Detailed information Memo to be sent to potential DBNGP buyers

7/9/97

The next major step towards the sale of one of Western Australia's key energy assets will take place this week when a detailed Information Memorandum is distributed to potential buyers of the Dampier-to-Bunbury Natural Gas Pipeline (DBNGP).

The Information Memorandum provides details of the 1,530km DBNGP's assets for sale, associated operational, contractual and financial information, and the proposed legislative and regulatory framework which will apply to the sale.

Energy Minister Colin Barnett said there had been significant interest from interstate and overseas investors in the 100 per cent sale of the pipeline.

"There have been more than 40 registrations of interest from companies and investors around the world seeking details on the sale which will now be available in the Information Memorandum," Mr Barnett said.

"There has been significant interest from foreign-controlled energy players and a good response from financial organisations, investment companies and Australian energy companies.

"The Government has always felt that the Dampier-to-Bunbury Natural Gas Pipeline would be an eagerly sought energy asset and the interest shown so far has proved that to be true."

Mr Barnett said the companies and investors which had registered interest in buying the pipeline had signed confidentiality agreements as a precursor to providing the Information Memorandum.

"The details in the memorandum will allow potential investors to submit non-binding bids to the Gas Pipeline Sale Steering Committee," he said.

"The committee is then expected to invite a number of bidders to participate in a detailed due diligence process prior to submitting their final bids.

"At this stage, the sale process and the target to complete the sale by the end of this year remain on track."

The key points of the DBNGP sale are:

·      full 100 per cent sale with a target for completion of the sale by the end of 1997;

·      expansion rights for the new owner;

·      AlintaGas and Western Power retaining priority rights on the capacity to serve residential and small business customers;

·      State Government retaining the easement as a gas corridor and issuing an access licence to operate and maintain the pipeline;

·      an additional 70m easement being acquired by the State, where feasible, for gas infrastructure;

·      a cap on tariffs being introduced, declining over the period 1998 to 2000; and -

·      a State commitment to adopt an access code containing a negotiated-based access and pricing regime which will be consistent with the National Access Code beginning January 2000.

"The sale of the Dampier-to-Bunbury Natural Gas Pipeline has the potential to realise the highest sale price for a State-owned asset in WA's history," Mr Barnett said.

"It has a current book value of more than $1 billion.

"I am confident the sale will deliver a substantial return to WA taxpayers on their investment. The price at which the pipeline eventually sells will depend on its future earning potential as determined by the prospective bidders which have registered their interest."

In determining their final bids, the State expects prospective bidders to focus on the following key aspects which place the DBNGP in a favourable position as a strategic asset servicing the requirements of gas users in the State:

·      the current environment of strong growth in demand in the WA market and the potential for continuing growth in this area;

·      ability to enhance capacity through access to the existing easement and to the additional easement, when obtained;

·      anticipated decline in incremental enhancement costs;

·      long-term customers contracts;

·      experienced pipeline workforce;

·      well-maintained pipeline;

·      access to significant reserves of natural gas; and -

·      the policy of deregulation and major reform in the energy sector of WA.

Media contact: Justine Whittome (08) 9222 9699

Key features of the sale of the Dampier-to-Bunbury Natural Gas Pipeline

·      The Dampier-to-Bunbury Natural Gas Pipeline (DBNGP) was commissioned in 1984. Since that time, gas consumption in Western Australia has risen by more than 250 per cent and is expected to continue to grow strongly.

·      In the year to June 30, 1997, the DBNGP transported a total of 178 petajoules (PJ) of gas with an average of 487 terajoules delivered per day (TJ/d), with a peak of 593 TJ/d during May 1997.

·      Average annual capacity downstream of Compressor Station 9 is currently 476 TJ/d which will rise to 512 TJ/d after the expansion program, which is expected to be substantially complete by the end of December 1997. This additional capacity is fully committed.

·      At June 30, 1997, the DBNGP assets totalled around A$1,054 million and generated total revenues of approximately A$213 million for the year ended June 30, 1997.

·      The main line of the DBNGP runs parallel to the west coast of the State for approximately 1,530km starting from the Burrup Peninsula, near Dampier, and finishing at main line valve 157 (Clifton Road) in the South-West of Western Australia, near Bunbury.

·      For most of its length, the DBNGP lies within a 30m range of easements, consisting primarily of Crown easements and easements in gross. The State intends to retain the easement rights and to issue a licence for access to the easement to enable operation and maintenance of the DBNGP.

·      The State intends to obtain an additional 70m easement, where feasible, for gas infrastructure.

·      The State will issue further licences to the acquirer of the DBNGP, as appropriate, for access to the existing easement and/or the expanded easement for access to enhance the pipeline.

·      Based on preliminary work undertaken by AlintaGas and work independently commissioned by the Gas Pipeline Sale Steering Committee, it is currently anticipated that the cap on tariffs for a full haul firm service at 100 per cent load factor will be $1.24/GJ for 1998 and $1.12/GJ for 1999. From the year 2000, the State is planning to adopt the National Access Code and tariffs could fall to around $1/GJ.

·      In addition to the main line, a range of pipeline-related facilities will be included in the DBNGP assets offered for sale. These include compressor stations, meter stations, nine laterals, main line and lateral isolation valves and maintenance depots.

·      Presently, approximately 86 per cent of the DBNGP's annual throughput is delivered to industrial customers and users, while nine per cent is consumed by liquefied petroleum gas and feedstock users, and approximately five per cent is supplied to small commercial and residential customers.

·      The Transmission Division of AlintaGas currently holds 13 contracts under which it transports natural gas for its customers. Existing contracts cover 398 TJ/d of firm and reserved full haul capacity, 59 TJ/d of part haul capacity, and 62 TJ/d of full haul interruptible capacity.

·      Approximately 150 AlintaGas employees are currently involved in the operation and maintenance of the DBNGP. The acquirer will be required to offer employment to these employees, subject to arrangements which are currently being negotiated.

Media contact: Justine Whittome 9222 9699