July Australian Energy & Resources Market Update

Articles Written by Grace Black (Associate), Isabel McElhinney (Associate), Haerim Nam (Associate), Patrick Cunanan (Law Clerk), Samuel Skinner (Law Clerk)

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


Recently completed deals:

Sedgman acquires Onyx Projects

On 1 July 2022, ASX-listed CIMIC Group’s subsidiary Sedgman announced that it recently acquired project management and engineering company Onyx Projects, set to be renamed Sedgman Onyx.

Sedgman Onyx will operate as part of Sedgman’s Australia West business unit.

Bowen Coking Coal completes acquisition of New Lenton Coal

On 1 July 2022, ASX-listed Bowen Coking Coal Ltd announced that it completed its acquisition of 100% of the shares in New Lenton Coal Pty Ltd, which currently owns a 90% interest in the Lenton Joint Venture.

The Lenton Joint Venture features the Burton Mine and Lenton Project, both located in the north of Central Queensland, as well as the existing Burton plant and infrastructure, which is strategically located in close proximity to existing Bowen assets and will have total processing capacity of up to 5 million tonnes per annum.

IGO completes acquisition of Western Areas

Further to our April 2022 Australian Energy & Resources Market Update, ASX-listed IGO Limited announced on 20 June 2022 that it had completed the acquisition of ASX-listed Western Areas Limited by way of scheme of arrangement.

The final cash consideration was A$3.87 per share, which was a 15% increase from the A$3.36 per share offer made in April 2022 to reflect the surge in nickel price.

Prospect Resources completes sale of stake in Arcadia Lithium

On 20 April 2022, ASX-listed Prospect Resources Limited announced that it completed its sale of its 87% interest in the Arcadia Lithium Project located in Zimbabwe to Zhejiang Huayou Cobalt Co., Limited, a subsidiary of new energy lithium-ion battery material producer.

The transaction was for cash consideration of approximately US$377.8 million.

Prospect intends to distribute a substantial portion of the net proceeds to its shareholders. The expected distribution of A$440 million to A$450 million will equate to approximately A$0.94 to A$0.96 per share, including up to a A$0.20 capital reduction. It expects to retain between A$30 million to A$40 million to progress battery and electrification metals projects, primarily in Zimbabwe.

Recent announcements: 

Genesis Minerals – takeover offer for Dacian Gold; possible merger with St Barbara

On 5 July 2022, ASX-listed Genesis Minerals Limited announced the proposed merger with ASX-listed Dacian Gold Limited by way of a conditional off-market takeover offer.

If the transaction proceeds, each Dacian shareholder will receive 0.0843 Genesis shares for every Dacian share currently held. Based on Genesis’ closing price on 1 July 2022 of A$1.205, this equates to an implied offer consideration value of A$0.102 per Dacian share and a total equity value of A$111 million. Completion remains subject to a 50.1% minimum shareholder acceptance condition. Dacian’s directors have unanimously recommended that shareholders accept the offer.

The announcement also noted that Genesis has secured capital raising commitments for up to A$100 million to fund the combined group. 

In the same announcement, Genesis also confirmed that it had recommenced discussions with ASX-listed St Barbara Limited for a possible merger, but that there is no certainty that the talks will lead to a transaction. The motivation behind the transaction is for further consolidation in the Leonora District. St Barbara’s announcement confirming the same is available here.

Genesis wholly owns the Leonora Gold Project, located within the Eastern Goldfields in the Shire of Leonora in Western Australia, and the right to earn-in to an initial 65% interest in the Barimaia Gold Project, located in the Murchison District in Western Australia. Dacian owns the Mt Morgans Gold Operation and the Redcliffe Gold Project, also located in the Eastern Goldfields Region in Western Australia.

St Barbara owns the Gwalia Gold Project, also in the Leonora District, and an associated processing plant. As noted in our April 2022 Australian Energy & Resources Market Update, St Barbara had reportedly been in talks with ASX-listed Ramelius Resources Limited regarding a potential takeover.

Yancoal Australia rejects parent company’s potential bid for company

On 7 June 2022, ASX-listed Yancoal Australia (market cap: A$8.02 billion) announced that its independent board committee had concluded that the company does not recommend or support parent company Yankuang Energy Group’s proposed non-binding expression of interest for the remaining 37.74% shareholding in the company. The consideration for the potential bid was A$5.07 per Yancoal share (to be satisfied in the form of H-Share convertible bonds issued by Yankuang Energy).

