The Andrew Forrest-led iron ore miner Fortescue Metals is understood to have hired investment bank Citi in a quest to buy Alinta Energy’s Western Australia energy assets, tipped to be offloaded for up to $1bn.
Investment bank Goldman Sachs has been running the sale process, with first round bids due by Friday May 19, and it has attracted some of the biggest names in corporate Australia.
Macquarie Group is bidding with BP, APA Group, advised by Barrenjoey and Morgan Stanley is lining up, while Wesfarmers and the business interests of billionaire Gina Rinehart are also believed to be around the hoop.
Alinta is understood to count the $63bn Fortescue and Ms Rinehart’s mining heavyweight Hancock as among its customers.
Suggestions are Wesfarmers, which owns Kleenheat Gas, is interested as part of its search for additional energy for its business interests, while the APA Group is a joint owner on the key pipeline asset, for which it has pre-emptive acquiring rights.
So far, the suggestions are that Macquarie, which is bidding with BP, and the APA Group are serious contenders.
Yet the interest from financial groups that had been looking, such as pension funds, is believed to be waning, with the strong level of appetite from industry and operational players making it difficult for them to compete on price.
Suggestions so far are that the portfolio of assets on offer is set to sell between $500m and $1bn.
Chow Tai Fook is selling at least a majority of Alinta Energy’s Pilbara operations.
Chief among them is the Newman Power Station, which includes a gas and distillate power station with a battery storage system.
It provides energy through a 220 kilovolt transmission line to the Roy Hill mine site, also in the Pilbara.
The power station has supplied the region with power for more than 40 years.
It also has an 11.8 per cent stake in the 1380km Goldfields Gas Pipeline, transporting natural gas from Carnarvon basin producers in the northwest of the state to Kalgoorlie in the southeast that is part of the offer.
The remainder of the pipeline is owned by APA.
The power station is fired by gas and diesel but the investment is pitched as an energy transition story with the asset moving towards cleaner fuel.
It accounts for about 15 per cent of Alinta’s earnings before interest, tax, depreciation and amortisation.
Some contracts were set to expire last year and have been renewed.
In terms of other suitors, Zenith Energy is looking closely at the Alinta portfolio.
The company specialises in tailored remote off-grid power generation and urban microgrids, with a focus on renewable energy generation, and it is owned by Pacific Equity Partners.
DataRoom understands that Zenith has been in talks with a pension fund about a joint bid for Alinta.
But the view among some is that while the Alinta offering is a natural extension of Zenith’s business involving remote gas generation, it does not bring anything else into the region, so would have fewer synergies than other contenders.
Major miners like Hancock and Fortescue are customers to Alinta and were always expected to line up.
Other parties named to have been looking at Alinta include the private equity firm EQT, which has an infrastructure fund.
Expectations have been that EQT would partner with another suitor.
There’s been a lot of focus on the $12bn APA Group in the competition under its recently appointed boss Adam Watson.
Some believe it is highly motivated to buy the offering after missing out on the opportunity to develop the Central-West Orana Renewable Energy Zone in NSW that was won by ACE Energy, which includes Acciona, Cobra and Endeavour Energy.
Should APA exercise its pre-emptive rights to buy it, it is believed that the current customer contracts would remain in place.
DataRoom understands that working with Hancock on Alinta is Highbury Partnership, which advised on the $4bn acquisition by Chow Tai Fook of Alinta Energy in 2017 from TPG Capital.
Macquarie partners with BP on its Australian Renewable Energy Hub in the Pilbara, but is not believed to be bidding through that vehicle which includes other stakeholders.
Others likely to be on the edges of the contest are Queensland Investment Corporation through its Pacific Energy business and CKI through Energy Developments.
Suitors have had access to a data room to assess the offering in recent weeks.
As of June 2020, Alinta was generating $3.4bn in revenue and $239m of net profit.
Alinta controls 85 per cent of the WA retail energy market and a raft of gas and coal-fired power assets, as well as some renewable energy assets.
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