We consider that it would be good economics through a reduced funding cost channel as well as having a positive climate impact. At first glance, the indication was for a post IPO dividend yield of around 5.5-6%, but as time has progressed this has been lifted to 7%. In this context it should be noted that Industry Queensland is reporting an intention of Brookfield to increase coal capacity of Dalrymple from 85 million tonnes of coal per annum (MTpa) to 100MTpa.
Given such aggressive expansion plans in a sector that many market participants believe is struggling, it may be less of a surprise that institutional investors appear to not have been playing ball so far. We think that even with an indicated 7% distribution yield, we would have some question marks around several factors in the transaction, that now appears on track to be marketed to retail investors.
