Hastings, CDPQ win A$10bn TransGrid auction

A consortium teaming up Australian fund managers with overseas institutions will buy a 99-year lease for NSW’s electricity grid.

A group led by Hastings Funds Management (Hastings), the Melbourne-based firm, has won the right to run New South Wales’ electricity grid for nearly a century.

The consortium, in which Hastings holds a 20.02 percent stake, also includes Canadian pension Caisse de dépôt et placement du Québec (24.99 percent), Australia-listed Spark Infrastructure (15.01 percent), Kuwait Investment Authority’s Wren House (19.99 percent) and Tawreed Investments, a subsidiary of Abu Dhabi Investment Authority (19.99 percent).

At A$10.3 billion (€7.0 billion; $7.5 billion), the price tag reached by the network values the business at 1.6 times its regulated asset base. The windfall will please New South Wales’ (NSW) government, which expected to reap about A$9 billion through the sale.

Announcing the deal earlier today, Premier Mike Baird said more than $3 billion worth of debt attached to the business would need to be paid off, leaving net proceeds pocketed by the government at around $7 billion.

The offer trumped a number of rival bids, with several other consortia also understood to have been in the running for acquiring the lease. These comprised a tie-up between State Grid Corporation of China and Macquarie Infrastructure & Real Assets, a team involving AustralianSuper, Canada Pension Plan Investment Board and Borealis Infrastructure, and a group involving IFM Investors and QIC.

The transaction came at a sensitive time in Australia, with the federal government under fire for failing to safeguard national interest by selling strategic assets to foreign investors, notably from China. In recent weeks, it emerged that the Northern Territory authorities had leased Port of Darwin to a Chinese entity without a full due-diligence by Australia’s Foreign Investment Review Board.

Under safeguards governing foreign ownership of strategic assets, no single overseas bidder for TransGrid could control more than 50 percent of the company.

The NSW government will now move towards selling off the 99-year lease of 50.4 per cent each of power utilities Ausgrid and Endeavour Energy. It has previously hoped to raise about $13 billion from all three transactions, all of which would go towards funding new infrastructure projects.