Elliott Management closes in on coal assets

It is understood that Elliott is assessing several new opportunities in Australian coal.

Fresh from striking a deal to buy a half share in mining services giant Thiess for at least $1.7bn, Elliott Management is now believed to be closing in on coal assets in Australia, as lenders shy away from investing in the sector.

It is understood that Elliott is assessing several new opportunities in Australian coal and has amassed more debt in Western Australia’s Bluewaters Power Station.

Banks have been reluctant to lend to coalmining companies due to concerns about the impacts of the commodity on the environment. It could place Elliott in a strong position to pick up coalminers cheaply at a time when few buyers exist but demand for coal remains.

The theory is that Elliott, which has at least $US37.7bn ($51.7bn) of assets under management, will raise its own funds to buy other coalminers in Australia and use Thiess to service the assets and the companies.

Coal – particularly metallurgical coal – remains in demand for export despite the reluctance of banks to lend.

There are ripe pickings for any party keen to buy coal assets.

Mining giant BHP has been trying to sell its Mount Arthur thermal coal mine in NSW through Macquarie Capital, but has opted to run a dual track process for a sale or demerger of a $2bn-plus portfolio comprising that asset, plus a stake in its Colombian coal mine Cerrejon and two metallurgical coal mines in Queensland.

An acquisition would be ironic, given that Elliott is the activist investor that shook up BHP and lobbied for the sale of the miner’s US-based shale gas portfolio and for it to abandon its dual-listed structure.

This year, Coronado Coal was forced to embark on a deeply discounted equity raising for $250m to appease lenders.

Other coalminers in Australia under pressure from lenders include Whitehaven Coal, Peabody Energy, Centennial Coal and TerraCom, the Griffin Coal mine that powers Bluewaters, and also the Wiggins Island Coal Export Terminal.

With respect to Bluewaters Power Station, Elliott was originally part of several distressed debt investors that purchased loans from the lending syndicate to the coal-fired power station in Collie, 200km south of Perth.

The US-based fund had been working with Corrs Chambers Westgarth in its quest to control the destiny of the power station.

It is understood that a proposal by the lenders, which earlier had included other funds such as Oaktree Capital Management and Soliton Capital Partners, has recently been put to the owners of the asset that provides 15 per cent of the power to Western Australia, where they would pay down debt at a lower rate.

Owners Sumitomo and Kansai Electric are understood to have the option to accept the offer or see the power station placed into receivership or administration.