(EnergyAsia, October 31, Friday) — Following news of BG’s plans to acquire Australia’s Queensland Gas Company Limited (QGC), AGL Energy Limited (AGL) said it will sell all its shares in QGC to BG unless a superior competing offer emerges. BG’s announcement was made by subsidiary BG International (Australia) Investments Pty Limited. AGL will receive A$5.75 per share for its 204.6 million shares in QGC. (US$1=A$1.50).

AGL said it has entered into an option agreement with BG that provides AGL with the right to acquire 1,097 petajoules (PJ) of 3P gas reserves plus exploration acreage. In addition, AGL has the right to acquire the 140 MW gas fired Condamine power station in Queensland state, and an associated 10 PJ pa gas supply contract.

AGL said the sale of its QGC shares will yield cash proceeds before capital gains taxation of approximately A$1.18 billion.

AGL has signed an option agreement with BG giving AGL the right but not the obligation to acquire stakes in certain gas development projects, and possibly the 140MW Condamine combined cycle power station currently under construction and a 10 PJ pa gas supply contract until 1 January 2014.

AGL managing director, Michael Fraser, said: “This transaction is consistent with our often stated objective of converting the QGC equity stake into direct ownership of gas reserves. The entire transaction represents an excellent outcome for AGL. Our original investment of A$327 million, made in March 2007, has the potential to be transformed into a number of investments and cash valued at close to A$1.2 billion and we retain our original 740 PJ gas supply contract.”

He added that AGL would assess the gas acreage and power station options under the BG deal against other potential opportunities.

“We will conduct a thorough assessment of not only the assets potentially available under the BG options but also other opportunities available in the gas and electricity markets,” said Mr Fraser.

If BG is successful in its bid, and after the bid closes, AGL and BG intend to further discuss mechanisms to potentially supply gas into BG’s proposed Queensland Curtis LNG project in Gladstone to allow AGL to access LNG net back pricing for gas supply from the Lacerta project. Gas from the Polaris development may also be dedicated to BG’s LNG project. 

“I am very comfortable that whatever the outcome of the BG option, we already have in place an equity and contract gas portfolio with sufficient duration, depth and optionality to serve our needs well into the future. The BG option, of course, adds further strategic optionality to our business,” said Mr Fraser.