October Australian Energy & Resources Market Update

Articles

Our update covers mining, oil and gas, electricity and renewable energy.

Mining

RECENT ANNOUNCEMENTS

IGO conducts due diligence on Western Areas Limited

On 21 September 2021, ASX-listed IGO Limited confirmed that it has commenced due diligence for the potential acquisition of ASX-listed Western Areas Limited. According to an earlier article by the Australian Financial Review on 20 September 2021, IGO was given four weeks from mid-September to formalise its scrip-heavy bid of around $1 billion, which it lodged in August.

It is expected that the due diligence will focus on Western Areas’ Odysseus mine, located near Leinster, Western Australia, which is set to produce its first nickel concentrate in 2023 and has an estimated mine life of 10 years. 

The Australian Financial Review listed Wyloo Consolidated Investors, which holds a 5.28% shareholding in IGO, and BHP, which relies on Western Areas and other rival miners such as IGO Group and Mincor to provide sufficient nickel concentrate to its Kalgoorlie nickel smelter, as potential competing bidders. It also noted that BHP’s reliance on rival miners for supply may force BHP to consolidate the Western Australian nickel sector.

For IGO, the acquisition of Western Areas would steel its strategy to be a globally relevant producer of metals used by the clean energy sector.

MARKET RUMOURS AND OPPORTUNITIES

South32 and Baowu to sell stakes in Eagle Downs

On 23 September 2021, the Australian Financial Review reported that the 50/50 owners of the partially-built Eagle Downs coal project located in Moranbah, Queensland, ASX-listed South32 and China’s Baowu had appointed Macquarie Capital to sell the asset.

In an earlier article dated 22 September 2021, the Australian Financial Review had listed Whitehaven Coal and Pembroke Resources as potential buyers as the owners of the nearby Winchester South project and Olive Downs project respectively. However, Whitehaven is focusing on debt reduction for the next year, and Pembroke struggled to raise funds for its Olive Downs project, the article noted.

An issue for South32 was said to be the project’s long-standing contracts for rail, port, power and water and how they should be shared among the project partners.

South32 is reportedly also selling its Illawarra coking coal mines, located in New South Wales. The mines are close to Sydney’s water catchments, making them vulnerable to sustainability pushbacks – the same reason which prompted NSW regulators to reject an extension of the Dendrobium mine earlier this year. The Australian Financial Review speculated that ASX-listed Bluescope would be the likely purchaser of the Illawarra projects if a sale process commences.

Glencore set to hire Bank of America and UBS for CSA sale

On 24 September 2021, The Australian reported that ASX-listed Glencore is set to engage Bank of America and UBS for the sale of its CSA copper mine (estimated worth $500 million and $1 billion) located in Cobar, New South Wales. Glencore is currently considering proposals but there is no guarantee of a transaction, according to the article.

The item listed ASX-listed copper miner 29Metals and OZ Minerals as likely buyers. Aeries Resources had previously attempted to buy the mine for US$575 million, but terms could not be agreed.

The CSA copper mine produces more than 1.1 million tonnes of copper ore and in excess of 185,000 tonnes of copper concentrate each year, which is exported to smelters in India, China and South-East Asia.

Minova attracts interest from Platinum Equity, Apollo Global Management and Anchorage Capital Partners

On 12 September 2021, The Australian reported that ASX-listed Orica’s sale of Minova, its commercial explosives and blasting systems business, is being considered by private equity firms Platinum Equity and Apollo Global Management, after Anchorage Capital Partners reportedly walked away.

However, the article noted that the level of Platinum and Apollo’s interest in the business is unclear, with private equity firms having been hesitant due to its exposure to the coal mining industry.

In an earlier article, The Australian had reported that Dywidag Systems International (also known as DSI) has been interested in the Minova business for some time.

Orica had announced the sale back in May and had engaged JPMorgan for the sale. The business reported a revenue of $219.1 million in Orica’s first half of the 2021 financial year (down from $263 million) and earnings before interest and tax of $7.2 million (down from $11.1 million). According to the article, it generates about $30 million of annual EBITDA. 

