Ann: APA reports solid FY22 results, page-42

APA rules off institutional leg of $750m raise for its big M&A bet
by Sarah Thompson and Kanika Sood, copyright link
August 23, 2023 04:26 AM
It’s not often that pipelines owner APA Group offers up discounted stock to investors. But when it does, it sure can pull a crowd.
APA Group boss Adam Watson. Its $675 million institutional placement – part of a broader $750 million raise to bankroll the acquisition of Alinta’s remote power assets in Western Australia’s Pilbara – had enough demand to get it over the line before lunch. Fund managers were receiving books covered messages by early afternoon.The purchase of the power assets – for which it faced competition from Morgan Stanley’s infrastructure investing arm – comes less than a year in for APA’s new boss Adam Watson, who took reins in December after serving as the chief financial officer. Watson had Darren Rogers, APA’s group executive for energy solutions, front and centre on Wednesday’s investor calls with him. Sources said another executive, Ross Gersbach, was instrumental in getting the deal done after recently returning from the US.
APA’s brokers, Barrenjoey and Morgan Stanley, would have kept tinkering with the book into the day to make sure the stock trades well come Thursday. Fund managers were told to expect allocations to run into the night. The 8.2 per cent discount to last close was just right to get existing shareholders on board, sources said.The point is APA offered fundies stock at an 8.2 per cent discount to the last close – and they took it with both hands. It was APA’s first equity raising in more than five years; the last one was done via a $500 million rights issue in early 2018.
Wednesday’s rapid fire bookbuild is an early vote of confidence for APA’s M&A bet. It’s telling shareholders it sees value in going deeper into power generation and is willing to stump up $1.7 billion to do so – across a $675 million pro-rata institutional placement, a $75 million share purchase plan and $993 million debt.As for the investment banks involved, the deal’s not an insignificant addition to their deal table credits, although it would carry greater mileage in the ranking for equity capital markets (where volumes have been depressingly skinny) than in M&A.Good for league tablesIn ECM league tables,
Barrenjoey ended the 2023 financial year on the second spot while Morgan Stanley didn’t make the top ten, according to Dealogic and Refiniv. The APA deal is the second joint role for the duo this financial year, after Abacus Property Group’s Storage King demerger which included a $225 million institutional placement.On M&A league tables, if only completed deals (and not announced ones) are considered, Barrenjoey was on the fourth spot while Morgan Stanley was at the eight one at June 30. But as bankers know, there are a bunch of deals lying around that won’t have made the cut yet including gold miner Newcrest and Newmont’s merger, lithium miners Livent and Allkem’s merger, and of course Origin Energy.
In that regard, APA is a good deal to have for the bosses. It is expected to close before December 31.Alinta Energy Pilbara is made up of four main assets: Port Hedland power station (210 megawatts), Newman Power Station and associated battery (238 megawatts and 35 megawatts), the Chichester solar farm (60 megawatts) and Goldfields gas transmission pipeline, which can transport 203 terajoules a day.It has 900 megawatts worth of renewables and storage products under development, 1 gigawatt of long-term development opportunity and 300 kilometres of planned high voltage transmission lines to add to the 200 kilometres it already has.