The BHP Group Ltd (ASX: BHP) share price is slightly down after the ASX mining share announced a major agreement regarding its power.
BHP is one of the world’s largest resource businesses. It’s involved in iron ore, copper and coal. The business also has a potash project in progress in Canada.
$2 billion power agreement
BHP announced to the ASX that has entered into a binding agreement with Global Infrastructure Partners (GIP), which is a part of BlackRock, regarding BHP’s inland power network for the Western Australia Iron Ore (WAIO) business.
WAIO) comprises four main joint ventures in the Pilbara region of Western Australia, with BHP holding an 85% interest in WAIO.
Under the agreement between the two businesses, a trust entity will be established that is 51% owned and controlled by BHP, while GIP will provide US$2 billion in funding for a 49% stake.
BHP said it will pay the entity a tariff linked to BHP”s share of WAIO’s inland power over a 25-year period.
Under the agreement, BHP will retain full operational control of WAIO, including its inland power infrastructure. The agreement does not affect BHP’s existing joint venture agreements or BHP’s obligations under its agreements with the State of Western Australia or affect ownership of any WAIO assets.
The ASX mining share said that WAIO will continue to plan and execute its long-term strategy focused on increasing iron ore production to 305 million tonnes per year, supported by targeted investments, while retaining optionality for future growth.
BHP said net proceeds will be incorporated into and evaluated in according with its capital allocation framework. Completion is expected towards the end of FY26.
Management comments
The BHP CEO Mike Henry said about the agreement:
We are pleased to partner with GIP on this arrangement that enables BHP to access capital and maintain operational and strategic control of a critical part of WAIO’s infrastructure.
The BHP chief financial officer Vandita Pant said:
This arrangement is an example of BHP’s disciplined approach to capital portfolio management. It strengthens our balance sheet flexibility, supports long-term value creation and enhances BHP’s shareholder value.
Final thoughts on the BHP share price
Having an infrastructure investor on board with almost US$190 billion of assets under management (AUM) across energy, transport, digital infrastructure and water and waste management sectors is probably a good move.
The BHP share price has jumped above $44 in the last few weeks, seemingly because of a strengthening outlook for copper.
BHP faces potential longer-term weakness in the iron ore market (with growing African iron production), but potential strengthening of the copper price.
Therefore, I wouldn’t call the BHP share price a buy at this stage. I believe it’s better to buy when there is weakness rather than strength. There are quite a few other ASX dividend shares I’d rather buy first.
