Brookfield will explore IPO of Dalrymple Bay Coal Terminal

The DBCT is one of Queensland’s major metallurgical coal export facilities. Picture: Daryl Wright

Global private equity firm Brookfield is moving to explore a potential initial public offering of its $2bn-plus Dalrymple Bay Coal Terminal that has been on the market through Bank of America and HSBC.

Brookfield will weigh a potential float on the back of the public market investor’s interest in defensive and stable yielding investment opportunities.

The float plans will unfold as Brookfield also moves forward with its sale in a dual track process.

The DBCT is one of Queensland’s major metallurgical coal export facilities, where only between 20 per cent and 30 per cent of the coal leaving the terminal is of the thermal variety.

Indicative bids for the asset are due on February 7.

An investor road show has been underway over the past month and binding bids are due around the middle of next year.

So far, market observers are betting that the New York-based Global Infrastructure Partners is the front runner to buy the terminal because it is known to be an eager acquirer.

It recently broke a record for its fund raising efforts by securing an eye-watering amount – between $US20bn ($29bn) and $US22bn.

The Wall Street Journal recently reported that the record-breaking fundraising by GIP was the latest demonstration of the red-hot appetite for an asset class that has delivered strong returns for investors in recent years and is perceived as less risky than other strategies such as leveraged buyouts.

Working for CK Infrastructure, which is also thought to be interested, is Morgan Stanley, while its American rival JPMorgan is also understood to be advising a suitor.

There is also apparently some local interest in the asset.

Parties are in the process of signing non-disclosure agreements to gain information about the terminal ahead of embarking on due diligence.

Brookfield secured control of the asset during the financial crisis in 2009 when it embarked on a $1.8bn recapitalisation of Babcock and Brown Infrastructure, which essentially comprised the DBCT.

Brookfield itself is currently looking to raise $US20bn for its latest infrastructure fund, according to Preqin.

The Toronto firm closed on a $US14.5bn fund earlier this year,.

The amount of so-called dry powder infrastructure funds had at their disposal stood at $US172bn - a record high - as of December 2018, according to Preqin.

The DBCT handles approximately 20 per cent of the world’s seaborne metallurgical coal trade and will be sold with take or pay contracts in place.

The operations are outsourced to a company owned the terminal’s mining customers, which means that all operating costs are a direct pass-through with no cost for the terminal owners, making the asset more akin to a regulated utility with a low operating risk profile.

The move to offload the assets follows Brookfield’s sale of its half-share in Genesee and Wyoming Australia to joint venture partner MIRA for about $1bn.