SEA Gas
Australian Oil & Gas Deal of the Year 2002
SEA Gas
On 17 May 2002 SEA Gas ? then a 50:50 joint venture between Origin Power (formerly Boral) and Australian National Power (an International Power subsidiary) ? broke with tradition and closed the first Australian greenfield pipeline non-recourse financing with construction risk.
The A$338 million deal has since been expanded to incorporate a third equity partner ? TXU joined in September ? and the project upped to A$500 million.
The non-recourse pipeline financing has its precursors. Duke Energy paved the way with a multi-asset financing that included project debt for brownfields EGP and QGP. However the greenfield element ? the Tasmanian Natural Gas Pipeline ? was funded with a Duke guarantee during construction and then taken off balance sheet on completion.
Sea Gas is an evolution from that deal, with banks taking project risk during construction along with the EPC contractor. Consequently, the project constitutes a real watershed in pipeline risk mitigation.
The 680km pipeline is to run from Port Campbell in Victoria, where there are large reserves of undeveloped natural gas, to Adelaide in South Australia. The participation of TXU has spawned an expanded pipeline ? from 70 to 125 petajoules of gas per annum with the diameter of the original pipe increasing from 360 millimetres to 450 millimetres ? and silenced calls by TXU and Duke Energy for a rival second pipeline from Victoria to Adelaide.
SEA Gas was selected by the South Australian government as preferred bidder to provide the state with a new source of gas in March 2001. All the sponsors (including latecomer TXU) have downstream assets in Southern Australia that are hungry for gas.
Origin Energy is the largest retailer in Adelaide and also owns two small generation plants. Its main source of supply will be the Yolla Field in Bass Strait, Melbourne. Yolla is the central component in the BassGas project, in which Origin has a 37% stake, and capacity demand by SEA Gas was a key factor in the decision to commence BassGas development on 22 April 2002. Gas will come on line in 2004.
Origin has also entered into supply agreements with International Power for Minerva Gas. The Minerva Field, in the Olway Basin off the Victoria coast, feeds International Power's entire initial capacity allocation. In March 2002 the company entered into a take-or-pay gas sales agreement, contingent on securing pipeline funds, with BHP Billiton, owners and developers of Minerva. BHP will supply 260 petajoules of natural gas over a 10-year period. This agreement underwrites development of Minerva, accounting for 90% of BHP's share of reserves. The remainder will be sold into the market on a merchant basis.
International Power has the gas earmarked for its Pelican Point Power subsidiary. At the moment the plant is feeding from reserves in Northern Australia which are projected to run out in 10-12 years. Once the pipeline is in place Pelican Point will be upgraded from 500MW to 800MW by 2004.
With supply and offtake risks minimized, the deal was not a hard sell. The mandate went out to banks in 2001 and ABN Amro (also facility agent), ANZ, Royal Bank of Scotland (Australia) and TD Securities (Toronto-Dominion Bank) were appointed as equal leads in early 2002. The full amount was underwritten on financial close in May.
The original A$338 million deal comprised a A$214 million non-recourse senior term loan that converts to a three-year bullet at start of commercial operations. And a further A$124 million equity bridge to be taken out on completion of construction and split between the sponsors. The senior loan was priced at 135bp over base rate with the bridge coming in at 85bp over base rate.
With TXU expanding the project to A$500 million ? which makes even better economic sense, claim bankers ? all the extra funding is being provided by the original arrangers.
Given that the loan does not fully amortise, lenders are taking on refinancing risk. The sponsors opted for this route because of the upside potential in renegotitation once the pipeline is up and running. Any future deal is likely to be a longer term project financing.
The original schedule for construction of the pipeline remains on target for October 2002 and SEA Gas expects that gas will begin to flow in late 2003, with the pipeline in commercial operation by January 2004.
SEA Gas has awarded the major pipeline engineering, procurement and construction (EPC) contract to a joint venture between AJ Lucas Joint Ventures and Spie Capag Australia Pty Ltd. A contract for the first compressor station has also been awarded to HPS Technology Pty Ltd.
EA Gas
Status: A$338 million closed 17 May 2002. Extended to A$500 million September 2002.
Location: Victoria, Australia
Description: 680km gas pipeline.
Total project cost: A$548 million
Total project debt: A$500
Sponsors: ANP (International Power); Origin Energy (formerly Boral); TXU
Offtakers: Origin Energy; International Power; TXU
Fuel supply: BHP Billiton
Lead arrangers: ABN Amro; TD Securities; ANZ; Royal Bank of Scotland (Australia)
EPC: AJ Lucas Joint Ventures; Spie Capag Australia Pty Ltd.
