Barnaby Joyce questions Arrow Energy bid

OPPOSITION finance spokesman Barnaby Joyce has raised concerns about the PetroChina-Shell $3.44 billion bid for Arrow Energy.

OPPOSITION finance spokesman Barnaby Joyce has raised concerns about the PetroChina-Royal Dutch Shell $3.44 billion bid for Arrow Energy, calling for the foreign investment regulator to closely examine the deal because of China's involvement.

The Arrow board, which has recommended the joint bid by state-owned PetroChina and Shell, yesterday won the support of the company's largest shareholder, New Hope.

The deal also needs approval by Australia's Foreign Investment Review Board.

"If the Australian government wanted to take over Arrow Energy we would be asking more questions, so why don't we ask more questions when the Chinese government wants to," Senator Joyce said.

The finance spokesman is nervous about what happens if PetroChina looks to acquire Shell's share once the takeover is approved. "It creates confusion down the track because if Shell looks to sell its share down the track to PetroChina, your dispute becomes with another nation."

Senator Joyce's main concerns, however, involve the very notion of sovereign capital investments, and in particular such investing by a regime like China.

"I have got a problem with state-owned investments," he said. "You can never own shares in another government. They can run what they acquire at a loss indefinitely. They can shut down industries whenever they want."

Senator Joyce's concerns about the deal came as New Hope threw its support behind the bid.

The thermal coal company, which has a 16.7 per cent stake in Arrow, said yesterday it supported the transaction in the absence of a superior proposal.

New Hope will receive about $576.22 million for its stake in the coal seam gas company.

"At this stage we are just sitting back, and if someone comes in with a higher offer so be it, if not, we are happy to take the money," chairman Robert Millner said.

The revised deal announced this week will hand Arrow shareholders cash of $4.70 per share, plus one share in a new listed entity, Dart Energy, compared with the previous offer of $4.45 a share.

Shares in Arrow continued to fall yesterday, dropping 2.16 per cent to $4.99.

CS CSG, the 50:50 joint venture owned by Shell and a PetroChina subsidiary, will own Arrow's Queensland CSG assets and domestic power business, Shell's Queensland CSG assets, and its site for an LNG plant on Curtis Island, near Gladstone.

Analysts widely favoured the deal and most expected the transaction to get all regulatory and shareholder approvals.

RBS Morgans analyst Nik Burns said some shareholders may have expected to achieve a higher share price given the size of Arrow's potential resource.

"We believe they would have been in for a long wait for such an outcome to occur organically," he said in a report. "Major hurdles included the significant time it will take to develop and monetise the CSG resource, the ongoing capital requirements, and competition for gas contracts."