Shifting stakes fan questions

AlintaGas chairman Tony Howarth was fielding all the right questions from well-informed shareholders at the company’s AGM last week.

"Could the Alinta board guarantee the company’s management and directors would be able to adequately lead Alinta through current and proposed growth and diversifi-cation?"

"Does the company have sufficient capacity in the Dampier to Bunbury Natural Gas Pipeline for its cogeneration plans with Alcoa?"

"Is Alinta considering buying into the pipeline?"

"How will tariff prices affect the company’s plans?"

"How does AMP Henderson’s position affect Alinta?"

In the absence of chief executive officer Bob Browning, Mr Howarth did not hesitate with his reassurances on capacity, capability and absence of exposure to AMP Henderson restructuring, deferring to those with more technical knowledge when appropriate.

Neither did the chairman dodge considerations of Alinta’s potential infrastructure portfolio, although the responses remained carefully phrased.

But the company’s responses on pipeline ownership were a definite shift from last year, when Mr Browning said Alinta was restricting its pipeline considerations to small laterals.

And despite Alinta’s stated position now, considerations by several other energy players and administrators will deter-mine medium and longer-term outcomes.

Last week Mr Howarth was unequivocal that "in the long-term", "with the right partners", and if in a position to do so, Alinta would act on its interest in "ensuring WA’s future" with regard to such a "key strategic asset" as the DBNGP.

There are plenty of potential Eastern Australia-based partners, including TXU and Origin Energy, but another locally listed ambitious energy player, Wesfarmers, is also considered a reasonable possibility, but recent statements coming out of the company are difficult to interpret with clarity.

An Alinta LPG associate, and a losing bidder in the original $2.4 billion sale of the DBNGP in 1997, Wesfarmers remains a considerable influence in WA’s power scene.

The company is a would-be LNG supplier to Transperth’s fleet, the winning bidder through subsidiary StateWest Power to supply new electricity supplies to WA’s Midwest region, and a short-listed tenderer for two projects – one to supply power to the West Kimberley, and the other to build and operate a south-west coal-fired plant to supply base-load power for Western Power.

The company released its third quarter results on the same day as Alinta’s AGM, reporting Wesfarmers Energy earnings before interest and tax result at a 16 per cent rise in comparison with the same period last year.

Just four weeks earlier, Wesfarmers Energy managing director David Robb said the company would be interested in any pipeline asset at the right price.

However, Mr Robb immediately qualified the statement, stating regulated assets were unlikely to provide the returns to which shareholders had become accustomed.

He also described getting into gas pipelines as "not a logical step" for the company.

Nonetheless Mr Robb was happy to describe Wesfarmers Energy as "quite opportunistic", saying future company growth within WA could come "out of the left field".

"We can look at and evaluate opportunities quickly and thoroughly," he said.

While company investigations into the supply of coal from the company’s Premier coal mine to a second Kwinana Hismelt module could underpin long-term company growth, a stake in a pipeline providing gas from the north-west could well complement Wesfarmer Energy’s LNG plans.

The company operates a small pilot plant at Kwinana, from which it is supplying its own fleet and a vehicle for refrigerated trucking company Sands Fridge Lines.

Mr Robb says this plant could supply LNG on a regular basis to customers within a year, including LNG to remote power facilities.

While the pilot plant could be a precursor to one in the Kimberley region, it could itself be expanded on a Government tender, for example, to supply LNG to Transperth vehicles.

A DBNGP tariffs decision, expected before the end of the month from WA’s gas pipelines access regulator, could determine ultimate ownership of the facility.

Debt-plagued Epic Energy, current owner of the pipeline, says its ability to continue as owner would be seriously jeopardised should an unfavourable decision be handed down.

Mr Howarth assured AlintaGas shareholders: "Notwithstanding the regulator’s decision, we are confident that AlintaGas can continue to deliver reliable, cost-effective gas to its customers."