Morgan Stanley exits Chilean electricity firm

Morgan Stanley Infrastructure unloaded its 50% interest in SAESA to Alberta Investment Management Corporation. The deal places the Chilean utility solely in Canadian hands and lets the acquirer broaden its exposure to a fast-growing infrastructure market.

Morgan Stanley Infrastructure (MSI), the infrastructure unit of the US investment bank, sold its interest in SAESA Group, a Santiago, Chile, electricity distribution and transmission company.

MSI, the manager of a $4 billion global infrastructure fund, co-owned 50 percent of SAESA with Canadian pension Ontario Teachers' Pension Plan (OTPP). It sold its interest to Alberta Investment Management Corporation (AIMCo) for an undisclosed sum.

A press release said MSI, as part-owner of SAESA, believed its work with the utility left the company “well positioned for future growth and continued success.” Sadek Wahba, global head of MSI, detailed managerial and operational improvements resulting from its ownership in SAESA: 

“Between 2007 and 2010, capital spending increased by approximately 14 percent annually,” said Wahba. “Our investment thesis for SAESA has now been borne out”. 

Wahba went on to note MSI had received interest in SAESA, which he attributed to Chile becoming a member of the Organisation for Economic Co-operation and Development (OECD) and its de-rated risk. The MSI head also pointed out that its successful experience with SAESA should pave the way for further investments in the country:

“We remain interested in Chile, given its long-standing regulatory environment, membership in the OECD, and our knowledge of the market based on this successful investment,” Wahba said.

AIMCo in a statement noted its stake in SAESA complemented its investment in Autopista Central, a toll road operator headquartered in Santiago. AIMCo acquired 50 percent of Autopista Central from Skanska in December 2010.

Morgan Stanley and OTPP acquired SAESA, then PSEG Chile Holding, from energy group PSEG Global in June 2008. Credit Suisse, which advised PSEG on the sale, noted MSI and OTPP shared $1.3 billion in enterprise value for SAESA at the time, with a $870 purchase price.

SAESA is responsible for delivering power to 16 percent of Chile, with a strong presence in Cautin Province, Araucania Region, Los Lagos and Palena.

Chile is seeking to re-establish vital infrastructure following a devastating earthquake in March 2010. Energy infrastructure, in particular, has become a pressing issue for Chile, highlighted by a September power outage that halted crucial copper production.

The outage renewed criticism of President Sebastian Pinera, who has been blamed for failing to invest in energy infrastructure. Rodrigo Alvarez, minister of energy, has said he intends to develop a $950 million plan to modernise energy infrastructure throughout Chile via foreign investment.