EIG Targets Australia's Origin to Build Global LNG Company

(Reuters) — EIG, teaming with Brookfield Asset Management in a A$15.5 billion ($10.5 billion) bid to split Australia's Origin Energy, is looking to use the deal to help build a global LNG company, its boss said on Wednesday.

Under the proposed buyout announced last week, EIG's MidOcean Energy would acquire Origin's integrated gas business including its 27.5% stake in Australia Pacific LNG (APLNG), an LNG project in Queensland state.

EIG has been eyeing the APLNG stake for at least three years, after being thwarted in a $10.8 billion bid for Santos Ltd STO.AX in 2018, aiming to create a global LNG company targeting customers in Japan, South Korea and China.

APLNG's appeal is its long-term contracts to supply China's Sinopec and Japan's Kansai Electric.

"Really the attraction for us are the export volumes and the contracts. This is not meant to be a play on domestic gas pricing in Australia," EIG Chief Executive Blair Thomas told Reuters in an interview by phone from Riyadh.

EIG missed out on acquiring a 10% stake in APLNG last year with a $1.59 billion bid that was pre-empted by APLNG operator ConocoPhillips.

A stake in APLNG would add to interests in four other Australian LNG plants that MidOcean agreed to buy from Tokyo Gas for $2.15 billion in October.

The bid will need approval from the Foreign Investment Review Board (FIRB) and the Australian Competition and Consumer Commission, which is heavily involved in monitoring soaring domestic gas and power prices.

Analysts have speculated the government, desperate to drive down gas and power prices, could use the foreign investment approval process to extract concessions on gas supply and pricing.

APLNG, along with two other LNG producers on the east coast, has already been targeted by the government to boost gas supply.

Thomas said EIG was not in a position to make promises about supply or price on behalf of APLNG, given it is a joint venture.

"It's not up to us. So, I think people just need to temper their expectations as to what's achievable, and recognize the fact that APLNG is the best among the east coast suppliers," Thomas said.

With its focus on LNG exports, EIG is undaunted by the Australian government's threats to impose a cap on domestic gas prices.

"We do invest globally and unfortunately we see those same issues pretty much everywhere we operate right now," Thomas said.

EIG won FIRB approval when it bid for a stake in APLNG last year and for a stake in Senex Energy.

"We've never not gotten approval and I would hope that would be the case this time as well," Thomas said.

As for the competition watchdog, Thomas did not expect much concern around APLNG, and said the companies would make the case that breaking up Origin would be in the national interest.

He said the deal was good for consumers because Origin would be better funded to invest in the transition to cleaner energy.

"Energy transition is hugely capital intensive and this company just isn't in a position to do that."

"By separating them, giving them really pure play platforms with new owners that are highly capitalized, I think there's much greater ability to execute much more ambitious growth plans," Thomas said.

($1 = 1.4810 Australian dollars)

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