- From: Vol 13, Issue 5 (May 2012)
- Category: Need to know
- Region: Asia
- Country: Australia, Japan and Malaysia
- Related Companies: (RWE) Rhein Ruhr Partners , Berlinwasser, Goldman Sachs, Hastings Funds Management, Hyflux, Infracapital Partners, International Power, Itochu, Japan Bank for International Cooperation, Malakoff, Marubeni, Ontario Teachers’ Pension Plan and Sydney Water
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Japanese trading house Itochu has taken another step into the water market with the £43.5 million purchase of a 20% interest in Bristol Water, a regulated British water company.
Itochu already has a couple of small water interests, including a 12.5% stake in the cursed Wonthaggi desalination project in Australia and interest in the Rabigh water, steam and power plant in Saudi Arabia. It is involved with Hyflux in the consortium which secured the 336,000m3/d Dahej SEZ desalination plant earlier this year, and is also bidding with the Singapore-based company on the Mile 6 desalination plant in Namibia.
- Hyflux is likely to want to continue to rely on its Japanese friends to support its ambitions. It has opted for more expensive gas turbines at its Tuaspring power and desal complex, pushing the capex on the project up by 20%, which will put further pressure on its balance sheet.
- One of the reasons why the Japanese have been so active in financing water projects is the support of Japan Bank for International Cooperation, which helps finance deals with low-cost debt, currency hedges and credit insurance. It became independent last month, and looks set to significantly increase its involvement in global water finance (see Putting the ‘international’ back into JBIC). Specifically, it is expanding its scope beyond greenfield water projects to support the acquisition of brownfield assets as well. The move has been driven by a number of factors, including the slowdown of the Gulf IWPP market.
- Competition between Asian export credit agencies looks to set get tougher. Malaysia’s Malakoff International leveraged a $90 million funding package – including a contribution from the national export credit agency – to buy into the Hidd IWPP in Bahrain. At just $113.4 million for a 40% stake in the mega-project, the price tag came in below predictions, and looks like a bargain for Malakoff. Seller International Power will not be too concerned – its disposal of assets frees it from the regulatory burden its regional market domination has brought it, and means it can continue to bid with impunity in the Gulf.
- The big infra deal of the month was the sale of Sydney Water’s Kurnell desalination plant to Ontario Teachers Pension Plan and two funds managed by Hastings Funds Management (see Sydney signs off on desal refinancing).
- Insiders expect only two serious bids for Veolia’s UK regulated water activities, despite four groups registering expressions of interest in the sale of the businesses (See Risks remain in Veolia UK water sale). Goldman Sachs Infrastructure Partners and InfraCapital (which has teamed up with Axa) are tipped to bid, while Marubeni may pull out, and a consortium of iCON Infrastructure and Canadian pension fund manager PSP Investments is expected to drop out on price grounds.
- RWE seems to be having less luck with the sale of its 24.95% interest in Berlinwasser Holding, which is the utility for Germany’s capital city. It has reportedly been offered €618 million for the stake by the City of Berlin – considerably less than the €800 million it had been holding out for.