APA, Fortescue take the lead as Alinta raises stakes in asset sale

Company News

by Peter Milios

Alinta Energy is now understood to be set on selling all of the West Australian assets it has on offer, rather than just 80 percent stakes, and the understanding is that offers have landed between $1 billion and $1.5 billion.

APA (ASX:APA) and Fortescue Metals (ASX:FMG) are in the final stage of the race. There have been suggestions that Macquarie Capital and joint venture partner BP have fallen away.

"There is intense competition for the Alinta assets, and APA and Fortescue are currently leading the race," said an industry insider. "Macquarie Capital and BP, on the other hand, appear to have dropped out of the running."

Other potential contenders, such as I Squared Capital, Atco, or TransAlta, may still be in contention, but their involvement is yet to be confirmed.

It is understood most of the value of the offering is in the two power stations being sold by Alinta in WA – Port Hedland and Newman, a distillate power station with a battery storage system. The latter provides energy via a 220-kilovolt transmission line to the Roy Hill mine site in the Pilbara.

"The Port Hedland power station, along with the Newman power station and its battery storage system, represent the significant value in Alinta's offering," noted a market analyst familiar with the matter. "These assets play a crucial role in supplying energy to the Pilbara region, particularly for major customers like Hancock, BHP, and Fortescue."

The Port Hedland station has five 42-megawatt gas-fired turbine units, which play a vital role in providing electricity to the Pilbara region.

In addition to the power stations, Alinta's 11.8 percent stake in the 1380km Goldfields gas pipeline has attracted attention. The pipeline transports natural gas from Carnarvon basin producers in the northwest of the state to Kalgoorlie in the Goldfields.

"Industry experts estimate the stake in the Goldfields gas pipeline to be worth between $100 million and $200 million," revealed a source close to the negotiations. "APA, which already owns the majority of the pipeline, holds pre-emptive rights to acquire Alinta's interest."

While the remote energy grid is considered a less valuable asset, it is still estimated to be worth around $50 million.

"APA, with the support of Barrenjoey and Morgan Stanley, is making a strong bid in the contest and is currently viewed as the frontrunner," stated an industry analyst.

Final bids for the assets are expected to be submitted in the middle of next month, marking a crucial stage in the competitive process.

Alinta conducted management presentations to four parties during the second stage of the competition three weeks ago, but recent speculation suggests that only Fortescue, advised by Citi, and APA remain in the race.

"The offering has proven to be highly complex, attracting significant interest from potential buyers," remarked a spokesperson for Alinta. "We are currently working with Goldman Sachs to navigate the complexities and ensure a successful sale."

If APA succeeds in acquiring the Alinta assets, it would strengthen their capabilities in transmission management, as they already possess a transmission network of approximately 200 kilometres, with potential for further expansion and acquisition.

Analysts at Macquarie recently commented on APA's financial capacity, stating that the company has around $2 billion of debt capacity, which would reduce the need for additional equity financing.

The sale of Alinta's assets would not only provide a significant opportunity for the successful buyer but also contribute to the energy landscape in Western Australia, benefiting major customers in the mining region and supporting future infrastructure development.

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