Narrative
Full Description
Project narrative
Circa March 21, 2017, the Bank of China (BOC) entered into an approximately $4 billion AUD ($3 billion USD) bridge loan agreement with Chow Tai Fook Enterprises Limited (CTFE) — Hong Kong–incorporated and based conglomerate holding vehicle of the Cheng Yu-tung family, with diversified investments in jewelry, real estate, hotels, infrastructure, energy, transportation, telecommunications, and financial services — to support its acquisition of Australian gas and electricity retailer Alinta Energy Limited. The proceeds were to be used by the borrower to cover the majority of the $4 billion AUD purchase price of Alinta Energy, with CTFE providing the remainder in cash. CTFE planned to refinance the debt via Alinta Energy in the Australian loan market after the acquisition was closed. Record ID#110692 captures the BOC's loan. Then, in August 2017, a syndicate of seven banks — including BOC — entered into a $920 million AUD ($726 million USD syndicated loan agreement with Alinta Energy Pty Limited — the Australia-incorporated company now wholly-owned by CTFE — for working capital and capital expenditures purposes. The loan was divided into a $700 million USD term loan and a $200 million AUD revolving loan.Record ID#110706 captures BOC's contribution. Then, in October 2017, a syndicate of an unspecified number of banks — led by the Bank of China (Hong Kong) Limited (BOCHK) as sole mandated lead arranger and bookrunner — entered into a $17 billion HKD ($2.2 billion USD) syndicated recourse loan agreement with CTFE to refinance the bridge loan used to acquire Alinta. The loan carried a maturity period of five years and an interest rate of the Hong Kong Interbank Offered Rate (HIBOR) plus a margin of 144 basis points (bps). The loan was not secured by Alinta's shares. BOCHK was syndicating the loan in August 2017, offering lead arranger role for commitments over $500 million HKD and arranger for commitments between $150 million HKD and $490 million HKD, with commitments. Record ID#110707 captures BOCHK's contribution. Alinta Energy was an Australia-incorporated electricity generation and gas retailing company supplying natural gas and electricity to residential, and commercial and industrial customers. At the time of the acquisition, it operated power plants in Australia and New Zealand with a total generation capacity of 1,800 MW, with most of its businesses being gas-fired power generation and gas pipeline transmission in Western Australia, though with retailing electricity and gas to 790,000 customers in Victoria and South Australia. Specific assets included the 112 MW cogeneration Glenbrook Power Station, which used surplus gas from NZ Steel and waste heat to generate electricity, in Glenbrook, New Zealand, the 210 MW Port Hedland Power Station and its 25 kilometers of 66 kV transmission lines in Western Australia, the 178 MW gas-fired Newman Power Station and Battery Storage and a 30 MW battery storage facility in Western Australia, the Newman to Roy Hill Electricity Transmission Line, a 121 kilometer long 220 kV transmission line from Newman Power Station to the Roy Hill Mine including substations, a distribution system and 6 MW of onsite diesel generation in Western Australia, an 11,843% stake in the 1,378-kilometer, 194 trillion joules per day mainline Goldfields Gas Pipeline in Western Australia, the 285 MW cogeneration gas-fired turbine Pinjarra Power Station in Western Australia, the 380 MW gas/diesel-fired generator Wagerup Power Station in Western Australia, the 94 MW gas-fired generator Bairnsdale Power Station in Victoria, and the 50 MW gas-fired generator Braemar Power Station in Queensland, a 100% stake in 148 kilometer long Braemar Gas Pipeline used to supply the Braemar Power Station and transport gas to Roma to Brisbane pipeline in Queensland, and 549,000 customers in Western Australia (85% of gas retail mass market share) and 220,000 customers in Victoria, Queensland, New South Wales, and South Australia, a 107 MW power purchase agreement with the Bald Hills Wind Farm in Victoria, and a 89 MW power purchase agreement with the Walkaway Wind Farm in Western Australia. It was headquartered in Sydney, New South Wales. On March 16, 2017, CTFE entered into an agreement to purchase 100% of the issued share capital of Alinta Energy for about $4 billion AUD ($3 billion USD), from its shareholders, including private equity firm TPG Capital, LP. On April 21, 2017, Australia's FIRB approved the acquisition. The acquisition was completed on April 28, 2017. At the time of the acquisition, Alinta's shareholders had recently deferred the release of a prospectus for an initial