Sydney’s Reliance Rail PPP restructured for value recovery

The process included some original shareholders exiting, removing monoline insurers from the capital structure and a new senior debt refinancing.

International Public Partnerships has invested $154 million to increase its shareholding in the Reliance Rail PPP project to 33 percent, with the remaining share held by AMP Capital-managed funds.

Reliance Rail now maintains 78 electrified train sets in Sydney, which it has financed, designed and manufactured under a PPP model between 2006 and 2014. It is now receiving an availability-based revenue stream extending to 2044 with the ultimate counterparty being Transport for New South Wales.

INPP has held a small minority stake in the project since 2006. However, since 2012, this has been carried at nominal value only, said the listed infrastructure investment firm. “While the operational performance of the project has been excellent, equity value has been repressed by the complexity of the project’s original structure,” it noted.

The restructuring process, which took several years, included the exits of some of the original shareholders, the removal of monoline insurers from the capital structure and a complete restructuring of the project’s senior debt, putting in place a deleveraged, lower-cost and more sustainable structure.

Reliance Rail was the largest PPP in Australia in 2006. The then-concessionaire included Downer EDI with a 49 percent stake, ABN AMRO Australia and Babcock & Brown Public Partnerships holding 12.75 percent each and AMP Capital with 25.5 percent.

The 2017 transaction is expected to restore the original value of INPP’s existing investment, providing its investors with an attractive return on a blended basis of the new and existing capital, INPP said. The investment was funded through INPP’s existing £400 million ($532 million; €448 million) corporate debt facility, which has now drawn or committed up to £100 million to assets.

INPP has invested in 127 social and transport infrastructure projects under a private finance scheme, regulated assets and other similar procurement methods in the UK, Europe, Australia and North America. Amber Infrastructure is the investment advisor to INPP.