AUSTRALIA’S biggest gas infrastructure business APA Group has bought a major pipeline linking the Surat basin to the Queensland Curtis Liquefied Natural Gas export facility on Curtis Island from BG Group in a deal worth US$5 billion.
APA bought the 543 kilometre underground pipeline network by purchasing shares in BG subsidiary QCLNG Pipeline Pty (PipeCo) Ltd.
The company said in a statement that the deal would enhance the company’s position as Australia’s biggest owner of gas pipelines and complement its existing footprint as gas demand increases in coming years.
APA managing director Mick McCormack said the pipeline would expose the company to the “globally-significant east coast LNG sector” while enhancing its position as “Australia’s largest owner of gas transmission pipelines”.
“The acquisition…expands APA’s contracted revenue base with revenue from highly creditworthy counterparties under 20 year take-or-pay contracts,” Mr McCormack said.
Mr McCormack said the deal was good business because it had an appropriate risk profile, was operating cash flow per security accretive in the first full year of ownership, and would not affect the company’s credit ratings.
APA said the deal would bring in “fully contracted revenue derived through long-term take-or-pay gas transportation agreements”.
The company said the deal, which is expected to be close in the second quarter of 2015, would contribute extra earnings before interest, tax, depreciation and amortisation of US$383 million and operating cash flow of US$200-221 million.
BG executive chairman Andrew Gould said sale was in line with the company’s strategy to focus on its “core areas of oil and gas exploration and production and LNG”.
The company was reviewing its “reference conditions, long-term price assumptions and business plans in light of recent movements in commodity prices, particularly oil”, it said in a statement.
“Any impact of changes to these assumptions on the carrying value of assets within the group’s portfolio will be reflected in the 2014 fourth quarter results,” BG said.
“The timing reflects QCLNG’s advanced stage of development; we are now on the verge of delivering the world’s first large-scale project using natural gas from coal seams as a feedstock for LNG.
“We are pleased to have entered into an agreement for the sale of this high-quality infrastructure with a bidder the calibre of APA Group.
“BG Group and its partners have firm capacity rights in the pipeline for 20 years, with options to extend,” BG said.
BG said the transaction was expected to result in a post-tax profit of about US$2.7 billion.
BG entity QGC Pty Ltd will operate the pipeline for an initial three-year term which PipeCo has an option to extend, though APA has the option to take over operations 12 months after the acquisition.
In a deal underwritten by Macquarie, Morgan Stanley and Deutsche Bank, the purchase will be funded by a US$1.8 billion entitlement offer and a US$4.1 billion debt facility.
The US$1.8 billion will be comprised of US$800 million from institutional investors and US$1 billion from retail investors through a three-to-one underwritten pro-rata accelerated entitlement offer, with an offer price of $6.60 per new stapled security.
The sale is conditional on the start of commercial LNG deliveries from Gladstone and partner consent.