BG Group plc (LSE: BG.L) has agreed to sell its wholly owned subsidiary QCLNG Pipeline Pty Ltd. to APA Group (ASX: APA) for US$5 billion.
QCLNG Pipeline owns a 543-kilometer, large-diameter underground pipeline network linking BG Group's natural gas fields in southern Queensland, Australia, to a two-train liquefied natural gas (LNG) export facility at Gladstone on Australia's east coast.
The pipeline was constructed between 2011 and 2014, and has a current book value of US$1.6 billion. Tariffs payable on the pipeline are set to provide a fixed rate of return on the asset base with the primary tariff components escalating annually with US inflation indices. For the year ended Dec. 31 2016, the pipeline tariff is expected to deliver to APA Group EBITDA of US$390 million.
The sale is conditional on the start of commercial LNG deliveries (post-commissioning) from the QCLNG export facility at Gladstone and on partner consent. BG Group and its partners have firm capacity rights in the pipeline for 20 years, with options to extend.
On completion, expected in the first half of 2015, the transaction is expected to result in a post-tax profit of US$2.7 billion. The profit on disposal will be partly offset by a post-tax impairment of BG Group's remaining QCLNG assets, expected to be around US$2 billion, following categorization of QCLNG Pipeline as held for sale in the fourth quarter of 2014.
The Group expects that the sale proceeds will be used to reduce net debt and to fund future growth investment.
Andrew Gould, interim executive chairman of BG Group, commented, “The sale of the QCLNG pipeline is in line with our strategy to focus on BG Group's core areas of oil and gas exploration and production and LNG. The timing reflects QCLNG's advanced stage of development; we are now on the verge of delivering the world's first large-scale project using natural gas from coal seams as a feedstock for LNG."