Tilt Renewables says news that it’s a winner of Victoria’s renewable energy auction means a $720 million takeover offer is too low, and should be rejected.

On Tuesday, the Victorian government said Tilt’s (ASX:TLT) 336 megawatt (MW) Dundonnell wind farm was one of six projects chosen in the Victorian Renewable Energy Targets (VRET) auction.

The VRET was for 928MW of renewable energy. The government buy 37 per cent of the output from Dundonnell.

Tilt is using that as a stick to whack kiwi power generators Infratil (ASX:IFT) and Mercury NZ (ASX:MCY) which made the $2.30 a share offer.

Mercury and Infratil control 78 per cent of Tilt — and after approval from the Australian Foreign Investment Review Board, declared the offer unconditional last week.

Fiona Oliver, chair of Tilt’s Independent Directors Committee, repeated that the premium of 8 per cent on recent trading wasn’t high enough and didn’t recognise the company’s strategic value.

It had been a 24 per cent premium to the pre-offer share price.

“It is expected that upon completion in mid to late 2020 Dundonnell will contribute approximately $40-50 million of ongoing free cash flow before debt service annually. This is significant,” Ms Oliver told investors.

The farm itself is expected to cost $600 million to build, funded half by a $300 million equity raising underwritten by Infratil and debt. It will increase Tilt’s generation capacity by 55 per cent.

“A final investment decision to proceed is expected in late CY2018 with construction expected to begin early in CY2019.”

She said the company has a “significant pipeline” of developments outside the Dundonnell farm.

Tilt shares rose 2.4 per cent to $2.13 on Wednesday morning — still 8 per cent below the offer price.

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