Infratil reaps $329m profit on Z Energy share sale

Z will end up with a 49 per cent share of the fuel market if the $785 million sale, which requires the competition regulator's approval, goes ahead. Photo / NZME.

Infratil will book a profit of $392 million on the sale of its remaining 20 percent stake in Z Energy and said it will use the funds to pursue growth opportunities.

Infratil sold the 80 million shares at $6 apiece following a bookbuild in which the New Zealand Superannuation Fund sold 9.7 per cent , or 38.9 million shares at the same price, leaving the fund with about 10 percent of Z.

Infratil's profit, which is subject to finalisation of its share of Z's earnings for the six months ended September 30 and sale costs, came from total sale proceeds of $479.2 million after costs and doesn't take into account dividends collected along the way.

The sale price was at the bottom of the $6 to $6.20 range in which the shares were offered and compared to Z's record-high close of $6.63 on Tuesday, when the sale was announced. Z shares have gained 51 percent in the past 12 months.

Chief executive Marko Bogoievski said while Infratil was a supporter of the Z Energy business and its proposed acquisition of Chevron New Zealand, "the current market provided an opportunity for a clean exit and the flexibility to recycle capital into new growth opportunities."

Infratil and NZ Super Fund paid about $696 million for Shell New Zealand in 2010, funded with cash and debt, and transformed the former Shell downstream and retail business into Z Energy. They sold down their holdings to 20 percent apiece in an initial public offering of Z in 2013 at $3.50 a share, raising $840 million. Infratil's net proceeds from the IPO were $396 million.

Infratil released revised guidance for the year ending March 31, 2016, to reflect the loss of earnings from its share of Z. Forecast earnings before interest, tax, depreciation, amortisation and fair value changes are cut to a range of $500-$530 million from a previous range of $520-$550 million. Operating cash flow is now expected to be $250-$280 million from $270-$300 million.

Following the sale of its Z stake, Infratil's net debt is about $310 million, made up of $989 million of infrastructure bonds, other drawn debt of $74 million and cash of $753 million.

"Infratil will continue to assess the full suite of capital management alternatives against ongoing opportunities for new investment and report on any decisions as that assessment is completed," Bogoievski said. The diversified investor, which is managed by Wellington-based investment bank HRL Morrison & Co, will provide a further update with its first-half results on November 11.

Infratil shares last traded at $3.06 before being halted for the transaction and have gained about 17 percent in the past year.