APA Group named preferred bidder in Basslink contest

Basslink Repair Vessel Ile De Re in dock at Point Henry. Picture: Alison Wynd

The $12.5bn APA Group appears to have won competition to buy the undersea power cable Basslink, fending off competition from private equity with a price of more than $526m.

DataRoom understands that APA has been named the preferred bidder in the competition, although a deal is yet to be signed.

The asset has been up for sale through its receiver FTI Consulting, adviser Houlihan Lokey and law firm King Wood Mallesons and final bids were due in the middle of August.

Working for APA is understood to be Macquarie Group, while customer Hydro Tasmania is believed to be advised by Morgan Stanley.

It is understood that APA’s offer included a deal with the Tasmanian state government and the state owned Hydro Tasmania, a key customer for the power cable, in relation to contract pricing.

Gas pipeline owner APA was competing with a consortium headed by Merrick Howes, a former executive at Anchorage Capital Group, while Pacific Equity Partners had been running the ruler over the business.

Mr Howes’ company that has been trying to buy Basslink is called Aviron Capital and is advised by Faraday Associates.

However, APA was always considered the front runner to buy Basslink after it bought the $526m of senior debt in APA Group in the past year.

Also weighing in its favour was its strong track record of operational expertise, given it already operates the Murraylink electricity cable between Victoria and South Australia and the Directlink electricty cable between NSW and Queensland.

An announcement on the sale late on Wednesday after DataRoom revealed earlier in the day online that APA had won the contest, Vaughan Strawbridge of FTI Consulting said that the process was highly competitive and after selecting APA as the preferred bidder, it had received a binding offer for the restructure and recapitalisation of Basslink.

FTI was now moving to final documentation, which included agreeing key operating agreements with stakeholders of Basslink, including a deed of company arrangement to effect the restructuring being proposed to creditors for approval.

Basslink collapsed into receivership in November.

 

Owner Keppel Infrastructure Trust placed the asset into voluntary administration with EY, and receiver KPMG was initially appointed before it was replaced by FTI Consulting in June.

Basslink’s overall debt is understood to be close to $626m and it is understood APA’s offer is at least the value of its $526m in senior debt.

The receivership followed claims by the Tasmanian government and Hydro Tasmania of damages worth $105.3m from an outage of the power and internet connection with the mainland in 2015.

The undersea cable provides two-way access of 500MW of power between Tasmania and the mainland.

The 370km high voltage, direct current electricity interconnector comprises physical connection between Tasmania and Victoria for not just power, but internet services.

In addition to smoothing Tasmania’s own power grid, it plays a role in stabilising the National Energy Market when power demand fluctuates in the summer months.

According to a disclosure in October last year to the Singapore exchange, KIT’s Australian subsidiaries had a standstill agreement for its loans that expired in late October.

It is understood that FTI initially received about 10 expressions of interest for Basslink in the sale process before the competition narrowed.

Meanwhile, APA Group has been acquisitive in the past year in efforts to diversify away from gas to appease institutional investors’ preference for companies that produce clean energy from assets like wind or solar farms.

But APA’s share price has gained this year on the back of the rising oil price, brought about by Russia’s war in Ukraine that has resulted in sanctions imposed by western nations on Russia, a major supplier of oil and gas to Europe.

APA’s acquisition targets has included AusNet.

It entered a bidding contest for Australian listed electricity transmission and distribution business last year with Brookfield, which bought the business with its Canadian backers for $9.6bn.

It is competing to develop the first of the Renewable Energy Zones, Central West and Orana, in NSW and has also weighed the acquisition of other renewable energy assets in Australia and New Zealand.

It has also considered acquisitions in the North America market for some time, but announced last month that it would put its North America expansion strategy to bed.

Chief executive Rob Wheals’ unexpected departure was announced last month on the back of the North America strategy change, with a new replacement yet to be announced.