Origin Energy has sold the Darling Downs pipeline network (DDPN) to Jemena for $392 million following an extensive six-month due diligence process.
The transaction lifts sales from Origin’s asset divestment program announced in September 2015 to $1 billion, considerably higher than the original $800 million target.
Located in Queensland, the DDPN is responsible for the transportation of gas to Origin’s Darling Downs Power Station, Australia Pacific LNG and the domestic market.
Under the terms of the sale agreement, Origin has secured gas transportation services on the pipeline network for periods ranging from 10 to around 30 years.
Origin CEO Frank Calabria said the sale, which represents a 16.9x FY2018 EBITDA multiple to Origin, is scheduled to be completed by June 30, 2017.
“The sale culminates our announced asset divestment program, the net proceeds of which will be used to reduce debt,” Mr Calabria said.
“We’re on track to achieve our target of adjusted net debt of well below $9 billion by June 30, 2017.
“In addition, we continue to make good progress on the divestment of Origin’s conventional upstream business, Lattice Energy, during calendar 2017.”
Jemena managing director Paul Adams said the acquisition was a crucial next step in delivering on Jemena’s Northern Growth Strategy which seeks to build an interconnected supply chain of energy delivery assets in northern Australia through targeted acquisitions and greenfield developments.
“This is a strategic investment for Jemena which leverages the DDPN’s connection with our Queensland Gas Pipeline to allow us to grow scale in this key market at a crucial time for the Australian energy sector,” Mr Adams said.
Mr Adams said Jemena’s Northern Growth Strategy focuses on bringing gas to where it is needed most through the most efficient and cost-effective means available.
“We know that 75 per cent of total east-coast gas supplying domestic and export markets transacts through the Wallumbilla gas hub,” he said.
“Through our Northern Gas Pipeline (NGP) project we are connecting Northern Territory gas fields with Mt Isa in Queensland.
“A potential expansion and extension of the NGP to Wallumbilla would be capable of delivering up to or beyond 700 TJ of gas per day to the east-coast market and can play a significant role in resolving the east-coast gas supply shortage.”
Jemena recently received its pipeline licence from the Northern Territory Government for the construction of the NGP.
Construction is set to commence in mid-2017, with first gas to flow in 2018.