Pipe supply: OneSteel
Legal adviser to consortium: Johnson Winter Slattery
Legal advisor to lenders: Freehills
Back to contents
SEA Gas
On 17 May 2002 SEA Gas ? then a 50:50 joint venture between Origin Power (formerly Boral) and Australian National Power (an International Power subsidiary) ? broke with tradition and closed the first Australian greenfield pipeline non-recourse financing with construction risk.
The A$338 million deal has since been expanded to incorporate a third equity partner ? TXU joined in September ? and the project upped to A$500 million.
The non-recourse pipeline financing has its precursors. Duke Energy paved the way with a multi-asset financing that included project debt for brownfields EGP and QGP. However the greenfield element ? the Tasmanian Natural Gas Pipeline ? was funded with a Duke guarantee during construction and then taken off balance sheet on completion.
Sea Gas is an evolution from that deal, with banks taking project risk during construction along with the EPC contractor. Consequently, the project constitutes a real watershed in pipeline risk mitigation.
The 680km pipeline is to run from Port Campbell in Victoria, where there are large reserves of undeveloped natural gas, to Adelaide in South Australia. The participation of TXU has spawned an expanded pipeline ? from 70 to 125 petajoules of gas per annum with the diameter of the original pipe increasing from 360 millimetres to 450 millimetres ? and silenced calls by TXU and Duke Energy for a rival second pipeline from Victoria to Adelaide.
SEA Gas was selected by the South Australian government as preferred bidder to provide the state with a new source of gas in March 2001. All the sponsors (including latecomer TXU) have downstream assets in Southern Australia that are hungry for gas.
Origin Energy is the largest retailer in Adelaide and also owns two small generation plants. Its main source of supply will be the Yolla Field in Bass Strait, Melbourne. Yolla is the central component in the BassGas project, in which Origin has a 37% stake, and capacity demand by SEA Gas was a key factor in the decision to commence BassGas development on 22 April 2002. Gas will come on line in 2004.
Origin has also entered into supply agreements with International Power for Minerva Gas. The Minerva Field, in the Olway Basin off the Victoria coast, feeds International Power's entire initial capacity allocation. In March 2002 the company entered into a take-or-pay gas sales agreement, contingent on securing pipeline funds, with BHP Billiton, owners and developers of Minerva. BHP will supply 260 petajoules of natural gas over a 10-year period. This agreement underwrites development of Minerva, accounting for 90% of BHP's share of reserves. The remainder will be sold into the market on a merchant basis.
International Power has the gas earmarked for its Pelican Point Power subsidiary. At the moment the plant is feeding from reserves in Northern Australia which are projected to run out in 10-12 years. Once the pipeline is in place Pelican Point will be upgraded from 500MW to 800MW by 2004.
With supply and offtake risks minimized, the deal was not a hard sell. The mandate went out to banks in 2001 and ABN Amro (also facility agent), ANZ, Royal Bank of Scotland (Australia) and TD Securities (Toronto-Dominion Bank) were appointed as equal leads in early 2002. The full amount was underwritten on financial close in May.
The original A$338 million deal comprised a A$214 million non-recourse senior term loan that converts to a three-year bullet at start of commercial operations. And a further A$124 million equity bridge to be taken out on completion of construction and split between the sponsors. The senior loan was priced at 135bp over base rate with the bridge coming in at 85bp over base rate.
With TXU expanding the project to A$500 million ? which makes even better economic sense, claim bankers ? all the extra funding is being provided by the original arrangers.
Given that the loan does not fully amortise, lenders are taking on refinancing risk. The sponsors opted for this route because of the upside potential in renegotitation once the pipeline is up and running. Any future deal is likely to be a longer term project financing.
The original schedule for construction of the pipeline remains on target for October 2002 and SEA Gas expects that gas will begin to flow in late 2003, with the pipeline in commercial operation by January 2004.
SEA Gas has awarded the major pipeline engineering, procurement and construction (EPC) contract to a joint venture between AJ Lucas Joint Ventures and Spie Capag Australia Pty Ltd. A contract for the first compressor station has also been awarded to HPS Technology Pty Ltd.
EA Gas
Status: A$338 million closed 17 May 2002. Extended to A$500 million September 2002.
Location: Victoria, Australia
Description: 680km gas pipeline.
Total project cost: A$548 million
Total project debt: A$500
Sponsors: ANP (International Power); Origin Energy (formerly Boral); TXU
Offtakers: Origin Energy; International Power; TXU
Fuel supply: BHP Billiton
Lead arrangers: ABN Amro; TD Securities; ANZ; Royal Bank of Scotland (Australia)
EPC: AJ Lucas Joint Ventures; Spie Capag Australia Pty Ltd.
Pipe supply: OneSteel
Legal adviser to consortium: Johnson Winter Slattery
Legal advisor to lenders: Freehills
Back to contents
Request a Demo
Interested in IJGlobal? Request a demo to discuss a trial with a member of our team. Talk to the team to explore the value of our asset and transaction databases, our market-leading news, league tables and much more.