Basslink collapse likely to resurrect APA Group’s bid

Basslink’s debt is understood to be close to $700m and, while it was expected some lenders may sell debt in the asset, the belief now is that they are likely to retain the loans.

Australian gas pipeline owner APA Group is expected to make a second attempt to buy Basslink after its collapse into the hands of receivers on Friday.

APA had been in exclusive talks to buy the operation with help from Macquarie Capital, but was said to have walked away.

However, with the asset now in the hands of its lenders, and suggestions it has abandoned its pursuit of $10bn electricity asset owner AusNet, APA will no doubt be taking the view that it can gain control of the undersea cable at a lower price.

Basslink’s debt is understood to be close to $700m and, while it was expected some lenders may sell debt in the asset, the belief now is that they are likely to retain the loans.

This could deter private equity groups such as Oaktree, Bain Capital and Kohlberg Kravis Roberts that earlier showed interest in the hope of securing the loans at a discount.

Now the primary focus for the lenders will be to get their money back, which may mean APA could pick up the asset for around $700m.

When the cable was up for sale some time ago, the price expectation of owner Keppel Infrastructure Trust was understood to be about $1bn for the 290km underwater cable between Tasmania and Victoria.

Working as voluntary administrators are Adam Nikitins, Stewart McCallum and Colby O’Brien from EY, while receivers are Peter Gothard, Peter McCluskey and Brendan Richards from KPMG.

In a statement on Friday, Keppel said a standstill agreement with its lenders had expired.

Basslink had been reviewing its position and had reached out to the Tasmanian government and the National Australia Bank.

Last year, it was ordered to pay substantial costs over cable outages in 2015, which are now due. This included a payment of $46.7m including costs to the Tasmanian government, and the government-backed Hydro Tasmania last month claimed it was owed $33.3m from Basslink, although the cable operator disputes this.

Hydro Tasmania also asked for $25.3m in respect of arbitration costs awarded.

Keppel Infrastructure later launched a separate sale process with assistance from advisory firm Rothschild.

The interconnector links the Victorian and Tasmanian electricity grids, but also incorporates a 12-core fibre-optic telecoms cable and will remain in operation while in receivership.

Most of its cashflow is generated from a 25-year term agreement with Hydro Tasmania.

There is now the prospect of a second interconnector from Bass Strait to Victoria, to be developed by TasNetworks, which deterred buyers in an earlier sale process.

APA’s renewed interest in the asset comes amid further speculation it has stopped working on a plan to buy AusNet after making a cash-and-scrip proposal worth about $10bn.

Rival bidder Brookfield lifted its bid price to more than $10.1bn cash. Brookfield has Foreign Investment Review Board approval for an acquisition.