The $773 million purchase of the Basslink power cable, according to APA Group chairman Michael Fraser, represents a significant opportunity for the owner of a gas pipeline to expand its electricity transmission business and contribute more to the switch to clean energy.
The 370km Victoria-Tasmania cable will be purchased from receivers as part of the agreement, which was flagged on Monday and confirmed by APA late on Tuesday. When APA’s contract with Hydro Tasmania expires on June 30, 2025, it plans to convert the asset into a regulated asset. APA won the asset despite competition from other bidders.
“Our focus is to put Basslink on a sustainable footing and ensure that it plays a role in bringing new renewable generation onto the grid – as Australia winds down its reliance on coal – as well as providing energy security to Tasmania,” In Sydney at the annual general meeting, Mr. Fraser addressed the shareholders.
A large portion of the $877 million construction cost of Basslink’s acquisition price will be used to pay back the venture’s creditors, including $648 million in senior secured debt. The money will be provided by the current debt facilities held by APA, which has already spent $587.4 million purchasing Basslink’s bank debt.
Just before noon, APA shares were up 3.2% at $9.87.
The announcement of the acquisition coincides with the Albanese government’s agreement to pay for 80% of the cost of building Marinus Link, a second interconnector between Tasmania and Victoria.
Marinus Link will receive a minimum of $2.5 billion from Canberra, with the remaining 20% to be covered equally by the Commonwealth, Victorian, and Tasmanian governments.
Offshore Wind Growth
APA acting CEO Adam Watson, who is filling in after the retirement of Rob Wheals, described Basslink as “a great business, with great people” and said it would help Tasmania succeeds in achieving its goals for growth in the production of renewable energy.
“We’ve acquired a set of capabilities that will position us well to support Tasmania’s renewable energy plans, as well as the connections necessary to support the development of new energy solutions, such as offshore wind farms, more broadly across Australia,” At the AGM, Mr. Watson said.
He asserted that APA had a company with the knowledge to link offshore wind farms to the grid.
In the $10 billion battle to acquire AusNet Services last year, APA was outbid by Canadian juggernaut Brookfield, forcing it to turn to alternative strategies to support its push into electricity infrastructure, which is anticipated to benefit from the move across the economy to reduce carbon emissions.
Later, it abandoned a long-standing plan to buy a US energy infrastructure company in order to refocus on expansion prospects in the rapidly changing Australian energy market.
Mr. Fraser also reaffirmed APA’s recommendation that full-year distributions to shareholders for 2022–23 should total 55 cents per security, up from 53 cents the previous year.
“Our balance sheet remains strong and ensures we are well positioned to pursue growth opportunities and ultimately create sustainable, long-term value for you, our security holders,” he told the AGM.
Reference: https://www.afr.com/companies/energy/apa-says-basslink-will-beef-up-role-in-energy-transition-20221019-p5bqy2