Latest / Best of Business / Greg Smith: Generate investment specialist on Infratil selling Contact Energy stake to fund future growth

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

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  Speaker 1: You're listening to a podcast from Newstalk Z'B. Follow this
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  Speaker 2: Now Infratil has announced today that it's selling about a
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  Speaker 2: third of its Contact Energy shares. The infrastructure business is
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  Speaker 2: selling more than fifty three million shares in total. That's
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  Speaker 2: five percent of contacts total issued share capital. Contact's gone
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  Speaker 2: into a trading holt while this trade takes place, and
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  Speaker 2: after the trade Inverttel will still own about nine percent.
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  Speaker 2: Greg Smith is an investment specialist and generator and he's
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  Speaker 2: with us now.
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  Speaker 1: Hi Greg, Hi, Heather.
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  Speaker 3: Why the saildown, Well, yeah, it's not really about Contact.
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  Speaker 3: You know, they've got a state lesson a year ago
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  Speaker 3: through the man of a deal. I don't think it
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  Speaker 3: was ever a long term cornerstone holding. They're now selling
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  Speaker 3: around about a third of it. I think basically it's
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  Speaker 3: because of lots of opportunities else where, particularly high growth
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  Speaker 3: areas like data centers, potentially renewables offshore, and this give
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  Speaker 3: them the flexibility to fund those and basically Contacts not
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  Speaker 3: where they see the highest returns going forward.
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  Speaker 2: Yeah, and they've only committed I mean the remaining shares
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  Speaker 2: they've only committed to hold them unto life after the
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  Speaker 2: field around about the full year results in August. Now,
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  Speaker 2: if they need the money for something else, why are
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  Speaker 2: they sticking around to August.
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  Speaker 3: Well, look, you know they haven't sort of said one
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  Speaker 3: way or another, but yeah, they have for now sell
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  Speaker 3: down the state from fourteen percent to nine percent. They've
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  Speaker 3: got their full year results next week. They're not going
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  Speaker 3: to sell down before August, as you say, So we'll
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  Speaker 3: have to see how that plays out, but yeah, it
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  Speaker 3: does you know, with the reduction in the state, tell
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  Speaker 3: you that this isn't a cornerstone position for them. Yeah,
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  Speaker 3: they're selling obviously quite a big block, you know, half
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  Speaker 3: a billion dollars. Basically they've made a bit of a
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  Speaker 3: profit on that. They're having to take a seven percent
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  Speaker 3: discount to get it across the line. So we'll have
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  Speaker 3: to see where it goes from there. But certainly the
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  Speaker 3: signaling is around recycling hep, what have a solid mature
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  Speaker 3: set and redeploying it elsewhere.
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  Speaker 2: Yeah, and where do you think they're going to redeploy it?
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  Speaker 3: Well, obviously data centers has been a really great business
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  Speaker 3: for them, so you know, I suppose that is a
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  Speaker 3: future AI as we know, sort of gaining a momentum.
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  Speaker 3: But they've got some great renewables assets offshore as well,
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  Speaker 3: so you sort of feel that where it's going to
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  Speaker 3: be going, you know, sort of higher growth opportunities and
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  Speaker 3: look and all this is not sort of under undermining
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  Speaker 3: the assets that Contact have, which you are great in
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  Speaker 3: their own right, and I'm sure there'll be plenty of
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  Speaker 3: buyers for that stake, and we'll see more about that tomorrow.
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  Speaker 2: Now, just in general, re you know, the electricity market
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  Speaker 2: and the upcoming election, how high are you rating the
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  Speaker 2: chances that New Zealand First actually goes through with one
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  Speaker 2: of its policies and breaks up some gent tailors.
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  Speaker 3: Well, yeah, it's going to be one of the major
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  Speaker 3: sort of election sticking points is along with US aguably
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  Speaker 3: changes to Keypius over But yeah, asset sales you know
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  Speaker 3: are obviously again they've certainly been a big election topic.
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  Speaker 3: I mean the government has sort of ruled out selling
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  Speaker 3: down more the gentails. Obviously that's been a highly successful
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  Speaker 3: privatizational part privatization, New zeald First sort of wants to
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  Speaker 3: push a head further of that, So I'm sure there'll
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  Speaker 3: be healthy debate not just about the gentailers either. Sure
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  Speaker 3: there will be plenty of debate about other assets that
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  Speaker 3: could be sold and sort of fund our debts and challenges.
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  Speaker 2: Yeah, thank you very much, Greg Well said, I appreciate
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  Speaker 2: your time as Greg Smith Investment Specialist.
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