Lenders vie for TransGrid acquisition financing

Lenders are pitching to back the bidders for New South Wales electric utility TransGrid, which is estimated to be worth as much as $6.4 billion.

Lenders are pitching for roles to back bidders in the upcoming New South Wales privatisation of TransGrid, which is being valued at between A$7 billion and A$8 billion ($5.6 billion to $6.4 billion), according to sources familiar with the matter.

The sale of a 99-year lease in the electricity transmission grid TransGrid is expected to attract a wide bidding universe of at least six consortiums, including Chinese bidders.

According to two of these sources, China’s State Grid Corp is weighing a joint bid with Australia-listed Ausnet, though nothing definitive has been decided upon. State-owned China Southern Power is teaming up with Global Infrastructure Partners.

In the past, Chinese state-owned enterprises have often competed with each other in the early stages of a bidding process but the Chinese government typically gives its blessing to one bidder at the final stage.

Li Ka-shing-controlled Cheung Kong Infrastructure is also expected to bid for Transgrid and could yet turn to relationship lenders for funding, including Bank of China, Mitsubishi UFJ and HSBC, one of the sources who declined to be named said.

The NSW government is set to commence the sale process for TransGrid but there is no formal timetable as yet, a second of the sources said.

The lenders backing the different consortiums have still to be firmed up. The sizes of the loans are also yet to be firmed up. The first source in discussions with bidders, though, told FinanceAsia that loan sizes of about A$2 billion are being discussed.

Banks have formed different financing groups separated by Chinese walls to back different bidders. “It’s a large deal and all the banks are looking to get involved in the financing, as only one bidder will win. If you don't get any advisory fees, at least you will get some financing fees,” said this first source.

Heightened interest

Other consortiums that are expected to bid include Australian Super, Canada Pension Plan Investment Board, and Borealis Infrastructure. There is also Hastings Funds Management, which has teamed up with Spark, a Macquarie-led consortium, and a consortium including Queensland Investment Corp and IFM Investors.

The conservative government in New South Wales was re-elected on March 28 and state premier Mike Baird is expected to privatise the assets this year. The New South Wales government is also expected to sell stakes in leases for distribution networks Ausgrid and Endeavour Energy, and in total the three assets up for privatisation could net an estimated A$30 billion ($23 billion).

Ausgrid, which is both a transmission and distribution asset, is the biggest of the three.

There is stepped-up interest in New South Wales's privatisation programme after rival Australian state Queensland’s planned privatisation was taken off the table after a shock election loss for the Liberal National Party in January.

“Things didn't go as expected in Queensland and bidders are now more focused on New South Wales,” a third source said.

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