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Hong Kong-based CK Infrastructure has made a US$7.8-billion (A$13-billion) bid for Australia’s largest gas pipeline operator, APA, the target company said. The price represents a premium of 33 percent to APA’s closing price a day before the bid was made.
For now, APA is advising shareholders to wait as the big is only indicative. However, the board has granted CK Infrastructure and its partners in the bidding consortium access to information for conducting due diligence, suggesting it is in favor of the offer.
Australia ABC News reports that the Hong Kong company already has an extensive presence in the Australian energy market, including stakes in the two largest utilities in Victoria, Citipower and Powercor, and SA Power Networks, the single electricity distributor in South Australia. The Chinese company also holds a 19.3-percent stake in gas pipeline operator Envestra, which serves around a million households and businesses, operating 21,000 km of pipelines.
In terms of pipelines, APA is the second-largest operator in Australia, with 15,000 km to its name but servicing 1.3 million households and businesses, mainly along the eastern seaboard. According to ABC News, the CK Infrastructure bid will certainly attract the attention of the competition authorities given its stake in Envestra, as well as its majority ownership in yet another gas pipeline operator, DUET Group, which the Chinese company bought for US$5.6 billion (A$7.4 billion) last year.
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Although the bid is preliminary, CK Infrastructure has already addressed potential competition concerns on the part of the Australian Competition and Consumer Commission and the Foreign Investment Review Board. The company has offered to divest all of APA’s Western Australian gas pipeline assets before or following the acquisition.
APA’s shares jumped by 22 percent on the announcement of the bid but failed to reach the price level offered by CK Infrastructure. According to Australian media, this suggests doubts on the part of investors that the Hong Kong company would easily win ACCC’s and FIRB’s favor.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.