Friends of the Earth
West Midlands Transport
Campaign
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Birmingham Friends of the Earth West Midlands Transport Campaign |
19 July 1999
The Infrastructure Trust of Australia Group (ITA), Australia's first and largest listed infrastructure trust, said today it has reached agreement with Anglo-Norwegian company Kvaerner ASA to purchase two of its subsidiary companies that specialise in the development and management of infrastructure assets.
The subsidiaries, Kvaerner Corporate Development Limited (KCD) and Kvaerner Investment Limited (KI) will be purchased by Macquarie European Infrastructure Limited, a wholly owned UK subsidiary of the ITA Group. The transaction is expected to be completed within three months.
The businesses hold interests in 24 projects of which seven are of specific interest to the ITA Group. Six of the assets are in the United Kingdom and the seventh is in Portugal.
The total cost of the transaction is £90.2 million (approximately A$212.1 million). The ITA Group has sufficient cash (A$170 million) and facilities to complete this transaction. However, given other future commitments, it will look to raise additional capital in the near term. Details will be announced shortly.
Four of these assets are toll roads and about 88 per cent of the purchase price relates to these roads. The purchase is forecast to achieve a 12.5 per cent post tax return in Australia for the ITA Group over the life of the assets.
At completion of the purchase, ITA will be one of the largest owners of toll roads in the western world and by the end of this year, toll roads in which ITA will have a substantial interest will handle more than 1 million vehicles per day.
Macquarie Infrastructure Investment Management Limited, the Manager of the ITA Group, said that it will also change the Trust's name, to the Macquarie Infrastructure Group (ASX code MIG) from ITA. The new name better reflects Macquarie's role as manager of the listed entity and the spread of international assets now held by the Group.
"The acquisition enhances the Group's growth opportunities, and with this, its ability to increase cash distributions to unit holders over time," said Macquarie Infrastructure Group Chairman, Mark Johnson.
Macquarie Infrastructure Investment Management Managing Director, Anthony Kahn, said the assets are being acquired from Kvaerner ASA as part of an asset sale program and international restructuring being undertaken by the firm.
Mr Kahn said the newly acquired assets are:
A 50 per cent holding in the A$800 million Yorkshire Link "shadow" toll road in the UK a 24.8 per cent holding in the A$1.3 billion Tagus River toll bridges in Lisbon, Portugal a 50 per cent holding in the A$1.7 billion Midlands Expressway in the UK a management contract for the A$475 million Dartford River toll crossings in London a 50 per cent holding in a concession company undertaking a A$260 million expansion of the Queen Elizabeth Hospital in Greenwich, London a 26.7 per cent holding in a concession company which has been nominated to undertake a A$1.0 billion refurbishment of the Ministry of Defence buildings in Whitehall, London and a 50 per cent economic interest in a A$100 million waste to energy incinerator under construction in Baldovie, Scotland.
The ITA Group's existing assets are:
A 50 per cent holding in Interlink Roads Pty Ltd, the owners of the M5 Motorway concession 50.9 per cent of Horizon Energy, which holds 25 per cent of the Victorian coal mine and electricity power plant LoyYang A 68.4 per cent of the Airway Motorway Group, the developer of the Eastern Distributor toll road in Sydney, which is due to open in the first quarter of 2000 10.8 per cent of Transurban City Link 8.1 per cent of the Hills Motorway (M2) a joint venture agreement to develop a new toll road and tunnel in the German city of Rostock.
Mr Kahn said each of the newly acquired assets has solid earnings potential. He said the Yorkshire Link shadow toll road in the United Kingdom began operations in February 1999. Under the shadow toll road arrangement, the UK Government pays the concession holder an agreed toll per vehicle using the road and users access the road for free.
The Dartford River toll crossings form part of the London orbital motorway and comprise two tunnels and one bridge. The bridge was opened in 1988.
The two Tagus River toll bridges in Lisbon, Portugal, include the 10 kilometre long Vasco da Gama Bridge which opened in 1998.
The Midlands Expressway in the United Kingdom, which is similar in project cost to Transurban's Melbourne City Link toll road, will be the UK's first user pays toll road with financial close expected next year. Under the already signed Concession Agreement, the concession company has absolute discretion on the level of tolls charged over the entire 53-year post financial close concession period.
The Queen Elizabeth Hospital in Greenwich, London, is undergoing a $260 million redevelopment under the UK Government's Private Finance Initiative (PFI) accommodation program. Under the PFI program, companies undertake defined construction works and provide a broad range of related services over a long contract period. In return the concession company is paid annual "availability charges" and "service charges" by the relevant government authority. These types of investments are characterised by high levels of fixed costs and revenues.
The $A1 billion refurbishment of the Ministry of Defence headquarters in Whitehall, London is also part of the PFI program.
Finally, 78 per cent of the projected revenue for the A$100 million waste to energy incinerator nearing completion in Baldovie, Scotland, is through already signed long term contracts for waste disposal with local government authorities.
As part of the overall transaction, the ITA Group will, subject to unit holder approval, issue ITA units to Australian listed company Pacific Energy Limited (PEL), which is a Kvaerner associate. A PEL controlled company will acquire and assume obligations for assets held by KCD and KI which the ITA Group does not wish to retain. If unit holders do not approve the issue of these units, then PEL will be paid cash in lieu. The value of the units to be issued to PEL is £8.25 million (approximately A$19.4 million). This amount is included in the total consideration paid for the acquisition.
"We believe the outlook for the ITA Group is solid, especially given the Group's ability to take its specialised infrastructure management expertise into international markets and pro-actively manage these and other like assets," Mr Kahn said.
In the 1998/99 financial year, ITA paid a 10 cent distribution, after announcing a half year profit (to December 31, 1998) of $161.4 million.