Wesfarmers among suitors for Alinta assets, bids due this week

Chief executive Rob Scott addresses shareholders at the Wesfarmers AGM in Perth last year. Picture: David Berrie

Perth-based conglomerate Wesfarmers is understood to be among the suitors looking to acquire Alinta Energy’s Western Australia assets.

It comes with first round bids for the assets due on Friday in the Goldman Sachs-run competition.

Sources say that the motivation of the $58bn listed conglomerate is to gain additional sources of power and would be compelled by the renewable energy component of the offering.

In Western Australia, Wesfarmers owns Kleenheat Gas that sits within its Chemicals, Energy and Fertilisers unit.

It retails natural gas to Western Australia customers between Geraldton and Busselton, including the Perth metropolitan area, and supplies LNG to a broad range of residential, commercial, forklift and industrial customers across the state and in the Northern Territory.

A large number of parties are believed to be lining up for Alinta’s business, including Pacific Equity Partners, which owns Zenith Energy, and the business interests of Gina Rinehart, which owns Hancock Energy and Hancock Prospecting.

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.

Also in the competition is private equity firm EQT and Macquarie Group, which would partner with another suitor, likely to be BP, which is also looking.

Macquarie already partners with BP on its Australian Renewable Energy Hub in the Pilbara.

The Australian-listed APA Group is supposedly gunning hard for the business and has tapped Barrenjoey and Morgan Stanley as its advisers.

Queensland Investment Corporation is expected to be looking through its Pacific Energy business, while CKI is believed to be bidding through Energy Developments, although the Chinese-owned group may face opposition from the Foreign Investment Review Board.

There’s also a view that billionaire Andrew Forrest will be around the hoop – either through his Squadron Energy or through Fortescue Metals.

Investment bank Citi is mandated by a party, and sources have been pointing to either QIC or Brookfield.

Based on the level of interest, some think that private equity firms, and even possibly APA, will not be competitive on price, going up against parties with a cheaper cost of capital.

Yet APA is highly motivated 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.

APA already jointly owns a WA pipeline with Alinta.

Suitors have had access to a data room to assess the offering in recent weeks.

On offer is the majority of Alinta Energy’s Pilbara operations, with Alinta retaining operational control and a minority stake.

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.

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.