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APA Expects Offers for Australian Gas Pipeline in Next Week

APA Group, whose pipelines deliver more than half of Australia’s natural gas, expects to receive final bids shortly for a pipeline that may fetch about A$400 million ($420 million).

APA trimmed the list of bidders to a “small handful” of companies and expects binding offers “in the next week or so,” Managing Director Mick McCormack said in an interview in Sydney. The company agreed to sell the Moomba to Adelaide Pipeline System to get regulatory approval for its takeover last year of Hastings Diversified Utilities Fund.

“We’re comfortable with the numbers we’ve been shown,” McCormack said yesterday, declining to name any of the companies. “It could be an entry point into Australia for an overseas player. It could be a fund manager who wants to invest directly in those sort of assets.”

APA, with a gas pipeline network spanning more than 14,000 kilometers (8,700 miles), plans to focus on expansion of existing assets, investing about A$300 million a year, after acquiring Hastings Diversified. The company may receive about A$400 million for the 1,185 kilometer pipeline system stretching from the Cooper Basin in central Australia to Adelaide, the South Australia state capital, CIMB said in a March 26 report.

“We don’t need to buy anything,” McCormack said. “The company is in a position with its balance sheet that if an opportunity does come up, we’ve got the capacity to look at it. Any opportunity has got to add value.”

LNG Infrastructure

The Sydney-based company is interested in buying infrastructure assets tied to about $65 billion of liquefied natural gas projects on Queensland state’s Curtis Island if the developers of those plants decide to sell, McCormack said.

BG Group Plc, the U.K.’s third-largest oil and gas producer, is working with Goldman Sachs Group Inc. as it considers selling pipelines and other infrastructure at its LNG venture, two people with knowledge of the matter said in February.

Origin Energy Ltd., developing a neighboring project with ConocoPhillips, also may sell infrastructure assets, including pipelines, its Managing Director Grant King said in February. Santos Ltd., led by Chief Executive Officer David Knox, said in February that it didn’t plan to sell infrastructure assets connected to its Gladstone LNG venture.

BG doesn’t comment on speculation, the company’s Australian business said in an e-mail today. Origin’s Sydney-based spokeswoman Anneliis Allen declined to comment, referring to King’s comments in February.

“We’re experts in operating pipelines,” McCormack said. “So whether it’s Grant King or David Knox or BG, they will want the certainty that they are going to get the gas delivered to Curtis Island and that’s where APA’s skills come in.”

Political Uncertainty

Shares of APA rose 0.5 percent to close at A$6.16 in Sydney, valuing the company at A$5.1 billion. That compared with a loss of 0.2 percent for the benchmark S&P/ASX 200 Index.

APA’s customers are uncertain about whether the government’s policies to reduce emissions will stay in place, which is affecting investment, McCormack said. Opposition leader Tony Abbott, favored to win the Sept. 14 election set in January, has pledged to scrap Prime Minister Julia Gillard’s price on carbon emissions.

“From January to September is a long time,” according to APA’s managing director. “Things around environmental policy impact our customers, so they impact us.”

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