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Macquarie accelerates Asian deals

The manager expects its tenth Asia fund, which is currently being raised with a hard cap of $2.25bn, to reach close on a 700MW, 19.5% IRR power plant transaction next Tuesday.

The Macquarie Group is getting closer to sealing a string of deals across Asian markets as it hastens efforts to deploy its tenth vehicle dedicated to the region. 

The Australian asset manager expects to reach close on a 700 megawatt (MW) power plant transaction in eastern India in April, an investment it described during a meeting with the New Mexico State Investment Council last week and which it says has been in its sights for the past six to eight months. 

David Luboff, chief executive officer of Macquarie SBI Infrastructure Management and a senior managing director at Macquarie Infrastructure and Real Assets (MIRA), explained to the members of the council who attended the meeting that the deal had been prompted by the project developer's need for fresh capital to replace the maturing investment of a UK-based fund manager. 

Revenues from the plant are said to be secured through a 15-year power purchase agreement with a southern Indian state and a 20-year coal supply contract with Coal India at a regulated tariff. 

“We have negotiated a 19.5 percent IRR return with [an appropriate] security structure and a minimum hold period of four years. You just would never get this type of IRR in the OECD world [for this type of asset risk profile],” Luboff said. 

He added that Macquarie's Mumbai team is also contemplating several potential toll road transactions in India. “What we love about India's toll roads is that the concession deeds are very familiar to us. Their public-private partnership legislation is in a form we are very comfortable with.” 

These transactions would follow on the firm's $42 million investment in a toll road in South Gujarat last year, the first deal it made through Macquarie Asian Infrastructure Fund (MAIF). 

The vehicle, which now has a hard cap of $2.25 billion, reached a first close on $1.1 billion in October. It targets deals in investment-grade Asian markets such as India, Korea, Japan and China and can invest up to 33 percent of its total capital in any of these four nations.

“We've got [two] investments we have committed to and a few others [we are analyzing],” Luboff said. 

MAIF is in the advanced stage of negotiations to acquire a power plant project in Korea. Other assets currently being considered by the fund include a Japanese airport, two tunnel roads in India and a port in Australia.

Macquarie declined to provide further details on MAIF's deal pipeline. 

Japan is in the process of privatising Kansai International Airport, Osaka's main hub, in a deal that could fetch as much as $18 billion. Port of Melbourne, meanwhile, is among the assets expected to be put up for sale this year by Australia's state governments.