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Macquarie-led consortium to pay A$7.6bn for Endeavour Energy stake

A consortium led by Macquarie Group is buying a controlling stake in one of Australia’s biggest public energy companies in a deal that will deliver a A$7.6bn windfall to the New South Wales government. 

The sale of a 50.4 per cent stake in Endeavour Energy to the Advance Energy consortium completes a trio of energy sales in NSW under an “asset recycling” policy, which the US administration has flagged as a possible model for its own infrastructure programme. 

Under the Australian strategy public assets are leased by state governments to private interests for 99 years with the proceeds used for building projects. The federal government typically provides a 15 per cent bonus on the value of the asset sales made by states. 

“Through initiatives like asset recycling and our strong financial management, we have catapulted NSW from the bottom of the national economic ladder right to the very top,” said Dominic Perrottet, NSW’s treasurer, on Wednesday. 

The NSW government said it had now raised more than A$20bn over three years through its asset recycling policy to pump into road, rail, school and other projects across Australia’s most populous state. 

Advance Energy, a consortium comprising Macquarie, AMP Capital, Qatar Investment Authority and British Columbia Investment Management Corporation, will manage Endeavour Energy’s business, which supplies electricity to 2.4m people in Sydney and nearby regions. The NSW government will control the remaining 49.6 per cent stake in Endeavour Energy. 

The consortium beat off competition from a rival bid led by Hastings Funds management and Spark Infrastructure, two Australian companies. It is paying 1.6 times the regulated asset base — a measure of the value of assets in a regulated business.

Michael Cummings, head of funds at AMP Capital Infrastructure, said Advance Energy is committed to ensuring Endeavour Energy enhances its network to support growth. 

No major Chinese bidder participated in the Endeavour Energy sales process, which followed controversy when China’s State Grid Corporation and Hong-Kong-based Cheung Kong Infrastructure were blocked last year from bidding for Ausgrid, Australia’s biggest electricity company on national security grounds. 

However, investor interest in Australia’s energy and infrastructure sector remains strong. In April CKI finalised a A$7.4bn deal to buy Duet Group, an Australian listed infrastructure group, and in March Hong Kong’s Chow Tai Fook group agreed a A$4bn deal to buy Alinta Energy, a privately owned company. 

Australian federal and state governments developed the “asset recycling” strategy in 2014 as a way to boost economic growth and build much needed infrastructure. NSW embraced the model and sold Transgrid for A$10bn in 2015 and a controlling stake in Ausgrid for A$16bn last year. 

Other Australian states have been slower to follow suit due to political concerns over the privatisation of public assets. But the model is attracting attention overseas, particularly in the US where President Trump plans to reveal a US$1tn infrastructure plan later this year. 

Steven Roth, co-chairman of Mr Trump’s infrastructure task force, recently said the US administration was looking “very carefully” at how Australia is financing its building programme through “infrastructure recycling”.

Via FT