BHP sells stake in critical Pilbara power network in deal with global fund giant

BHP has agreed to sell a roughly $A3 billion stake in the remote, stand-alone electricity network that is the backbone of its Pilbara mining operations to an offshoot of the world’s largest asset manager, BlackRock.

The Australian mining giant said on Tuesday that it has entered into a binding agreement to give Global Infrastructure Partners (GIP) a 49 per sent stake in its majority shareholding of the Western Australia Iron Ore (WAIO) inland power network.

The network is a stand-alone grid managed by BHP that supplies power to extensive iron ore mining and processing operations of the four main joint ventures in the Pilbara region, collectively known as WAIO, in which BHP holds an 85 per cent stake. 

BHP says that the agreement will establish a trust entity that is 51 per cent owned and controlled by BHP and GIP will provide $US2 billion in funding for a 49 per cent stake. BHP will pay a tariff to the trust, linked to its share of the network, over a 25-year period. 

The miner says the deal does not affect the running of the WAIO network – BHP retains full operational control of the grid, including its inland power infrastructure. Neither will the deal affect BHP’s existing WAIO joint venture agreements.

Rather, BHP chief Mike Henry says, the deal is about freeing up capital while keeping “operational and strategic control of a critical part of WAIO’s infrastructure.”

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

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

The move comes amid concerns that big miners are backing away from pledges to spend big on greening up their power supplies, including the WAIO network which is currently supplied by a gas and diesel fired generator.

In 2023, BHP unveiled plans to build around 550MW of wind, solar and battery storage in the Pilbara as part of a $4 billion plan to electrify and decarbonise its mining operations and cut emissions by 30 per cent by 2030 on 2020 levels.

BHP has since reduced its climate budget from $4 billion to $500 million, and in September fanned concerns of a total about-face on renewables amid reports it had binned plans to build a 50 megawatt (MW) solar farm at its Jimblebar mine and a 40 megawatt-hour (MWh) battery energy storage system in Newman, as a result of budget cuts.

But BHP denied it was backing away from decarbonisation, telling Renew Economy at the time it had signed a new and bigger “baseload renewable” supply agreement with Neoen, in a deal that would underpin the development of Neoen’s new Goyder North wind project and a new big battery at the site.

The deal with Neoen – sealed later that month – equates to 100 megawatts (MW) of renewable power for BHP’s massive copper mining province in South Australia, including the Olympic Dam mine, its smelter and refinery, and the operations at Carrapateena and Prominent Hill.

The supply deal – due to commence in 2029 – will be met by the first 300 MW of the new Goyder North wind project near Burra, and from the newly announced Goyder battery, which will be sized at a minimum of 200 MW and 800 MWh.

In a statement emailed to Renew Economy in September, BHP’s vice president of operational decarbonisation minerals in Australia, Dan Heal, said BHP was still “firmly committed” to decarbonisation and electrification of its Australian mining operations.’

What seems to have disappeared, however, is the appetite and capital for miners to build and own their own renewable energy assets, instead preferring to enter power purchase deals and other third-party contracts.

Certainly, this was a key takeaway message from Rio Tinto’s first capital markets day under its new CEO Simon Trott, last week, when the fellow mining giant cut its own decarbonisation spend to $1-2 billion out to 2030, down from $5-6 billion.

“This reflects our leveraging of third-party investment in renewables by energy developers and our financially disciplined capital allocation principles with the technologies needed to achieve the hardest net-zero emissions reductions taking time to mature,” Rio said in a statement.

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