BHP (ASX:BHP) share price falls after US$2 billion power agreement

Core Viewpoint - BHP Group Ltd has announced a significant $2 billion power agreement with Global Infrastructure Partners, aimed at enhancing its inland power network for the Western Australia Iron Ore business, while maintaining operational control and strategic flexibility [2][3][4]. Group 1: Agreement Details - BHP has entered into a binding agreement with GIP, which is part of BlackRock, for its inland power network related to the Western Australia Iron Ore (WAIO) business [2]. - A trust entity will be established, with BHP owning 51% and GIP providing $2 billion for a 49% stake, with BHP paying a tariff linked to its share of WAIO's inland power over a 25-year period [3]. - BHP will retain full operational control of WAIO and its inland power infrastructure, and the agreement does not affect existing joint ventures or obligations with the State of Western Australia [4]. Group 2: Strategic Implications - WAIO aims to increase iron ore production to 305 million tonnes per year, supported by targeted investments while retaining options for future growth [5]. - The net proceeds from the agreement will be evaluated according to BHP's capital allocation framework, with completion expected towards the end of FY26 [5]. Group 3: Management Insights - BHP CEO Mike Henry expressed satisfaction with the partnership, highlighting the access to capital while maintaining operational control [6]. - CFO Vandita Pant noted that the arrangement exemplifies BHP's disciplined capital portfolio management, enhancing balance sheet flexibility and long-term shareholder value [7]. Group 4: Market Context - The BHP share price has recently risen above $44, attributed to a strengthening outlook for copper, despite potential long-term weaknesses in the iron ore market due to increasing African production [8]. - The presence of an infrastructure investor with nearly $190 billion in assets under management is viewed positively for BHP's strategic positioning [8].