Transgrid secures $800m from investors to fund renewable energy transition

Transgrid provides electricity transmission services under a long-term lease arrangement with the NSW government. Picture: Ash Smith

Australia’s top four banks and investment bank Barrenjoey have sourced $800m from bond investors for Transgrid, as the NSW electricity transmission operator seeks fresh funds for renewable energy infrastructure.

Transgrid’s shareholders were recently said to have injected about $600m into the business for the same reason. With respect to the bond, Transgrid offered investors the opportunity to buy into a 10-year bond with a fixed yield of 6.29 per cent and a 5.25-year bond to source $300m with a floating rate at 1.8 per cent above the bank bill swap rate.

Sources say the funds called on from bond investors last week were being used to pay for the building costs of transitioning to renewable energy sources such as wind and solar.

Transgrid investors have been selling out of the business due to the higher capital costs related to funding the energy transition, with the latest trying to exit being the 20 per cent shareholder Abu Dhabi Investment Authority.

Costs associated with major infrastructure projects have stretched budgets beyond projections. Adviser Barrenjoey has been separately seeking buyers for the $2bn ADIA stake.

Other Transgrid owners include Singapore’s GIC with 10 per cent and the Future Fund, along with Canadian pension funds CDPQ and Omers.

Transgrid provides electricity transmission services under a long-term lease arrangement with the NSW government.

It operates as a regulated utility with approximately 90 per cent of assets leased from the state.

The business was privatised by the NSW government in 2015 for $10.3bn.