Palisade invests in ‘fastest and largest’ data link between US, Australia and NZ

The Hawaiki cable deal is the Australian firm’s first telecoms investment, which it plans to use as a launchpad for further opportunities in the sector.

Sydney-based Palisade Investment Partners has acquired a “significant ownership stake” in the Hawaiki submarine cable connecting the US, Australia and New Zealand.

The cable was commissioned on 20 July 2018 and has more than 43 terabits of data capacity, making it the “fastest and largest” link between the three countries it connects, Palisade said in a statement. The design includes several branching units to connect to Pacific Island nations and already holds capacity contracts with several users, including Amazon Web Services.

Palisade declined to disclose the price it has paid Hawaiki Submarine Cable LP for its stake or the size of the stake acquired. It is acquiring the interest in Hawaiki on behalf of two undisclosed direct-investment-mandate clients and its Diversified Infrastructure Fund, which it said has generated a five-year total return of 13.5 per year as at 30 June 2018, and a 12-month return of 14.5 percent, including an 8.2 percent and 7.5 percent yield, respectively.

Speaking to Infrastructure Investor, Palisade Investment Partners investment director Mike Reynolds said the firm had examined several assets in the telecommunications sector before landing on the Hawaiki cable as its first investment.

“Data usage is growing generally and in Australia, and the physical infrastructure that underpins that is becoming more and more important,” he said. “There’s only one other submarine cable connecting Australia with the US, so this has all the characteristics of critical infrastructure.”

While declining to disclose the exact structure of the deal, Reynolds said it was structured in a “somewhat defensive” way for Palisade and that it was not “just a vanilla equity investment per se”.

He added that Palisade would “absolutely” consider acquiring further assets in the sector and would look to leverage the experience gained with the Hawaiki cable when doing so, as the firm has done in renewables.

The acquisition will allow Palisade and Hawaiki Submarine Cable to “jointly explore investment in future data infrastructure developments”, the Australian fund manager said in the statement.