Ausgrid to tap Australian bond market

Ausgrid tapped the bond market two years ago to secure $1.2bn.

The NSW electricity distribution network company Ausgrid is the latest to tap the Australian bond market, with some expecting that it could be in search for as much as $1bn.

Working on the raise are banks MUFG, NAB and UBS, with investor roadshows currently underway to promote its six and half-year BBB-rated issue.

Ausgrid has $1.4bn worth of bank debt that is due to expire next year and the expectations is that the funds raised will be part of that refinancing.

Investors are to be offered a yield of about 2 per cent.

Ausgrid tapped the bond market two years ago to secure $1.2bn, so the thinking is that while the exact amount of funds that are being secured is yet to be determined, the raise will be sizeable.

The electricity distributor currently has 52 per cent of its funding structure with bank debt, with Australian bonds only comprising about 8 per cent, so it makes sense that the infrastructure owner would be interested in diversifying its funding structure further.

Ausgrid is owned by the NSW government, AustralianSuper and IFM.

The state government sold a 50.4 per cent stake of Ausgrid to IFM and AustralianSuper in October 2016 for $16.189bn to help pay for infrastructure projects.

Funds made an unsolicited proposal to the government for the business.

This was after foreign bidders for the asset, China’s State Grid Corp and Hong Kong’s Cheung Kong Infrastructure, were blocked from bidding for the asset by the federal treasurer due to national security concerns.

CKI and State Grid offered between $12bn and $16bn for the 99-year lease, said sources at the time.

The NSW government, retaining 49.6 per cent of Ausgrid, has an ongoing role as the lessor of the business and an investor and some question whether that interest will also eventually be offloaded.

At the time of the IFM and AustralianSuper transaction, Macquarie Capital advised the pair while UBS and Deutsche Bank advised the state government.

Meanwhile, a new Australian government bond is also in the market, attracting orders of more than $18bn. The bond with the longest ever maturity at 2051 was launched Monday and will offer a yield of 1.9 per cent.