Chinese buy control of gas network
The move paves the way for it to gain full control of SP Ausnet, which operates electricity and gas networks in Victoria, along with the balance of the Jemena distribution assets in NSW and Queensland.
State Grid has agreed to pay $824 million for 19.9 per cent of SP Ausnet, leaving Singapore Power with a 31.1 per cent stake.
It also bought a 60 per cent stake in Jemena at a price estimated at more than $2 billion. Jemena has assets valued at $9 billion and substantial borrowings. The purchase gives it control of the Eastern Gas Pipeline which links Bass Strait with Sydney and the Queensland Gas Pipeline which runs from Roma to Gladstone and Rockhampton, along with other assets such as half of the ACT's energy supplier and recycled water assets in Sydney.
The transaction is subject to Australian government approval, although since it involves the transfer of equity between two foreign entities, both of which are government-controlled - State Grid by Beijing and Singapore Power by the Singapore government, via Temasek - this is expected to be straightforward.
State Grid bought a 41.1 per cent stake in South Australia's ElectraNet last year.
It has a target of having 20 per cent of its assets outside China by 2020. It already has investments in Portugal, Brazil and the Philippines, after missing out in 2008 on part of the New Zealand grid, which was sold to Hong Kong's Cheung Kong Infrastructure.
State Grid said existing management arrangements would remain in place, although since Singapore Power receives a range of fees from both SP Ausnet and the Jemena entities, these are expected to be unravelled over time.
This includes payment by SP Ausnet of 1 per cent of its gross profit as measured by earnings before interest, tax, depreciation and amortisation, along with a similar fee for capital spending along with payments based on the size of the asset base. With Jemena, $5.2 billion of its borrowings are from Singapore Power, which also receives management fees.
No "significant changes" to either the operations or management of the assets acquired were planned, it said.
"For their respective management and employees, it will be business as usual," it said, with SP AusNet to remain a listed entity.
The most recent pipeline transaction was the $423 million paid for the Moomba to Adelaide pipeline by Queensland Investment Corp.
Frequently Asked Questions about this Article…
State Grid paid an estimated $3 billion-plus to gain control of the main gas network across much of eastern Australia and also bought a 19.9% stake in SP AusNet. The purchases give it control of key energy assets (including Jemena pipelines) and increase its footprint in Australian electricity and gas infrastructure, which matters to investors watching ownership, management and future cash flows of those listed and regulated assets.
State Grid agreed to pay $824 million for a 19.9% stake in SP AusNet. It also bought a 60% stake in Jemena for an amount estimated at more than $2 billion, bringing the total outlay to roughly $3 billion-plus.
The Jemena purchase gives State Grid control of the Eastern Gas Pipeline (linking Bass Strait with Sydney), the Queensland Gas Pipeline (Roma to Gladstone and Rockhampton), half of the ACT's energy supplier, recycled water assets in Sydney and other holdings. Jemena's assets are valued at about $9 billion and the business carries substantial borrowings.
Yes, the transaction is subject to Australian government approval. However, because it is an equity transfer between two foreign government‑controlled entities (China's State Grid and Singapore Power via Temasek), the article says approval is expected to be straightforward.
State Grid said existing management arrangements would remain in place and that no "significant changes" to operations or management were planned. SP AusNet is expected to remain a listed entity and it was described as "business as usual" for employees and management.
Singapore Power will retain a 31.1% stake in SP AusNet but is expected to see some of the management and related fee arrangements unraveled over time. Historically Singapore Power received a range of fees from SP AusNet and Jemena, and Jemena had $5.2 billion of borrowings from Singapore Power.
The deal supports State Grid's target of having 20% of its assets outside China by 2020. The company already holds overseas investments in Portugal, Brazil and the Philippines and bought a 41.1% stake in South Australia's ElectraNet the previous year.
Yes. The most recent comparable pipeline deal mentioned in the article was the $423 million purchase of the Moomba to Adelaide pipeline by Queensland Investment Corporation.
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