Brookfield loses interest in Shell’s Curtis Island LNG asset sale

Shell is one of three major oil and gas companies offloading assets in Australia, along with Chevron and ExxonMobil. Picture: AFP

Global buyout fund Brookfield is likely to have walked away from an acquisition of Shell’s $US2.5bn ($3.5bn) worth of QCLNG assets on offer due to the low returns and its tax structure, say sources.

First round bids have been received for the 26.25 per cent stake in the infrastructure assets of Shell’s Curtis Island LNG plant in Queensland and the understanding is IFM bid for the asset without Brookfield, which was earlier said to be its partner.

It is now understood that Brookfield has its eye on opportunities elsewhere.

The QCLNG deal requires writing a large cheque, and while the thinking is that Brookfield has more money than it needs for the acquisition, it does not want to allocate so much to the one investment.

It is now understood Hong Kong’s CKI submitted an offer and is seriously pursuing the opportunity with help from adviser Morgan Stanley and US-based GIP is also in the mix.

However, CKI is expected to require a highly level of certainty that they can gain approval from the Foreign Investment Review Board to buy the assets to remain in serious contention.

Interestingly, there has been some suggestion that there could be some Korean investor interest in the asset, although some say that the returns would be too low for South Korean funds.

Bidders are due to be short-listed in about two weeks.

The offering that is being sold through Rothschild is estimated to be worth about US$2.5bn and some believe that the ultimate competitor will be the owner Shell, given that many other companies may not be able to match its cost of capital.

For that reason, there is a chance that the energy giant could retain the assets.

Buyers will receive a fixed annual cash income for 15 years that comes from fees for using the plant, which is not linked to the oil price, commodity prices or throughput.

Shell is one of three major oil and gas companies offloading assets in Australia, with Chevron hiring investment bank UBS to sell its 16.6 per cent stake in the North West Shelf LNG plant in Western Australia and ExxonMobil working with JPMorgan to divest its gas assets in the Bass Strait worth about $US3bn.

The thinking is that the global groups will redeploy the funds raised from their sales elsewhere.