Investors offered stake in Pacific Hydro via $1b Clean Energy Fund

Sydney Morning Herald
Wednesday 14/10/2009 Page: 3

AUSTRALIA'S industry superannuation funds have launched a $1 billion-plus Clean Energy Fund that plans to take a big stake in Pacific Hydro and support future renewable energy developments. Garry Weaven, chairman of Industry Funds Management, an umbrella management group for 36 industry super funds, said investors were being offered a substantial stake in Pacific Hydro through the new Clean Energy Fund. Industry Funds Management put up to 49% of Pacific Hydro up for sale last month, managed by investment bank Lazard.

Initially it was expected the Pacific Hydro stake, valued at about $1 billion, would be taken up by foreign investors or those from the Australian power industry such as AGL and Origin Energy. However, the move to launch the Clean Energy Fund means the asset could stay wholly or largely in the hands of the industry funds sector. Mr Weaven said international investors would be influential in the Pacific Hydro sale regardless of the ultimate outcome. The global players will tend to set the price I think."

However, a range of Australian industry and public sector super funds which "don't have size to be large-scale direct equity investors but have a desire to be investors in renewable energy" would be able to buy in through the new fund, he said. The sale is scheduled to be completed by the end of the year. Industry Funds Management put the Pacific Hydro stake on the market to help fund the renewable energy producer's rapid growth plans. "The company has got bigger and the project pipeline has got bigger and our capacity to keeping the funding up to it has been severely tested," Mr Weaven said.

In 2005, after a bidding war with the Spanish infrastructure group Acciona, Industry Funds Management bought the 68% of Pacific Hydro it did not own. Its final bid valued the company at about $950 million. At the time, MrWeaven said IFM ownership would allow much faster growth because of the super fund's massive and guaranteed annual inflows and its lack of a need to pay dividends to investors.

Pacific Hydro has invested $1.5 billion in Chile in recent years, including raising $200 million from the debt markets at the height of the global financial crisis. That reflected the attractiveness of renewable energy investments to world markets, driven by the limited supply of good projects and regulatory support for the sector, Mr Weaven said. The adoption of a 20% renewable energy target in Australia and growth in the Chilean economy is expected to double Pacific Hydro's generation capacity in both countries in the next few years.