WSJ Blog: InfraRed Eyes More Deals Down Under (Wall Street Journal Online)

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London-based global infrastructure and real estate investor InfraRed Capital opened an office in Sydney in January, and has already invested part of its US$1.2bn fund in a new hospital in South Australia.

Now, it’s on the hunt for more deals.

We like Australia and New Zealand for five reasons: financial stability, enforceability and consistency of the legal framework, the transparency of processes, depth and sophistication of the supply chains needed to construct assets and provide PPP services and finally, a well-run public sector, InfraRed chief executive Werner von Guionneau told MoneyBeat.

InfraRed has so far invested around US$430m of its fund in five projects. These include the Royal Canadian Mounted Police Headquarters and the Singapore Sports Hub, which will include a 55,000 seat stadium.

The fund was raised from investors like Middle East, European and North American pension funds in 2011, and must be fully invested by 2015. It looks to make equity investments of between US$50 million and US$150m, and can back this up further with debt.

Traditional infrastructure assets deliver stable, predictable returns. PPPs are different as they can also generate a capital gain, and involve taking a project from the design phase through to operation. In the past five years, InfraRed has mostly invested in health, accommodation and transport, which cover assets like hospitals, army barracks and roads.

InfraRed director Bryn Jones said the Australia and New Zealand markets as very competitive, but political risks are often lower than elsewhere as new governments tend to continue with projects already approved.

The New Zealand Transport agency last month shortlisted a consortium including InfraRed for the development of a 27km strip of highway called Transmission Gully, which will run to New Zealand’s Wellington Airport. Infrared’s consortium partners include Leighton Holdings Ltd subsidiary Leighton Contractors and the Bank of Tokyo-Mitsubishi UFJ. It is competing against only one other consortium which includes John Laing Investments, Macquarie Group Limited and a subsidiary of Fletcher Building Limited.

Last year, InfraRed and partners including John Laing plc was awarded a contract to build the Wiri prison in South Auckland.

The firm’s Sydney-based director Sebastien Pochon’s remit also includes analyzing more developed PPP assets for acquisition by HICL Infrastructure Company Limited, a London-listed fund which is dedicated to PPP investments and a market value of 1.4 billion British pounds (US$2.2bn). HICL is managed by InfraRed.