Minter Ellison head of infrastructure Andrew Rentoul, partner, has predicted more infrastructure deals across Australia along the lines of the successful leasing of the Port of Newcastle by the New South Wales (NSW) government.
The firm advised the government of NSW on the AUD1.75bn (£960bn) transaction, which saw a pairing of Hastings Funds Management and China Merchants Group pay 27 times the forecast 2013–14 financial year earnings for the asset after a highly competitive bidding process.
Rentoul, who led Minter Ellison’s advisory team along with M&A partner Costas Condoleon and major projects partner Virginia Briggs, said Australia is seeing a growing wave of investment by international and domestic pension and sovereign funds in both existing and greenfields infrastructure projects.
He said: ‘The Port of Newcastle outcome confirms the very strong demand for quality assets in the infrastructure sector, and there will be more deals to come. Australia is a very attractive destination for funds and operators, with quality assets, a stable economy, proximity to Asia and low sovereign risk.’
According to Rentoul, apart from the stellar price, a significant feature of the Newcastle transaction was that the NSW government achieved its preferred allocation of responsibility for the future operation and development of the port. ‘This is an important benchmark for governments across Australia considering recycling capital into new projects,’ he said.
With Australia’s infrastructure deficit estimated at AUD770bn, he believes that now is the right time for governments to bring assets to market to unlock ‘lazy’ capital to deliver new infrastructure projects that provide opportunities for growth, jobs and economic development.
He said: ‘Across Australia there is a store of high-quality infrastructure assets that will be very attractive to investors, including roads, rail, ports and electricity
‘Recently, we’ve seen Transurban’s purchase of Queensland Motorways [AUD7bn] and Caisse de Depot et Placement du Quebec’s purchase of a 26 per cent stake in Port of Brisbane [reported to be AUD1.4bn] as well as the leasing of Port Botany and Port Kembla.
‘The market speculation is that governments may seek electoral mandates to transact assets including the Queensland ports of Gladstone and Townsville, the Port of Melbourne, port and water assets in Western Australia and the “jewels in the crown”, the electricity transmission and distribution assets in NSW and Queensland.’
He added: ‘Industry sources value the NSW poles and wires business alone at in excess of AUD30bn. That would pay for a lot of new hospitals, schools and roads.’