Sydney Morning Herald
Wednesday 12/12/2007 Page: 25
THE growing tussle among Australian investment funds to acquire North American power generating businesses has been joined by the ASX-listed infrastructure manager Allco Finance and a 40-strong group of not-for-profit superannuation funds. Allco and Industry Funds Management have followed the most recent aggressive players in the sector, Macquarie Group and Babcock and Brown, in grabbing assets in the expanding US energy sector.
The latest deal will result in Allco and IFM spending $US1.48 billion ($1.68 billion) on 29 power generation plants at 12 locations in New Hampshire, Massachusetts, New Jersey and Maryland from Con Edison. Allco will pay $US287 million for a stake of almost 38 per cent in the power projects, with IFM providing the remaining 62 per cent. Allco plans to sell down its interests to a number of its managed funds, including the unlisted Energy Infrastructure Fund, to start operating next year. Allco's shares rose 42c, to $7.78, in reaction to the deal.
IFM, the manager of $14.5 billion and the holding company for the Members Equity superannuation group, will inject its portion into a $3 billion international infrastructure operation. The intervention of Allco and IFM has increased the already fierce competition among fund and asset managers who have targeted regulated utilities such as electricity, gas and water businesses as long-term investments to provide steady and reliable cash flows.
Yesterday's move comes six weeks after Macquarie snapped up Puget Energy, the owner of the largest power company in the state of Washington, for $US7.4 billion. Macquarie put together a consortium of investors including the Canadian Pension Plan Investment Board and the British Columbia Investment Management Corporation to acquire Puget, which supplies electricity to more than 1 million customers and natural gas to 720,000 consumers. That deal put Macquarie ahead of Babcock and Brown in a race for assets.
In July B&B missed out on a previously agreed acquisition of the Montana energy provider NorthWestern. The company had accepted B&B's $2.7 billion bid but it was blocked by local regulators, who were concerned about the possibility of a huge increase in energy costs for NorthWestern's customers. B&B is still scouring the continent for similar deals. Its listed power fund subsequently bought wind farms in Texas and Colorado. Yesterday B&B announced it had sold 70 per cent of a retail portfolio of 53 properties in Switzerland, raising 233 million ($389 million).
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