Takeover target and energy infrastructure investor Hastings Diversified Utilities Fund says domestic demand for gas has softened, but long-term demand prospects are good.
HDF owns several primary gas transmission pipelines in WA, South Australia and south-west Queensland through its subsidiary, Epic Energy.
HDF is subject to takeover offers by the APA Group and Pipeline Partners Australia.
The responsible entity for HDF, Hastings Funds Management Ltd, has recommended that HDF securityholders accept APA's cash-and-scrip offer. The all-cash offer of PPA, which declined to match the APA bid, expires today.
HDF today reported a loss of $134.6 million for the six months to June 30, 2012, compared to a profit of $27.1 million in the prior corresponding period.
The bottom-line result was pulled back primarily by a higher performance fee to be paid to HFML and expenses related to the refinancing of debt held by Epic Energy.
HDF's total operating income in the first half was $103.8 million, up 32.3 per cent on the $78.4 million one year earlier.
HDF chief executive Colin Atkin said operations remained robust against the backdrop of takeover activity.
"There's been some softness in the domestic outlook more recently, and we believe the medium to long-run prospects for domestic gas demand nevertheless remain promising," Mr Atkin said in a market briefing on Friday.
"That said, the development of the LNG (liquefied natural gas) processing plants in Queensland provide us with significant certainty about demand, and we maintain our view that our pipelines will continue to provide an important support role to those and any future LNG processing plants well into the future."
Mr Atkin said domestic demand into Brisbane, South Australia and NSW was expected to be flattish to slightly positive.
This view was slightly softer than the view of prior periods and reflected the expected response to higher energy prices, efficiencies, and a tougher industrial environment.
"Still, as demand expectations change and new sources of energy are developed, the demand for pipeline capacity can change quickly and result in significant and rapid long-value contracting opportunities for us," Mr Atkin said.
"We remain comfortable that our existing long-value contracts provide certainty until we hit the next growth spurt."
Securities in HDF were unchanged at $2.65.