A $5 billion deal to buy two Queensland coal mines from BHP is a potential game changer for Whitehaven.
But at its core, Whitehaven Coal’s epic $US3.2 billion deal to buy the Daunia and Blackwater metallurgical coal mines in Queensland from BHP is an exercise in taking risk off the table for both parties.First, is commodity risk. For Whitehaven boss Paul Flynn, this is a deal that goes directly to the pure-play coal miner’s exposure to thermal coal used to generate power, which the world must wean itself off to make the urgent energy transition.
Third, is deal risk, a key problem with any M&A transaction. Flynn argues he’s managed this by securing a cracking deal. Existing cash and a $US900 million bridge financing facility from Bank of America and Jefferies will pay for the bulk of the deal, but BHP has also given Whitehaven vendor finance via a deferred payment structure.Whitehaven could also be liable for payments of up to $US900 million if metallurgical coal prices remain high between now and the 2027 financial year, but as Flynn says, he’ll be delighted to make those payments.
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