Cheung Kong Infrastructure and Power Assets, both controlled by Hong Kong tycoon Li Ka-shing, have reached out to lenders to back a joint bid for Fortum’s Swedish power grid, according to two sources familiar with the matter.
Finland's Fortum is auctioning off its Swedish power distribution assets and had sent out an information memorandum to potential buyers in November. The non-binding bids are due on December 15.
To back its bid, Cheung Kong Infrastructure and Power Assets have reached out to about 20 relationship banks, including major Japanese lenders for financing terms. "It's a beauty contest of sorts," said one of the sources. "They want some competition among the banks."
According to the source, Cheung Kong Infrastructure and Power Assets could be looking to raise about $5 billion to $6 billion and competition to finance the bid will be keen. "The Swedish asset is big and regulated and it's a very good asset," he said.
Cheung Kong Infrastructure and Power Assets have partnered before to jointly bid for large overseas assets. In May a consortium including Cheung Kong Infrastructure, Cheung Kong Holdings and Power Assets, agreed to buy Australia’s gas distributor Envestra.
Banks could yet carve out separate units to back different bidders, with Canada's Borealis Infrastructure Management also expected to submit a bid for Fortum's Swedish assets.
Fortum already sold its Finnish electricity grid for €2.55 billion ($3.15 billion) to a consortium led by Borealis and First State infrastructure funds in December last year. But that is expected to be dwarfed by the sale of its Swedish assets which are expected to fetch about $7.5 billion, according to a Reuters report in October.
Cheung Kong Infrastructure competed for Fortum's Finnish grid as well but in the end lost out.
Credit Agricole is providing debt and M&A advisory to Cheung Kong Infrastructure and Power Assets.
Companies controlled by Li Ka-shing have for some time been looking for acquisitions outside of Hong Kong in regulated and transparent markets that offer a steady yield.
However, they have faced stiff competition, not least from Canadian pension funds.
Chueng Kong Infrastructure was one of the bidders for UK rolling stock leasing company Porterbrook Rail Finance but lost out to a group of funds including Alberta Investment Management Corporation, Allianz Capital Partners and Hastings Funds Management.
As yielding assets in regulated markets are expensive, Li Ka-shing-controlled companies have ventured into slightly higher risk assets, such as aircraft leasing.
In early November, another Li Ka-shing controlled company Cheung Kong Holdings agreed to buy a portfolio of aircraft for about $1.9 billion, heralding its entry into the plane leasing business. Cheung Kong Holdings in August also said it had submitted a non-binding proposal for Terra Firma Capital Partners' aircraft leasing arm Awas.