The $11bn infrastructure owner APA Group has tapped investment bank Macquarie and law firm King & Wood Mallesons as part of its efforts to buy the Basslink Interconnector.
APA is understood to be in talks with the owner of the undersea cable, Keppel Infrastructure, after DataRoom revealed it was in the crosshairs of a suitor, tipped to be APA.
The group confirmed in a statement on Monday to the ASX it was in exclusive talks to buy the interconnector.
“APA has submitted a confidential, conditional and incomplete proposal to Keppel Infrastructure Trust regarding the potential acquisition.”
“While APA is in exclusive discussions, those discussions are ongoing and incomplete and no definitive agreement has been reached between the parties in relation to any transaction.”
APA said it had a strong balance sheet and $1.9bn of availability liquidity at June.
The revelation comes amid recent talk in the market that APA was preparing for an equity raising next month to fund an acquisition, with JPMorgan, Macquarie Group and Goldman Sachs on standby for the deal.
Basslink is a 290km underwater cable between Tasmania and Victoria. APA owns 15,000km of gas pipelines across Australia and delivers half the nation’s gas.
It has been looking at acquisition targets in the US and is said to have been competing in a number of auctions, as well as having its eye on targets here such as Woodside’s Pluto Train 2, with a $US3bn ($4.1bn) stake in the West Australian project potentially on offer.
Within the APA executive ranks is former Australian co-head of investment banking at Morgan Stanley, Julian Peck, who advised the Tasmanian government’s Hydro Tasmania on its negotiations over the interconnector.
Mr Peck is now APA’s head of strategy.
It comes as Kohlberg Kravis Roberts, Bain Capital and Oaktree Global Management are believed to be circling Basslink, as reported last week by this column, in the event that a deal with APA falls through.
Basslink’s current debt is about $635m and some of the original lenders to the subsea cable operator have been keen to retreat from the asset.
Owner Keppel Infrastructure was required to pay $38.5m to the Tasmanian government for major outages in 2015.
The interconnector, which incorporates a 12-core fibre-optic telecoms cable, links the Victorian and Tasmanian electricity grids.
Most of its cashflow is generated from a 25-year term agreement with Hydro Tasmania.
It is designed to protect Tasmania against the risk of drought-constrained energy shortages. It has an asking price of about $1bn.
There is now the prospect of a second interconnector from Bass Strait to Victoria, to be developed by TasNetworks.
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