BREAKFAST DEALS: Stalling TRUenergy

TRUenergy's anticipated float gets put on the back burner, while Gina Rinehart looks to a US bank for Roy Hill funding.

Hopes that Hong Kong’s CLP Holdings would rescue Australia’s IPO market for the year 2012 with a float of TRUenergy have been dashed. Not until next year, says CLP, most likely. Meanwhile, Gina Rinehart’s Hancock Prospecting is in talks with America’s official export credit agency about lending to Roy Hill. Elsewhere, Sundance Resources has reportedly made some headway with suitor China Sichuan Hanlong Mining, but concerns persist however for Nathan Tinkler’s Whitehaven Coal plans.

TRUenergy, CLP Holdings

The chief executive of Hong Kong’s CLP Holdings, Andrew Brandler said the float of TRUenergy has been delayed until next year for "various reasons,” but one sticks out above all others – equity markets.

Speaking to The Australian Financial Review, TRUenergy managing director Richard McIndoe said he hopes investor appetite will improve in the next 12 months.

"The issue is that the market is very challenging out there for any new equity issue, especially one of size,” McIndoe told the newspaper.

Many market onlookers have followed the movements at CLP in the hope that a successful $3 billion float of up to 40 per cent of the TRUenergy, the largest since QR National in 2010, might shock the market out of its doldrums.

Unfortunately, that’s not going to happen anymore, at least this year. Unless something magical happens, the IPO Australian market looks like it’s going to officially suck (by historical standards) for the entirety of 2012, possible the first half of 2013 as well.

Pessimists might take comfort from the fact that there are two other issues surrounding the decision to delay besides the equity markets.

CLP handed down its first half results yesterday to the Hong Kong Stock Exchange and it quickly became clear that TRUenergy, to be renamed EnergyAustralia, didn’t fare so well from the flooding at Yallourn.

Combined with the lower electricity derivative prices, TRUenergy’s operating earnings fell to $HK268 million ($32.8 million) from $HK1.19 billion.

Launching a company with bad weather is not ideal. But Brandler also had some thinly veiled swipes for the federal government by using that turbulent phrase, "regulatory risks”.

"We've had the carbon legislation come in, there's a lot of uncertainty how that is going to pan out, state-based regulation regimes, there's uncertainty around that, the Prime Minister's comments, etcetera,” Brandler told his shareholders.

"They've all raised a degree of heightened regulatory risk that we see in the Australian market."

Poor market conditions, a speedbump in the latest set of results and regulatory uncertainty. Why would CLP want to float TRUenergy right now?

Hancock Prospecting, United States' Export-Import Bank

Gina Rinehart’s Hancock Prospecting has entered into discussions with the Export-Import Bank of the United States about contributing to the Roy Hill iron ore project.

Roy Hill is approaching a financing deadline at the end of the year and it looking far and wide to find lenders. Rinehart is looking for another $7 billion.

According to media reports, Rinehart’s executives have met with Ex-Im Bank president Fred Hochberg about the possibility of participating in the $10 billion project.

"Roy Hill is holding early discussions with a number of potential financiers, and expects its eventual funding package will be drawn from a diverse range of Australian and international sources,” an email statement from a company spokesperson said, according to Fairfax.

You might remember Ex-Im Bank from its deals with Origin Energy and NewSat. The official export credit agency of the US has been expanding its interests in Australia recently, from $US500,000 four years ago to an anticipated $US5 billion this year.

Sundance Resources, China Sichuan Hanlong Mining

Keep an eye out for a release to the market from Sundance Resources updating the market on its takeover talks with China Sichuan Hanlong Mining, once worth $1.4 billion.

Media reports have indicated that Hanlong has already backed down from its threat to reduce the offer to 40 cents a share, from 57. Apparently they’re back up to 45 cents.

It’s being widely reported that Sundance isn’t interested in anything less than 50 cents a share.

Who has the leverage here?

Sundance owns the Mbalam iron ore project in Central West Africa and has done about all it needs to on the regulatory front to make a terrific mine. What it doesn’t have is cash and Mbalam needs an estimated $4.7 billion.

China has the money that Mbalam needs and needs cheap iron ore for its steelmills.

Since discussions begun between the two companies began the iron ore price has dropped, lessening China’s need for the moment to pay top dollar for assets.

For Sundance to have any real sway over the final outcome, it’ll need to make the case that the iron ore price will rebound enough to make a significant takeover offer now worthwhile.

Alternatively, it can try to convince Hanlong that there’s a good chance of another bidder emerging, which would negate the need to sell for what it deems is a lowball offer.

Mulsanne Resources, Blackwood Corporation, Whitehaven Coal, Nathan Tinkler

Those who don’t believe Nathan Tinkler can get the job done privatising Whitehaven Coal got a boost yesterday from the movements at one of his lesser-known vehicles.

Tinkler’s private investment vehicle Mulsanne failed to pay $28.4 million to Blackwood Corporation as part of a share placement agreed to by shareholders on July 12.

The deadline had already been extended, but Mulsanne couldn’t meet it and Blackwood has denied a further extension.

These two companies are small potatoes compared to Whitehaven. The question being posed is whether Tinkler’s troubles with Blackwood reveal something about Tinkler’s finances and his capacity to get the Whitehaven deal done.

Whitehaven shares didn’t react too badly to the news, slipping 1.5 per cent against a flat market.

It’s impossible to tell, we don’t have access to Tinkler’s bank account. But it’s something worth watching.

Wrapping up

While breadmaker Goodman Fielder didn’t have a deal to announce with its results yesterday.

However, chief executive Chris Delaney said the company is in exclusive talks with an unnamed bidder, having received "a number of offers” for its Integro edible oil and fats business.

Also out of yesterday’s news, condom and glove maker Ansell reported a solid profit of $130 million and added that it’ll have a warchest of about $200 million for acquisitions next year.

Elsewhere, The Australian reports that fund managers are hearing about ideas for a Fairfax Media breakup.

This is hardly new, but this reoccurring story is born out of the frustration from the poor M&A market. It’s a market beaten down for the same reasons as the IPO market.

Splitting up Fairfax would be a risky play as valuing media assets is difficult thanks to the decline in traditional advertising.

Still, anyone considering a run at Fairfax will be watching the company’s annual results next week where it’s expected a big writedown is on the cards.

And finally in mining, Singapore’s LionGold has secured more than 90 per cent acceptances for its Castlemaine Goldfields bid and intends to compulsorily acquire the rest.

The two-for-nine, $55 million scrip offer landed in April and, slowly but surely, LionGold won its prize.

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