The announcement follows earlier articles by Reuters on 2 June 2022 and The Australian on 31 May 2022, which reported that minority shareholders China Cinda Asset Management Co., Ltd. (15.89%), Glencore (6.40%) and China Shandong Investments (5.41%) were willing sellers but that Glencore was likely to reject Yankuang’s bid as too low.  

Details of Yankuang’s offer can be found in Yankuang Energy’s announcement on 25 May 2022.

Market rumours and opportunities:

South32 looking to sell Illawarra coal operations

Further to our October 2021 Australian Energy & Resources Market Update, on 12 June 2022, The Australian reported growing market speculation that ASX-listed South32 may be looking to sell its metallurgical coal operations in Illawarra, New South Wales. The mine produces hard coking coal for steelmaking both in Australia and around the world.

The sale would add South32 to the growing list of major Australian listed companies distancing themselves from coal, the item noted.

Oil & Gas

Recently completed deals:

Acquisition of 16.7% stake in Australian Integrated Carbon by Osaka Gas

On 9 June 2022, Osaka Gas Co., Ltd announced that it had acquired, through its subsidiary Osaka Gas Energy Oceania Pty Ltd, a 16.7% interest in Australian Integrated Carbon Pty Ltd, a company engaged in obtaining and selling carbon credits from regeneration of native woodlands in Australia.

The value of the transaction was not disclosed.

Recent announcements:

APA Group's Orbost Gas Processing Plant to be sold to Cooper Energy

On 20 June 2022, ASX-listed APA Group announced that it had entered into binding agreements with ASX-listed Cooper Energy Ltd to sell APA's Orbost Gas Processing Plant in Victoria for A$270 million to A$330 million.

Completion of the transaction is expected to occur in late July 2022. APA will continue to operate the plant following the completion of the sale until the plant’s Major Hazard Facility Licence is transferred to Cooper Energy, which is expected to take up to 12 months.

Santos' Pikka stake attracting North American oil majors

Further to our April 2022 Australian Energy & Resources Market Update, on 22 May 2022, The Australian reported that ConocoPhillips, Exxon Mobil Corporation, and Chevron Corporation are believed to be interested in buying a stake in the Alaska-based Pikka Project being sold by ASX-listed Santos Limited.

Santos inherited a 51% stake in Pikka through its acquisition of Oil Search Limited in late 2021 and is looking to sell the asset through Moelis & Co. The remainder of the project is owned by Repsol.

Pikka has been estimated to be worth between US$1.5 billion and US$2 billion.

Mitsui hires Jefferies Group to test buyer interest in joint ventures with Woodside Petroleum

On 27 April 2022, the Australian Financial Review reported that Mitsui, the Japanese trading group, had appointed Jefferies Group to test buyer interest in its oil and gas joint ventures with ASX-listed Woodside Energy Group Ltd.

According to the report, Mitsui is considering the divestment of its stakes in the Vincent, Enfield, and Greater Enfield oil projects, and the Toro and Ragnar gas projects which are currently jointly owned by Mitsui and Woodside. Mitsui has reportedly flagged these joint ventures as non-core and would prefer to invest in its core operations.

Potential buyers include Woodside, Glencore, Vitol, and private equity.

Market rumours and opportunities:

PetroChina may sell loss-making natural gas projects in Australia and oil sands in Canada

On 28 June 2022, Reuters reported that PetroChina may sell out from natural gas projects in Australia and oil sands in Canada to stem losses and divert funds to more lucrative sites. The report said that Browse Energy and ASX-listed Arrow Energy Holdings Pty Ltd, as well as MacKay River Oil Sands and Dover Oil Sands projects in Canada, are the assets that PetroChina is looking to divest.

The report went on to say that PetroChina wants to turn its attention to the Middle East, Africa and central Asia where more lucrative assets are available.

APA circled by at least one potential buyer

On 19 May 2022, The Australian reported that at least one potential buyer is said to be circling ASX-listed APA Group.

According to the report, APA’s board has not yet received an approach, but a prospective bidder is thought to believe that APA would be better suited to transition away from gas as a private company.

The article named Global Infrastructure Partners as a potential buyer for APA which acquired a A$4.1 billion stake in Woodside’s Pluto Train 2 project last year.

Meanwhile, APA is pursuing its own M&A ambitions and is looking to acquire the Basslink power connector in the Bass Strait, as well as renewable energy assets such as CWP Renewables.

