Sydney Desalination Plant leased for US$ 2.3 billion

The New South Wales state government in Australia accepted on 10 May 2012 a binding offer for refinancing the Sydney Desalination Plant (SDP) from a consortium of Ontario Teachers’ Pension Plan (OTPP) and Hastings Funds Management.

The successful bid values the 250,000 m³/d seawater reverse-osmosis plant at US$ 2.3 billion over 50 years. As Sydney Water owes US$ 2 billion for the plant’s construction by a Veolia-led consortium, it will only receive US$ 300,000.

OTTP Infrastructure Group currently manages an international portfolio of approximately US$ 11 billion, including water and wastewater, electricity distribution, airports, power generation, high-speed rail, port facilities and timberland.

The Hastings input comes from two managed infrastructure equity funds: Utilities Trust of Australia (UTA) and The Infrastructure Fund (TIF). UTA has investments in South East Water in the UK and TIF in Ballarat Water in Victoria, Australia.

“SDP is a high-quality infrastructure asset ideally suited to our investment criteria and will help to pay benefits to our members for decades,” said Stephen Dowd, OTTP’s senior vice-president, infrastructure and timberland. SDP would provide stable inflation-protected returns through its fair and transparent regulatory regime and contractual framework, he said.

Hastings pronounced itself pleased to have secured the asset given its attractive yield and low-risk investment characteristics.

“SDP is a core infrastructure investment and represents exactly the type of quality asset we are seeking to add to our investment portfolios. The investment is expected to provide strong, inflation-linked earnings and operates in a secure, regulated environment with strong contractual protections,” said Hastings CEO Andrew Day.

“This was a high priority transaction for our funds, UTA and TIF, and we expect the acquisition will enhance the balance sheets of both funds’ portfolios while generating solid returns with low volatility. SDP is a quality investment that will have long-term benefits for our investors,” Day said.

UTA and TIF have committed a combined US$ 374.2 million to the transaction.