The preferred bidder for the Dampier to Bunbury Natural Gas Pipeline is planning to spend more than $400 million over the next five years to increase the pipeline’s capacity by 35 per cent.
The increase will secure long-term gas supplies in Western Australia’s South West and make gas a viable fuel for new industrial developments, including new power stations. A consortium comprising Alinta, Alcoa and the DUET investment trust was named this week as the preferred bidder after offering a price of $1.86 billion.
The pipeline’s receivers, Martin Madden and Brian McMaster of KordaMentha, said they received “three high-quality bids that were sufficient to repay bank debt”.
This was contrary to earlier speculation that the bids would fall short of the $1.85 billion bank debt.
“The quality of the DBNGP asset attracted keen interest from a range of parties and has ensured that at the completion of the sale, the receivers’ sale objectives will be satisfied,” Mr Madden said.
Alinta chief executive Bob Browning said the bid price was based on the major shippers – Alinta, Alcoa and Western Power – paying a tariff higher than the regulated price.
“Macquarie, on behalf of the consortium, has reached agreement in principle with most of the key shippers to pay a higher non-regulated tariff,” Mr Browning said.
“The shippers, including Alinta, have agreed to this tariff to facilitate the funding of the early stage expansion of the pipeline and to quickly resolve the impasse with the banks.”
Western Power chairman Neil Hamilton said he was looking forward to settling a shipping contract but would not agree to a tariff that would result in higher electricity prices.
“Our preference is to reach a long-term shipping arrangement that would provide Western Power with certainty on gas availability well into the future,” Mr Hamilton said.
The consortium has tried to avoid competition issues arising from Alinta’s status as co-owner and operator of the pipeline.
These undertakings appear to have satisfied the Australian Competition and Consumer Commission, which has advised that it does not plan to intervene in the sale process.
