Australia roundtable: Eyeing the resources sector

Evaluating opportunities to exploit Australia’s resources boom were among the topics under discussion at a recent roundtable staged by Infrastructure Investor in Sydney.

In a recent gathering of leading infrastructure investment and advisory professionals in Sydney, Australia’s resources boom was under the microscope – and specifically what investment opportunities may arise from it.

Evidence of a resources boom is clear as demand from China in particular rockets. According to a report from the Bureau of Resources and Energy Economics, Australia’s resources exports reached a record A$190 billion (€156 billion; $195 billion) in 2011 – a 15 percent increase on the previous year.

In order to meet demand, mining companies require infrastructure for the optimal transportation of commodities. As Duncan Taylor, head of infrastructure funds and mandates at Lend Lease Investment Management, said: “The size of the resources boom and required infrastructure spend means that that the miners are likely to turn to external investors to fund the construction needs. We have recognised this and established a group to target these opportunities.”

As well as this new infrastructure, Danny Latham, co-head of infrastructure investments Europe at Colonial First State Global Asset Management, believes mining companies will be scrutinising their balance sheets for assets to divest. He said:

“There has been an ‘unbundling’ process in Europe which extends beyond that prescribed by regulation and increasingly encompasses divestments for economic reasons so that capital can be redeployed into higher-earning assets. We’ve seen it in Norway with [the] Gassled [transaction], we’ve seen it with MLPs [Master Limited Partnerships] in the US, and we’ll see it here. Mining companies will look at their balance sheets and see lazy assets that they don’t need to own.”

One example of a recent deal in the sector saw Indian infrastructure firm Adani Enterprises pay A$1.8 billion in May 2011 for a 99-year lease of the Abbot Point coal terminal, which serves as the gateway to Queensland’s coal-rich Galilee Basin. Infrastructure fund interest in the deal was strong, with rival bids from the likes of Brookfield Infrastructure Partners, Macquarie, Cheung Kong Infrastructure and RREEF.

Other topics discussed at the roundtable included the privatisation wave, the interaction between public and private sectors, the supply of finance, and refining the public-private partnership model. Joining Taylor and Latham were: David Roberts (ANZ); Raphael Arndt (Future Fund); Richard Hoskins (Hastings Funds Management); Michael Hanna (Industry Funds Management); and Greg Boyer (Infralink).

*A full summary of the roundtable may be found in the July/August 2012 issue of Infrastructure Investor magazine and by clicking here: https://www.infrastructureinvestor.com/Article.aspx?aID=0&article=68148