Macquarie eyes Aussie infra debt

The co-head of the firm’s infra debt strategy sees opportunities arising from the refinancing of brownfield assets and Australia’s growing renewables sector.

Macquarie's infrastructure debt investment division has been looking at opportunities in the Australian market in the past six to nine months, according to Andrew Robertson, senior managing director and co-head of Macquarie Infrastructure Debt Investment Solutions.

 

The infrastructure debt team of Australian-based Macquarie Group had previously been focusing on the UK, continental Europe and the US since being formed in 2012. The unit is currently raising its second UK inflation-linked infrastructure debt vehicle, which reached a second close at £770 million ($989 million; €870 million) last week.

In Australia, Robertson saw a broadening set of opportunities arising from the refinancing of existing assets and the rapid growth of the renewables market.

Many brownfield assets are currently financed with three-, five- and seven-year bank debt, he said, meaning and therefore there is a steady flow of refinancing opportunities for institutional debt investors with appetite for longer-term loans. Robertson noted that the renewables industry is still evolving, with lending typically granted against corporate power purchase agreements that are significantly shorter than the service life of underlying power generating assets.

“There is still room for innovation to improve the efficiency of renewables financing in Australia,” commented Robertson.

Australian banks and domestic institutional investors have traditionally preferred shorter-dated liabilities, while many project sponsors, particularly from Europe, see long-dated debt instruments as an effective way to lower costs and refinancing risk.

The mismatch between domestic investors' interests and sponsors' needs offers opportunities for international institutions to get involved in longer-term lending, according to Robertson. “The appetite for long-term debt solutions is growing in Australia. We can compete by lending in a longer tenor.”