Electricity & Renewables

Recent announcements:

BP to take a 40.5% stake and operatorship of the AREH project in Western Australia

On 15 June 2022, BP announced that it has agreed to acquire a 40.5% stake and operatorship of the Asian Renewable Energy Hub (AREH). The project, located in the Pilbara in Western Australia, is expected to be capable of producing approximately 1.6 million tonnes of green hydrogen or 9 million tonnes of green ammonia per annum.  The project intends to supply renewable power to local customers in the region. The other owners of the AREH are InterContinental Energy, CWP Global, Macquarie Capital and Macquarie’s Green Investment Group. Under the terms of the agreement, BP will acquire a 40.5% interest in the project and will assume operatorship from 1 July 2022.

Federation Asset Management agrees to acquire majority stake in Riverina, Darlington Point energy storage systems

Further to our April 2022 Australian Energy & Resources Market Update, on 28 April 2022 the Australian Financial Review reported that Federation Asset Management had agreed to acquire a majority stake in the Riverina lithium-ion battery project and Darling Point energy storage system from Edify Energy. The projects located in southwest NSW have a combined 150 megawatts of power and 300 megawatt-hours of storage capacity. The value of the deal has not been disclosed.

AGL Energy to review strategic direction following withdrawal of demerger proposal

Further to our May 2021 and April 2022 Australian Energy & Resources Market Updates, on 30 May 2022, ASX-listed AGL Energy announced that it had withdrawn the demerger proposal to separate AGL Energy into two companies: AGL Australia and Accel Energy. Having regard to anticipated voter turnout and stated opposition from a small number of investors including Grok Ventures, AGL believed that the demerger proposal would not receive the sufficient support to meet the 75% approval threshold for a scheme of arrangement.

On 23 June 2022, AGL Energy announced that it was committed to undertaking a review of its strategic direction, renewing the composition of the board and management, and determining the best way to deliver long-term shareholder value.

Star of the South 10% stake acquired by Cbus

Further to our April 2022 Australian Energy & Resources Market Update, on 1 June 2022, Copenhagen Infrastructure Partners (CIP), through Copenhagen Infrastructure IV, and Cbus Super (Cbus) announced the acquisition by Cbus of a 10% interest in CIP’s interest in the Star of the South wind project. Star of the South is an off-shore wind project located off the south coast of Gippsland Victoria. The Australian Financial Review reported that Star of the South has been earmarked by the Victorian state government as at the forefront of its target to generate about 20 per cent of its energy needs from offshore wind within a decade, a timetable that adds to pressure on Star of the South to be operational by 2028. The value of the deal has not been disclosed.

Market rumours and opportunities: 

EnergyAustralia attracts Global Infrastructure Partners and CPDQ

Further to our April 2022 Australian Energy & Resources Market Update, on 8 June 2022, The Australian reported that Global Infrastructure Partners and Caisse dépôt et placement du Québec (CPDQ) were believed to be parties that have been considering a deal to buy a 50% stake in EnergyAustralia. EnergyAustralia is based in Melbourne and is owned by the CLP Group based in Hong Kong. EnergyAustralia’s assets include thermal coal, natural gas, hydro-electric, solar energy and wind power. The deal is reported to be worth A$4 billion (US$2.9 billion). According to the article, the question is whether the potential buyers will remain in the mix, given the challenges and government uncertainty about future intervention in the market.

CWP Renewables’ seeking indicative offers by mid to late August

On 27 April 2022, the Australian Financial Review reported that Swiss private equity firm Partners Group was seeking bids worth over A$4 billion for Australian renewable power producer CWP Renewables. CPW Renewables, which is wholly owned by Partners Group is a renewable energy company that develops, operates and owns renewable energy assets in Australia. It was further reported on 27 June 2022 that CWP’s auction would be underway in early July, with first round bids likely to be due in mid to late August. The article reported that CWP had a field of potential suitors including Canada’s CDPQ, APA Group, Brookfield and Global Infrastructure Partners.

Lal Lal Winds Farm 60% stake on sale by Macquarie and InfraRed Capital Partners

On 29 June 2022, the Australian Financial Review reported Macquarie Capital and InfraRed Capital Partners’ controlling stake in Lal Lal Wind Farms has been put on sale. The wind farm located southeast of Ballarat in Victoria is jointly owned by Macquarie Capital, InfraRed Capital Partners and Northleaf Capital Partners. The controlling stake comprises of 60% equity stake, 20% held by Macquarie Capital and the remaining 40% interest held by InfraRed Capital Partners. The article reported that it was understood that the action was headed towards the second round, with a shortlist of bidders. It was also reported that indicative bids were said to value Lal Lal Windfarms at about A$400 to A$450 million, including debt. 

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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