OTPP, Hastings win A$2.3bn Sydney desalination deal

Canada’s Ontario Teachers Pension Plan and Australian fund manager Hastings Funds Management have teamed up to win a contract for the 50-year lease of the Sydney Desalination Plant, which provides safe drinking water to the Australian city.

Canadian pension the Ontario Teachers Pension Plan (OTPP) and Australian fund manager Hastings Funds Management have jointly entered a contract with the government of New South Wales for a 50-year lease of the Sydney Desalination Plant (SDP).

State-owned Sydney Water Corp launched a competitive bidding process in November last year to refinance SDP through a long-term lease. As part of the transaction, Sydney Water Corp has entered a 50-year water supply agreement with SDP, which is capable of producing over 15 percent of Sydney’s total demand for potable (safe to drink) water.

The successful bid by OTPP and Hastings values SDP at A$2.3 billion (€1.8 billion; $2.3 billion). Hastings’ investment, which totals A$375 million, comes from two unlisted infrastructure investment funds, Utilities Trust of Australia and The Infrastructure Fund. The $117 billion OTPP has an C$11 billion international infrastructure portfolio covering sectors such as electricity distribution, airports and high-speed rail as well as water and wastewater.

Together, OTPP and Hastings own or manage water assets in Australia and globally that serve approximately 3.85 million water customers. For example, Hastings has a stake in the UK's South East Water while OTPP is an investor in Australia's Ballarat Water.

“SDP is a high-quality infrastructure asset ideally suited to our investment criteria and will help to pay benefits to our members for decades,” said Stephen Dowd, OTPP senior vice president, infrastructure and timberland, in a statement.  He added that the asset would provide “stable inflation-protected returns through its fair and transparent regulatory regime and contractual framework”.

Sydney is proving something of a magnet for large-scale infrastructure investment. Last month, the Australian government issued a request for tenders from the private sector to fund, design, build and operate the A$2 billion Moorebank Intermodal Terminal project, involving the construction of a rail link from Port Botany to a new freight terminal and warehousing facilities at Moorebank, a Sydney suburb.