UK - UK-based pension fund investment in infrastructure projects are set to increase rapidly following the National Grid Transco deal, Macquarie Bank predicts.
Macquarie’s European Infrastructure fund - along with foreign investors such as Northwestern Mutual Life Insurance, the Canada Pension Plan Investment Board and the Ontario Teachers Pension plan - acquired the Wales & the West Gas Distribution Network from National Grid Transco for £5.8bn. And Macquarie says it is currently holding talks with UK-based pension funds about investing in similar projects and expects them to join in by the end of the year.
UK-based schemes have, until now, not invested in infrastructure projects - unlike their counterparts in North America, Australia, Europe and Asia.
Macquarie managing director Jim Craig said its European Infrastructure fund caters to pension schemes and investors with a long-term outlook as it aims to deliver sustainable, regular cash yields and moderate capital growth.
The targeted investments include electricity and gas transmission and distribution networks (DN), water and sewerage companies, rail, airports, communications infrastructure and toll roads.
Craig said: “We are very pleased to acquire the Wales & the West DN on behalf of our investors. The high quality of the assets and the experience of DN management and staff make this a unique opportunity.
“The DN provides a strong match with the fundís investment criteria - a stable, essential-service business generating strong and sustainable cash yields and operating in a mature regulatory environment.
“The European infrastructure sector is generating a strong and growing pipeline of interesting opportunities.”
The sale is expected to be completed in second quarter 2005. Macquarie acted as financial adviser, lead underwriter and debt and equity arranger.
Acquisition facilities were provided by Barclays, Dresdner Kleinwort Wasserstein and Royal Bank of Scotland.
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