APA Group has announced it will acquire the remaining 50 per cent of the Diamantina Power Station project (DPS) from its project partner AGL for $151million.
DPS is a large scale gas fired power station that owns and operates two separate power facilities with shared infrastructure; the 242MW combined cycle gas turbine Diamantina Power Station and the adjacent 60MW open cycle gas turbine Leichhardt Power Station.
The acquisition will give APA 100 per cent ownership of the Diamantina and adjacent Leichhardt Power Stations.
DPS has been jointly developed by AGL and APA.
Financial Close is expected to be on Thursday, 31 March 2016 and AGL will continue to supply gas to DPS, under an existing long term gas supply contract.
DPS is underpinned by long term power purchase agreements with major electricity users in Mount Isa.
APA Managing Director, Mick McCormack said, “We are pleased to have had the opportunity to acquire the remaining 50 per cent interest in DPS and become the sole owner of this quality asset.
“The acquisition fits with APA’s growth strategy to build out our energy infrastructure business and to leverage our asset management, development and operational capabilities.
“DPS complements our existing energy infrastructure portfolio as it is connected to APA’s East Coast Gas Grid and is underwritten by two highly creditworthy counterparties.”
“APA is well positioned to continue to provide essential energy to businesses and communities in the mineral-rich North West Queensland region well into the future.”
Fully commissioned in November 2014, the Diamantina and Leichhardt Power Stations are modern, low emission, efficient power stations, delivering competitive and reliable energy supply.
They are remote power stations which are unconnected to the National Electricity Market.
DPS receives gas via APA’s Carpentaria Gas Pipeline and supplies electricity under long term contracts with Glencore’s Mount Isa Mines and the Queensland Government owned Ergon Energy, the two main electricity users in the region.
“Importantly, the acquisition enables us to further diversify APA’s revenue base and deliver increased returns to our securityholders,” Mr McCormack said.
The acquisition satisfies APA’s investment criteria of secure long-term revenue and returns, commensurate with the risk undertaken.
DPS will be immediately accretive on an operating cash flow per security basis. APA will fund the acquisition with a mix of existing cash and available undrawn committed corporate debt facilities.
The total funding requirement is approximately $550million, 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 $700million, 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 $1,335million
- Net interest cost is expected to fall towards the upper end of the current guidance range of $500million to $510million
- 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.