables in FY2018. We can also subtract the $464m (AR2020 p10) required to complete the new Turitea wind farm to the full extent of the 60 consented turbines. By my calculations that still leaves:

$989m - $464m - $144m = $381m

We can add to this the $272m proceeds from the sale of the Metrix metering business in FY2019.

That makes total capital of $381m + $272m = $653m still available for investment. I wonder what other investment direction MCY might 'Tilt' those funds towards ;-)?

A back of the envelope summary of the situation between Mercury and Tilt.

1/ 20% of the business cost Mercury $144m. On that basis Tilt was valued at $144m/0.2 = $720m. So the remaining 80% of the company had an implied value of $720m - $144m = $576m.

2/ Right now, Mercury has $653m of investable capital available. So they have enough surplus investable capital on the balance sheet now available to take out all of Tilt, except for one thing. The price of TLT shares is now rather higher than it was when Mercury bought their 20% stake.

3/ Mercury offered $2.30 for their 20% stake. TLT is trading on the market today at near double that price. So the amount that Mercury would have to pay to take out the remainder of the company would be at least:

$576m x 2 = $1,152m

4/ $1,152m would be getting near the upper limit of what Mercury could cope with without a capital raising. Would Grant Robertson support a capital raising for such a 'frivolous' investment?

5/ I am tending think that Mercury will hold their 20% stake if the balance of the company gets a new owner. Alternatively, if they sold their stake that would be $144m of profit. And maybe a nice bonus dividend for shareholders?

$144m/1400m = 10cps

Grant might like that. It would make him look 'responsible' after all the Covid-19 bail out expenditure he has been doing.

SNOOPY