NSW reaps $8bn from lease of 50pc of Endeavour to Macquarie-led consortium

AMP is among the winning members of a Macquarie-led consortium leasing 50.4pc of Endeavour off NSW for $8bn.

 

AMP and superannuation fund REST Super have emerged among the victorious members of the Macquarie Group-led consortium taking control of Endeavour Energy in what may be the highest priced sale yet.

NSW Premier Gladys Berejiklian today confirmed an exclusive report in The Australian’s DataRoom that what is known as the Advance Energy consortium will take control of a 50.4 per cent stake in Endeavour Energy, the last of three network businesses sold by the state.

The deal totals $7.64bn, including a 50.4 per cent equity stake for $2bn and a $5.5bn cheque for Endeavour’s debt, which comes off the AAA-rated state’s book.

Advance has already lined up a consortium of 16 local and international banks who will take parcels of $250m-$400m in the refinancing.

Bidding was said to be highly competitive because of the relative security of the asset, although interest costs are due to rise as the business emerges from under the cover of NSW AAA rating to the required minimum BBB investment grade rating.

Advance Energy includes Macquarie Infrastructure with and Real Assets (MIRA) with 30.16 per cent, British Columbia Investment Management Corporation (bcIMC) and AMP Capital with 25 per cent each, and Qatar Investment Authority (QIA) with 19.84 per cent.

AMP’s involvement is via the infrastructure equity unit of AMP Capital’s on behalf of its long term client, REST Industry Super (REST), one of Australia’s biggest industry superannuation funds with 1.9 million members.

Ms Berejiklian and Treasurer Dominic Perrottet said it was a “outstanding result” that secured the state’s $20bn infrastructure build.

The NSW Premier also said the sale had passed all regulatory clearances including the Foreign Investment Review Board, the Australian Competition and Consumer Commission and the Australian Taxation Office.

Michael Cummings, Head of Funds, Australia & New Zealand, Infrastructure Equity at AMP Capital said Advance Energy was committed to ensuring Endeavour maintains and enhances the network and would meet its responsibilities, including complying with the Electricity Networks price guarantee and the employment guarantees.

Under conditions imposed by the state the new controlling shareholders must guarantee employment for more than 2,400 employees and contractors up to 2020, and its prices in 2019 must be below those for 2015. The last condition overrules the Australian Energy Regulator, which governs the five-year returns for electricity companies and is appealing to reinstate a ruling in 2015 that slashed billions from network owners revenue.

The price for the 50.4 per cent stake on offer equates to almost 1.6 times Endeavour’s regulated asset base, the measure used by regulators to determine the revenue, capital and operating costs and returns a utility can extract. It compares to 1.55 times for 100 per cent of the 99-year lease over TransGrid — the main transmission business — and 1.41 times that AustralianSuper and IFM Investors paid for 50.4 per cent of Ausgrid after an auction cruelled by Treasurer Scott Morrison’s rejection of the two leading foreign bidders CKI and State Grid.

Endeavour supplies electricity to 2.4 million people in households and businesses across western Sydney, the Blue Mountains, Southern Highlands, Illawarra and south coast and Advance is said to be paying a premium for exposure to higher population growth and booming infrastructure spending.

The consortium has been going head to head with a rival group that includes Hastings Funds Management, Spark Infrastructure, Caisse de depot et placement du Quebec, Abu Dhabi’s Tawreed Investments and the Kuwait Investment Authority’s Wren House, which won the auction for the main transmission business, TransGrid, with a bid of $10.3bn in the first of the three auctions held by the NSW Government.

Macquarie was outbid for TransGrid by Hastings and its backers in 2015. At that time, Macquarie was working with China’s State Grid and there were reports that Macquarie had been unable to stretch its financing as far. as State Grid wanted.

Macquarie also advised the winning bidders for Ausgrid.