Igneo taps RBC for $2bn-plus Clarus sale

Clarus was previously called Firstgas and operates in energy transmission and distribution. Picture: iStock

Australia-based Igneo Infrastructure Partners is understood to have hired RBC as it tests the waters for a $2bn-plus sale of its New Zealand transmission pipelines business Clarus.

The company was previously called Firstgas, and it is understood that RBC has quietly made attempts to sell the business in the past.

Clarus is one of New Zealand’s largest energy groups, operating in the area of transmission, distribution, supply and storage of energy with over 500,000 customers.

The company says while the majority of its existing assets and investments remain in the traditional natural gas sector, it is targeting decarbonisation opportunities.

Within the Clarus company are businesses including Rockgas, which is New Zealand’s largest LPG retail supplier and Firstgas, which connects natural gas to homes, businesses and large industry, with more than 2,500km of high-pressure gas transmission pipelines and 4800km of gas distribution networks.

Its other businesses are Firstlight Network, its lines company that operates across 12,000 sqkm of the country’s east coast, First Renewables and Flexgas.

Flexgas owns and operates Taranaki’s recently expanded underground Ahuroa gas storage facility that has long term, fixed price contracts.

Igneo is likely targeting buyers such as GIP, Brookfield, APA Group and Stonepeak, which are typically drawn to companies with low risk, stable earnings streams.

It comes as the Future Fund, advised by JPMorgan, is poised to buy a stake in NSW electricity transmission company Transgrid from Canadian pension fund OMERS, which is advised by Barrenjoey, according to sources.

DataRoom revealed last year that stakes in Transgrid were up for sale amid huge capital spending requirements related to the energy transition, and OMERS was likely to be interested in a selldown.

Singapore sovereign wealth fund GIC, advised by Citi, was in talks to buy a stake of the $10bn-plus business when groups were offered access to commercial information on the business.

Barrenjoey had been Transgrid’s strategic adviser, while Macquarie Capital had offered advice on the debt.

Transgrid was sold by the NSW government in 2015 for $10.3bn.

The buyer was a consortium of Spark Infrastructure, Utilities Trust of Australia, Canadian pension fund CDPQ, Wren House and the Abu Dhabi Investment Authority’s Tawreed Investments.

In 2020, Canadian pension fund OMERS purchased a 19.99 per cent stake from the Kuwait Investment Authority’s Wren House Infrastructure Management for a price thought to be around $2bn.

Transgrid is a regulated business, with about 90 per cent of its assets leased from the NSW government over the long term.

The remainder includes contestable assets, such as its connection assets, which provide growth opportunities for investors as demand from new renewable generation increases over the next decade.

When the asset was privatised, the then listed Spark committed to owning 15 per cent, the Morrison & Co-advised UTA 20 per cent, CDPQ 25 per cent and Tawreed Investments and Wren House each 20 per cent.

The consortium paid 1.6 times the asset’s regulated asset base at the time, which was considered a large amount.

In 2020, onerous regulations meant the asset had a return on equity of about 5 per cent, which was considered low.

Other energy assets currently up for sale include Alinta Energy through RBC and UBS, and Edify Energy, which is being advised by Lazard.