Fundraising

QIC to pay $1.28bn for Australian gas storage

The transaction is the first investment made by the Australian firm's debut infrastructure fund, which reached a A$1bn first close last August.

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A consortium comprising the QIC Global Infrastructure Fund (QGIF) and existing QIC clients is set to buy Iona Gas Storage Facility (Iona), located west of Melbourne in Victoria, for a purchase price of A$1.78 billion (€1.14 billion; $1.28 billion). The asset will be acquired from EnergyAustralia, a subsidiary of Hong Kong-listed China Light and Power Group (CLP). 

The consortium has set up a vehicle named Iona Operations in which QGIF and QIC clients each take a 50 percent stake, while the asset will be managed by QIC. The deal is expected to close by the end of the year. 

According to a CLP filing made today at the Hong Kong Stock Exchange, the asset is a gas processing and compression plant with underground gas storage reservoirs. It provides gas injection, storage and withdrawal services to both the Victorian and South Australian gas markets. 
The storage capacity of the Iona gas facility is 23.5 petajoules.

“Iona is a strategic, high-quality infrastructure asset in the Australian east coast gas market. It provides essential storage facilities to domestic integrated utilities to service intermediate and peak gas demand,” said Ross Israel, head of QIC's infrastructure business, in a statement.

“It has long term contracts with its customers, which underpin stable and predictable cash flows while also presenting a platform for further growth and expansion opportunities.”

“Considering the fact that 66 percent of the Australian population is located in the region, Iona is a critical asset in terms of energy supply on the country’s east coast,” added Matina Papathanasiou, QIC's deputy head of infrastructure.

The transaction is the first investment made by QGIF, which achieved its A$1 billion first close on August 4. 
“The investment strategy of the fund is to set up a diversified portfolio of global infrastructure assets, with an aim to achieve a targeted return of 10-12 percent at a yield of 5 percent,” Papathanasiou told Infrastructure Investor. “Our teams have been actively looking at quality assets in the fields of energy, transport and PPP infrastructure in developed countries.” 
QGIF is an unlisted investment vehicle aiming to raise A$1.75 billion. It has secured commitments from a range of institutional investors including Hostplus, one of Australia’s largest pension funds, an Asian sovereign wealth fund and one of China’s leading insurers. 
With A$6 billion across 10 global direct infrastructure investments managed by its Global Infrastructure Business unit, QIC currently has A$73.8 billion in funds under management, on behalf of around 90 clients.