Bilfinger Berger, the German infrastructure group, is following in the footsteps of UK developer John Laing with a £245 million (€282 million; $384 million) infrastructure fund, to be listed on the London Stock Exchange in November.
The fund, known as Bilfinger Berger Global Infrastructure, will use the proceeds from its London listing to buy a seed portfolio of 20 mostly operational public-private partnership (PPP) projects “with strong yield characteristics,” Bilfinger Berger said in a statement. The portfolio will be acquired from Bilfinger Berger Project Investments, the German firm’s concessions unit, which owns 31 PPPs across the world.
The majority of the projects will be backed by availability payments – public contributions paid in exchange for making assets available in good condition. The seed portfolio is spread across the UK (37 percent), Canada (24 percent), Australia (23 percent), Germany (4 percent) and Hungary (12 percent) and consists of road and social infrastructure projects.
Bilfinger Berger said the fund is targeting an initial annualised yield of 6 percent on the issue price and an internal rate of return (IRR) of between 7 percent and 8 percent over the long term. The German company will own 19.9 percent of the fund at launch.
The fund’s management team will be transferred from Bilfinger Berger. “As a result of being internally managed, [the fund] will not incur NAV [net asset value]-based management fees, performance fees nor acquisition fees on further investments by the company. The total expense ratio of [the fund] should therefore decrease as the company’s portfolio grows,” Bilfinger Berger indicated.
Bilfinger Berger Global Infrastructure is already looking to acquire another 11 assets worth some £250 million over the next five years from its developer parent. During this time period, the fund will have contractual rights of first refusal and/or first offer “in respect of certain projects that Bilfinger Berger may dispose of,” Bilfinger Berger explained.
Frank Schramm, Duncan Ball and Arne Speer – all PPP veterans already employed by Bilfinger Berger – are the three directors that form part of the fund’s management board. In addition, there is also a four-member supervisory board.
‘Developer funds’ have been steadily growing over the last year, as infrastructure developers tap yield-hungry institutional investors as an elegant way to recycle project equity.
Besides John Laing’s London-listed infrastructure vehicle – the most similar in structure to Bilfinger Berger’s upcoming fund – which raised £270 million when it listed last year, Australian and Dutch developers Lend Lease and BAM PPP have teamed up with pension provider PGGM to form two similar, unlisted joint ventures (for more information on the latter, see the September 2011 issue of Infrastructure Investor).