Australia’s major gas pipeline owner APA Group has edged further into an integrated structure by paying $151 million to buy AGL Energy out of their jointly owned Diamantina power plant at Mount Is in northwestern Queensland.
The deal, announced to the ASX yesterday, comes as AGL Energy sells off non-core assets to tighten its focus on retailing and customers focused businesses such as solar power.
APA, which owned 50% of the Mt Isa power station, held a pre-emptive right to AGL’s half-share. It had already suggested that it was interested in buying AGL’s stake.
AGL will continue to supply gas to the power station, which is a 242 megawatt combined cycle, and a 60 megawatt open cycle gas turbine next door in Mount Isa.
APA is also in the process of a takeover bid for the rest of Ethane Pipeline Income Fund, which owns an ethane gas pipeline that runs from central Australia to Botany in Sydney.
APA shares fell 0.1% at $8.50 while AGL are down 1% at $18.23.
APA said the deal will boost its earnings and told the ASX in yesterday’s announcement that it will fund the acquisition with a mix of existing cash and available undrawn committed corporate debt facilities.
"The total funding requirement is approximately $550 million, including transaction costs and replacement of the project finance facility at the asset level. The acquisition of AGL’s equity interest equates to an enterprise value for DPS of approximately $700 million, at an EBITDA multiple of approximately 8 times FY2017 earnings.
“As a result of this acquisition, APA’s full year guidance for FY2016 has been updated as follows: EBITDA is upgraded to be in the range of $1,300 to $1,335 million (from $1,275 million to $1,310 million); Net interest cost is expected to fall towards the upper end of the current guidance range of $500 million to $510 million; and FY2016 total distribution guidance is unchanged – i.e., expected to be in the order of 41.5 cents per security, representing a 9.2 per cent increase on the previous year,” APA told the ASX.