public offer (IPO) for Alinta. Other interested bidders included Australia's AGL Energy and Chinese state-owned China Huadian Corp., but the shareholders did not accept either. CTFE had no plans to list Alinta or roll it into its NWS Holding Limited conglomerate. This was CTFE's first investment in the Australian energy sector. CTFE retained the existing chief executive officer of Alinta, Jeff Dimery. There was speculation that national security concerns from Australia's Foreign Investment Review Board (FIRB) could affect the acquisition. In 2016, FIRB rejected Chinese state-owned State Grid Corporation and Hong Kong's Cheung Kong Infrastructure Holdings proposed acquisition of New South Wales electricity grid distributor Ausgrid on national interest grounds. CTFE's chairman Henry Cheng was a member of the Chinese political advisory body, the People's Political Consultative Conference. However, Alinta, as a retailer of energy, not a distributor, and already having foreign ownership, were seen as beneficial for its case. In early 2020, media outlets The Age, Herald, and the Australian Broadcasting Corporation's (ABC) 7.30 conducted an investigation finding Alinta may have violated Australian privacy law by failing to protect the personal information of its 1.1 million customers. Leaked Alinta documents from a whistleblower showed that FIRB included 10 secret conditions to approving the acquisition of Alinta, mostly relating to data security but also to the operations, maintenance, and control of power generation and distribution assets (involving modifications to 40 information technology systems, 560 data sets, and the review of 1400 contracts), audit and tax, and the composition of its board of directors (majority Australian representation on its board, an independent Australian chairman, which was met quickly after the acquisition closed, some of which was achieved beforehand), with a mechanism to transition over time. As a retailer, Alinta collected names, addresses, birth dates, mobile numbers, Medicare and passport numbers, credit card details, and occasionally individual health information in its business. Alinta internal documents stated that the company may not be sufficiently protecting personal information and at that time was not meeting the requirements of privacy laws, due to poor privacy systems, even almost three years after CTFE's acquisition. When the media investigation went public, FIRB was heavily criticized, with former chairman of the Australian Competition and Consumer Commission (ACCC) Allan Fels arguing that FIRB needed to be overhauled to be more transparent, accountable, and enforce the conditions it makes (as well commenting that the Alinta acquisition, giving a foreign institution control over critical infrastructure, would not have been approved had the privacy issues been apparent earlier). The Essential Services Commission announced that it would begin inquiries and audit Alinta, noting that Alinta had previously paid $300,000 AUD for the alleged transfer of customers without consent. The Office of the Australian Information Commissioner, regulating the Australian Privacy Act, would also investigate the data privacy concerns. In Parliament, the role of Prime Minister Scott Morrison, who, at the time of the Alinta acquisition was the Treasurer of Australia and thus ultimately responsible for deciding to go through with FIRB's advice, was criticized by MPs for his role in imposing conditions that were not enforced. Alinta also admitted to being aware of fraudulent activity by third-party sellers of its services, leading to sales without customer consent (although it claimed it reported them and ceased relations with said parties). In May 2020, Alinta chief executive officer Jeff Dimery testified at a hearing of the Australian Senate Hearing of the Economics References Committee, where he defended the delays to implementing the FIRB conditions, claiming it was on schedule and that the conditions were difficult to meet in the short term and that customer data was stored in Australian servers. The hearing also included allegations that consultant Ernst & Young was biased when it assessed whether Alinta had complied with the FIRB conditions, because it was also providing internal audit services to the energy company and a senior partner had been Alinta's interim chief financial officer. Alinta finally met the FIRB conditions in the 2021 financial year. Nevertheless, analysts believed Alinta's complicated history with FIRB had long term effects, with no major acquisitions by it since 2018 and its 2024 attempt to purchase renewable energy company Tetris Energy delayed for months by FIRB.