Oil & Gas

RECENT ANNOUNCEMENTS

APA seeks to acquire AusNet Services

On 21 September 2021, ASX-listed APA announced that it made a non-binding indicative proposal to acquire all of the issued shares in ASX-listed AusNet Services at $2.60 per share. The announcement was made one day after AusNet announced that an infrastructure affiliate of Brookfield Asset Management had made an offer to acquire AusNet for $2.50 per share. In its announcement, APA said that it was planning to raise $1.5 billion to fund the transaction. AusNet subsequently announced that it would consider a revised indicative proposal upon the completion of the eight-week exclusivity period with Brookfield.

On 22 September 2021, The Australian reported that APA would likely have to raise $3 billion to win the $9 billion electricity transmission company.

On 23 September 2021, the Takeovers Panel announced that it had received an application from APA requesting that AusNet terminate its exclusivity arrangements with Brookfield on the basis that AusNet’s exclusivity arrangements with Brookfield, which involve “no-talk” and “notification” restrictions, are not subject to a customary “fiduciary out” for AusNet to respond to potential competing proposals. The Takeovers Panel published a further media release on 4 October 2021 stating that Brookfield had submitted in response that APA’s announcement contained misleading and incorrect information, undermining the efficient, competitive and informed market principle.

On 29 September 2021, APA announced that the offer would remain active while the Takeovers Panel application remains under review.  

MARKET RUMOURS AND OPPORTUNITIES

CKI withdraws from sale of Woodside’s Pluto Train 2

On 12 September 2021, The Australian reported that Hong Kong’s CKI had withdrawn from the sale process for ASX-listed Woodside’s 49% interest in the Pluto Train 2 processing facility, located on the Burrup Peninsula, near Karratha in Western Australia, despite having been considered a strong contender for the asset. The project is valued at A$4.13 billion (US$3 billion) and is expected to complete in approximately three years. All bids for the 49% stake were due the week starting 30 August 2021. It was announced that Brookfield and Global Infrastructure were now competing.

Triangle Energy in joint venture talks to expand production profile

On 9 September 2021, Mergermarket reported that according to managing director Robert Towner, ASX-listed Triangle Energy is actively engaging prospective joint venture partners to develop its projects in Australia. Towner announced the company hopes to secure a potential joint venture agreement in the next 18 months at the RU Good Oil & Gas Energy Conference on 8 September 2021.

Triangle Energy is a Perth-based junior energy company, with a large acreage in the prospective Perth Basin. While the equity structure of any joint venture accord is yet to be determined, Triangle Energy will seek a larger partner with a strong balance sheet and access to capital. 

Electricity & Renewables

MARKET RUMOURS AND OPPORTUNITIES

Sale of Meridian Energy Australia

On 6 October 2021, The Australian reported that the shortlisted bidders for Meridian Energy Australia, the $1 billion Australian renewable energy business owned by ASX and NZX-listed Meridian Energy, were Engie, Shell, Iberdrola and ASX-listed Telstra. Meridian Energy had announced back in June this year that it was reviewing its ownership of Meridian Energy Australia and would consider all options, including a partial or full divestment. Bids are due in December 2021, according to the article.

AustralianSuper seeks to sell stake in Ausgrid

On 3 October 2021, The Australian reported that the bid for 16.6% of AustralianSuper’s 25.2% total stake in Ausgrid is down to three serious suitors: Macquarie Infrastructure and Real Assets, Dutch fund APG and Ontario Teachers’ Pension Plan (with PSP Investments and Kohlberg Kravis Roberts). The stake up for sale is expected to be worth around $2 billion and bids are expected on 11 October, according to the article.

Morrison & Co sells stake in Macarthur Wind Farm

On 2 September 2021, The Australian reported that Morrison & Co is seeking to sell its 50% stake in the 420MW Macarthur Wind Farm, located in Macarthur, Victoria. The asset is expected to worth between $800 million and $900 million. Infrastructure funds Cbus, Host Plus, Palisade Investment Partners and ICG are expected to bid for the asset. AMP Capital owns the other 50% stake. Energy generated from the wind farm is fully contracted to AGL.

Sale of Elliott Green Power

On 31 August 2021, the Australian Financial Review reported that Elliott Management Corporation has launched a sale process for its solar business Elliott Green Power. With assets in Queensland and New South Wales, the business is estimated to be worth $600 million.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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