The $1.7bn coal port operator Dalrymple Bay Infrastructure appears to be warming the market up for acquisitions, with some questioning whether a BHP-related asset or the Port of Newcastle could be within its sights.
While delivering a 10.6 per cent increase in net profit for the six months to December 31 to $81.8m, the company said it was identifying opportunities for diversification through acquisitions, where value could be created through its “competitive advantages” and businesses which had a similar risk profile to the existing business.
Some market experts believe an obvious target would be the nearby Hay Point Coal Terminal controlled by BHP and Mitsubishi, which services coal mines in central Queensland’s Bowen Basin.
Dalrymple Bay Infrastructure owns the Dalrymple Bay Coal Terminal, which is the other port servicing the area. Synergies could be extracted through owning both.
They are both at the Port of Hay Point, 40km south of Mackay, and sources estimate BHP and Mitsui’s asset would be worth at least $1bn.
For the financial year to date, the Hay Point Coal Terminal has handled almost 51 million tonnes of coal, compared to DBCT, which has handled 61.1 million tonnes in 2023, and has a $1.7bn equity value with $1.7bn net debt.
BHP and Mitsui may take the view that, with the capital spending required, they may not want to own the port in the long term, creating the risk it becomes a stranded asset.
Dalrymple Bay Infrastructure could increase capacity by bringing through more tonnage or trains, or both.
Brookfield listed the business in 2020 and retains a 49 per cent stake, but the Brookfield Infrastructure fund which owns the infrastructure asset is listed in Toronto and has no urgency to sell.
Any deal could be partially funded by Brookfield, which has found the port to be an attractive investment from a financial perspective.
The company’s market value when it listed was $1.3bn, with shares at $2.57 (they are now at $3.77).
Soaring coal prices and global export demand have offered lucrative returns with a yield of about 7 per cent, despite the institutional investor representation on the register being limited because of the adversity of many to holding coal-related assets due to concerns about its impact on the environment.
The DBCT is one of Queensland’s major metallurgical coal export facilities. It handles about 20 per cent of the world’s seaborne metallurgical coal trade.
The other possible target could be the Port of Newcastle, jointly owned by Macquarie Asset Management and China Merchants.
Macquarie is almost surely a seller within four years, with the TIF fund which owns the asset nearing the end of its life.
The pair purchased the port in 2014 for $1.75bn. It handles almost 5000 ship movements and 166 million tonnes of cargo annually.
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