Infigen Energy Updates Fourth Quarter FY20 Operations

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Infigen Updates Fourth Quarter FY20 Operations

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Infigen Energy (ASX:IFN) releases its quarterly activity report for the three months ending 30 June 2020. The energy company reports that the current economic environment has had an impact on its revenues, with lower global energy prices impacting spot and forward prices moving forward. Due to this reduction, Infigen estimates non-cash losses of A$15-20 million for the FY20 full-year results.

Consequently, and also due to the record low-interest-rate environment and overall economic downturn, the business anticipates a non-cash loss of A$17-19 million. This is a result of interest rate swaps. Moreover, the company expects the payment of A$8 million in fees for the change of control transactions.

Moving forward, Infigen anticipates a decrease in energy prices for FY21 due to the impact of Covid-19. With increasingly lower demand and an oversupply of energy, the value will drop dramatically according to Infigen estimates. For the state of New South Wales, wholesale baseload electricity prices, currently at 79 dollars per megawatt-hour, is expected to be 55 dollars per megawatt-hour in FY21. This represents an overall decrease in electricity prices of over 30 per cent. Victoria and South Australia are expecting similar reductions as well. Infigen notes that the flattening of prices is a result of the oversupply.

As such, the outlook in the short term is not highly positive for Infigen, as the business is required to negotiate terms and conditions of their multilateral agreements in the face of lower electricity prices. The company expects that due to these conditions, net revenues and earnings before interest, taxes, depreciation and amortization will be materially lower in FY21 than FY20.

Infigen Energy notes that Covid-19 has had minimal impact on its operations and supply chains, allowing it to continuously provide electricity with no impediments. Moreover, at Infigen’s Cherry Tree Wind Farm in Victoria, the company expects completion in Q1FY21 with all 16 wind turbines operating fully. Additionally, Infigen’s Flyers Creek Wind Farm has collected expansion approval from the relevant landholders.

The release from Infigen also examines the recent takeover offers from UAC and Iberdrola, reaffirming the directors’ recommendation to accept the Iberdrola takeover offer without delay. As such, this negates the offer from UAC, with Iberdrola’s voting power in Infigen at 44.77 per cent at 31 July 2020.

Infigen further asserts its position in examining opportunities for its long-term strategic growth plans, despite the impacts of Covid-19. This includes but is not necessarily limited to the relocation of its South Australian Gas Turbines, as well as the change of control clause in the company’s Corporate Facility. Indeed, with the potential replacement of the Infigen board with directors from Iberdrola, the decision making for the company will be determined by Iberdrola. This relates to the extension of debt facilities and capital structure moving forward. Infigen Energy expects to report FY20 results on 20 August 2020.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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