Global Infrastructure Partners (GIP), part of BlackRock, has agreed to invest US$2bn (€1.7bn) in BHP’s Western Australia Iron Ore (WAOI) inland power network, for a minority stake.
GIP and mining giant BHP will form an entity in which BHP will hold a 51% stake and GIP the remaining 49% stake. BHP will pay the entity a tariff linked to its share of WAIO’s inland power over a 25-year period.
The network consists of four main joint ventures in the Pilbara region of Western Australia – a region that produces the majority of the world’s iron ore and the bulk of BHP’s revenues and profits.
BHP holds an 85% interest in WAIO and the remaining 15% is held by Japan’s Mitsui and Itochu. The WAIO power infrastructure comprises the Yarnima power station, and more than 400km of transmission and distribution lines, and integrated substations and control systems supplying electricity to mining operations and the township of Newman.
BHP will retain full operational control of WAIO, which will continue to plan and execute its long-term strategy focused on increasing iron ore production to 305 million tonnes per year. The miner said the sell-down to GIP did not affect existing joint venture agreements or obligations under its agreements with the West Australian government.
It said the sale was part of its strategy to recycle capital from undervalued infrastructure into higher-return growth opportunities.
Mike Henry, BHP chief executive officer, said: “We are pleased to partner with GIP on this arrangement that enables BHP to access capital and maintain operational strategic control of a critical part of WAIO’s infrastructure.”
BHP chief financial offer, Vandita Pant, said: “The arrangement is an example of BHP’s disciplined approach to capital portfolio management. It strengthens our balance sheet flexibility, supports long-term, value creation and enhances BHP’S shareholder value.”
The transaction is expected to be completed towards the end of this financial year, subject to regulatory approvals including clearance from the Foreign Investment Review Board.
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