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Tilt Renewables completes $260 million entitlement offer: Is it a Buy?

Tilt Renewables Limited (ASX: TLT) this morning completed the allotment of 14,999,735 fully-paid ordinary shares at an issue price of $1.75 per share – but is the renewables company a Buy?

What’s behind the $260 million entitlement offer?

Tilt announced on Tuesday that it had successfully completed the retail bookbuild component of its underwritten 1-for-2 pro-rata entitlement offer.

The clearing price under the bookbuild was NZ$2.22 per new ordinary share which reflects a premium of NZ$0.47 per new share over the application price of NZ$1.75 per share under the offer.

Eligible retail shareholders who elected not to take up their entitlements and ineligible retail shareholders will receive NZ$0.47 per share for each new share not taken up by them.

This morning’s allotment of securities represents 3.2% of the ordinary shares on issue (including the new shares) and Infratil Ltd  (ASX: IFT) will be the beneficial owner of 65.341% of the ordinary shares of Tilt, while Mercury NZ Ltd  (ASX: MCY) will hold 19.99% of Tilt’s ordinary shares.

How will the company use the proceeds?

On 20 February 2019, Tilt announced its intentions to raise the $260 million of new equity to fund its largest development, the $560 million Dundonnell wind project.

The entitlement offer represents the last piece of the funding puzzle and Tilt can now begin construction on the 336 megawatt (MW) wind farm, 23 kilometres north-east of Mortlake in Victoria.

The company plans to send the first power from the project by early 2020 and reach the full 336MW capacity by the end of 2020 as it continues to mature its energy production capabilities in Australia and New Zealand.

Is the Tilt Renewables share price a Buy?

Tilt currently has a market cap of nearly $1 billion but is tightly controlled by Mercury NZ and Infratil, with a combined ownership of over 85%.

The company is extraordinarily illiquid for such a large company and regularly goes long periods with zero trading volume on the ASX.

For those looking for renewables exposure, I’m bullish on the sector with the renewable-friendly Labor government potentially coming into power in the second half of the year, and think that some of the bigger players like AGL Energy Limited  (ASX: AGL) or Infigen Energy Ltd (ASX: IFN) could offer good value in 2019.

In the meantime, Fools should consider adding one of these top growth shares to boost portfolio returns in the medium- to long-term.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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