 |
| Clermont Meridian Trading Says Adani Agrees Linc Energy Deal |
Analysts at Clermont Meridian Trading have confirmed that Adani Enterprises have put pen to paper on the biggest single investment by an Indian company in Australia. The Indian company will buy Linc Energy's Queensland coal tenements for around £3bn after being announced as the winning bidder for the non-core coal tenements in the Galilee Basin.
“Adani plans to use the coal to feed power plants it currently has under construction in India. The deal will see Adani pay $500m in cash plus a $2 per tonne royalty throughout the first 20 years of production. The initial $500m was deposited in escrow yesterday,” said George Willis, Senior Vice President of Equity Trading at Clermont Meridian Trading.
Adani has already received approval from Australia's Foreign Investment Review Board along with an indicative approval for the transfer of the coal tenement by the Queensland government. The $500 million payment in escrow will be released upon completion of the deal, according to Clermont Meridian Trading research.
The handover is expected to happen today, with Linc chief executive Peter Bond confirming some staff will remain in Galilee to help Adani begin drilling.
Linc chief executive Peter Bond said some staff would remain at Galilee in the short term to help Adani start drilling, but the handover would happen today.
Mr. Bond said completing this transaction would allow Linc to sell other coal tenements and focus its attention on its core underground coal-gasification business. The company has negotiated exclusivity in negotiating any future joint development of proposed underground coal-gasification operations in Galilee.
The Teresa tenement is expected to be the next to be sold. Mr. Bond said the royalty agreement provides flexibility for Linc to turn it into cash now or get the full benefit of 20 years of cash flow.
He said, "The transaction provides shareholders with a net present value of approximately $1.5 billion, with the opportunity to earn over $3 billion in revenue over the life of the royalty, which is undoubtedly a great result for the company."
Two weeks ago, following an announcement by Adani that it had raised $850m ($934m ASD) via an institutional share sale, shares in Linc rocketed by almost 18%. At the close of trading yesterday, they were down 3¢ to $1.59.