Brookfield to kickstart IPO of Australian $1.4b coal port

Canada's Brookfield Asset Management plans to launch an IPO for its $1.4 billion Australian coal export terminal next week, three sources told Reuters.

Brookfield halted a dual-track divestment process for the Dalrymple Bay Coal Terminal (DBCT) — when it was considering both an IPO and a sale — in March because of coronavirus travel restrictions, two of the sources said, before negotiations resumed with investors in July.

Recent positive equity market conditions had swayed the decision for an IPO, one source said. Investment banks hired to manage the deal were scheduled to publish pre-IPO research on Monday, with a plan to list before year-end, the source added. DBCT will meet with Australian and offshore investors next week, all three sources said.

The sources requested anonymity because they were not authorized to speak publicly. Brookfield declined to comment, while DBCT did not immediately reply to a request for comment.

With an annual export capacity of 85 million tons, DBCT services mainly low-cost metallurgical coal mines in Queensland's Bowen Basin, where it has take-or-pay contracts.

Investors were pitched DBCT as a "low-risk" regulated utility with a "high stable yield", one source said, without specifying the dividend on offer.

The current near-zero interest rate environment has made high-yield investments scarce, although there is an increased pool of investors with stricter environmental, social and governance (ESG) filters that would preclude investment in DBCT.

"Some investors have issues with coal-related stocks but we would be interested in good infrastructure assets if they are well-structured and underpinned by long-term assets and long-term contracts generating long-term income streams," said one source, a Sydney-based fund manager.

DBCT last month raised about $550 million via a BBB-rated bond issue to repay debt due next year, Refinitiv's IFR reported. A separate offer to sell bonds to Australian investors at above-benchmark rates was scrapped.

The company has a net debt to regulated asset base ratio of 79 percent, according to Fitch.