Foreign capital boosts growth

16/10/2017 - 15:53


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SPECIAL REPORT: Mitsui & Company, Shell and Itochu Corporation are among a swag of businesses that have made substantial investments in the state’s exporting industries over the decades, showing that foreign investors can contribute without directly operating assets.

Foreign capital boosts growth
Sam Walsh joined the board of Mitsui in March 2017.

Japanese trader Mitsui & Company’s stake in a range of local businesses illustrates the long-term influence of foreign investors in the growth of the state’s export industries.

Mitsui’s interests include in iron ore, where it has joint ventures with both BHP Billiton and Rio Tinto, in energy through the North West Shelf Venture, and a range of agribusinesses.

One longstanding relationship is with another Japanese entity, Mitsubishi Corporation, with which Mitsui has a 50-50 stake in MiMi (Japan Australia LNG).

That entity itself holds a 16.7 per cent slice of the Woodside Petroleum-operated North West Shelf Venture gas project, which had total revenue of about $9.3 billion in the 2016 calendar year, according to the BNiQ Search Engine.

Mitsui’s equity share of the revenue would be about $775 million, with a similar amount for Mitsubishi.

While the share of revenue would not flow to either company, with both to be paid dividends from the project’s profits, the calculation gives an idea of Mitsui’s significance to the state’s economy in terms of production from its investments.

Mitsui’s iron ore interests are headlined by a 33 per cent stake in Rio Tinto’s Robe River assets, which together produced 66.8 million tonnes in the 2016 calendar year.

Two other Japanese businesses have an interest in Robe River, with Sumitomo Corporation holding 3.5 per cent and Nippon Steel 10.5 per cent.

Business News estimates Mitsui’s equivalent share of revenue at Robe River to be $1.55 billion, with Nippon’s share $486 million and Sumitomo about $162 million.

Mitsui additionally has a 7 per cent stake in a range of BHP Billiton-operated iron ore projects in Western Australia, including the Jimblebar, Yandi and Mt Goldsworthy mines, which equates to an estimated $1.5 billion of revenue.

Other international players with iron ore interests include China’s Sinosteel, which holds a 40 per cent stake in Rio Tinto’s Channar joint venture, and Japanese ITOCHU Corporation which holds a 8 per cent share of BHP’s WA iron ore entity, equivalent to revenue of $1.8 billion.

In agribusiness, Mitsui owns 25 per cent of grain exporter Plum Grove, which equates to revenue of around $133 million, 100 per cent of Shark Bay Salt, and 100 per cent of Bunbury Fibre Exports.

All up, Mitsui’s equity share of WA export revenue is around $4 billion.

Energising exports

In energy, BHP Billiton, Chevron, Shell and BP all have equal 16.7 per cent slices in the North West Shelf Venture.

Each business’s equity share of the venture’s revenue would be worth about $1.6 billion for the year.

Shell has two other major LNG interests. One is the Prelude FLNG project, in which it holds a 67 per cent stake and will be operator, once production commences next year.

The other is Gorgon, where Shell holds a 25 per cent stake, worth about $725 million.

That makes Shell’s energy export revenue from WA about $2.3 billion for the most recent reporting period.

A swag of Asian energy suppliers have smaller stakes across LNG projects, including Osaka Gas and Tokyo Gas, each with about 1 per cent of the Gorgon project.

Tokyo Gas holds a 5 per cent stake in Woodside-operated Pluto, as does Kansai Electric.

Local contributor

One WA-based business with multiple interests is Gina Rinehart’s Hancock Prospecting.

Hancock holds a 70 per cent stake in Roy Hill Holdings, with South Korean steelmaker Posco (12.5 per cent), China Steel Corporation (2.5 per cent) and Marubeni Corporation (15 per cent) the other investors.

Hancock also has a 50 per cent share in the Hope Downs Joint Venture with Rio Tinto, meaning its equity slice of production from that venture is 23.5mt.

That was worth about $1.3 billion in the 2016 calendar year, while Hancock’s equity share of Roy Hill would be about $2.1 billion, making Hancock’s slice of iron ore revenue across WA about $3.4 billion.

The company also has an interest in agribusiness, including Bannister Downs dairy, and a 67 per cent stake in the nation’s largest private landowner, S Kidman & Co.

The latter deal was worth $387 million, with Hancock taking a two thirds slice.

Earlier this month, Hancock bought the Willeroo pastoral station near Katherine.


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