BHP strikes US$2 billion funding deal with GIP for iron ore power network

The two firms will form an entity in which BHP will hold a 51% stake and GIP the remaining 49% stake

BHP Group said on Tuesday (Dec 8) that BlackRock-owned Global Infrastructure Fund (GIP) would invest US$2 billion in Western Australia Iron Ore’s (WAIO) inland power network for a minority stake.

The two firms will form an entity in which BHP will hold a 51 per cent stake and GIP the remaining 49 per cent stake. BHP will pay the entity a tariff linked to its share of WAIO’s inland power over a 25-year period.

“It’s a great deal that will help BHP with its capital recycling,” said analyst Baden Moore of CLSA in Sydney.

“I hope to see more of this from BHP as they pursue growth.”

BHP, the world’s largest listed miner, will retain full operational control of WAIO, including its inland power infrastructure. BHP shares cut early losses and were recently trading flat.

“This arrangement is an example of BHP’s disciplined approach to capital portfolio management,” chief financial officer Vandita Pant said in a statement.

“It strengthens our balance sheet flexibility, supports long-term value creation and enhances BHP’s shareholder value,” she added.

The deal comes as miners assess new ways to unlock capital from infrastructure investments, and as investors look for long-term assets that carry low risk and regular returns.

Rio Tinto CEO Simon Trott said last week that the world’s largest iron ore miner has identified a number of assets that it does not need to own, and that it would seek options, including partnerships and divestments of those assets.

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The agreement with GIP will not affect BHP’s existing joint venture agreements, the Australian company said in a statement. REUTERS

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