The listing of Brookfield Asset Management’s Australian coal export terminal is aiming to raise at least A$656 million ($477 million), in what is set to be a test of investor appetite for coal assets.
In a sign that initial demand may not have been as strong as hoped for, the company, Dalrymple Bay Infrastructure (DBI) DBI.ASX, will offer an annual dividend yield of 7%, according to a term sheet seen by Reuters. Previously, selected investors had been offered more than 5.5%.
The terminal will export mostly steel-making coal from the Bowen Basin in Queensland state, a type of coal that is still generally accepted by investors who are divesting from thermal coal in favour of renewables amid climate concerns.
Appetite for what is likely to be Australia’s second biggest IPO this year may come down to investors’ environment, social and governance (ESG) mandates, said Ric Ronge, head of investments at Adansonia Capital.
“You have got a lot of funds that are being dictated by ESG. In the end, I think that the yield is relatively attractive. It just comes down to whether you can sleep at night having a coal asset.”
Brookfield, which will sell a 51% stake in DBI, plans to sell 255 million shares, the term sheet said. The minimum target of A$656 million works out to A$2.57 per share.
Queensland has agreed to pay A$128 million for a 9.9% stake in DBI, which handles 15% of global metallurgical coal exports.
Brookfield representatives declined to comment. DBI did not reply to an email seeking comment.
Bids from institutional investors are due next Wednesday. A prospectus for retail investors is expected to be filed on Nov. 20, followed by an auction starting Nov. 30.
Brookfield may sell a third of its remaining 49% stake after DBI announces 2021 first-half earnings and the remaining two thirds of the company in two stages following the subsequent half yearly results, the term sheet said.
About half the proceeds will go to Brookfield, with the rest going towards the repayment of DBI’s debt and transaction costs.
Source: Reuters (Reporting by Paulina Duran in Sydney and Melanie Burton in Melbourne; Editing by Jane Wardell and Edwina Gibbs)