18 April 2016

ICG plans $1bn raising as stadium sale talks continue

Author: Andrew White
Source: The Australian

NSW Premier Mike Baird discusses the future development of ANZ Stadium with reporters yesterday.

AFL chairman Mike Fitzpatrick’s majority-owned infrastructure fund manager is set to embark on a $1 billion capital raising as negotiations continue with the NSW government to sell its highest-profile asset, the former Olympic stadium at Homebush.

Infrastructure Capital Group holds the rights to occupy and manage ANZ Stadium for the next 15 years but is discussing a sale after NSW Premier Mike Baird yesterday changed tack on a city-wide upgrade of Sydney’s stadiums. ANZ Stadium is set to be the major recipient in a $1.6bn state government makeover of Sydney’s main rugby union, league and soccer venues that would convert the Homebush oval arena to a roofed, rectangular venue.

ICG has owned the rights since 2007 when the then ANZ Bank-owned infrastructure investor bought out the then publicly listed owner of the former Sydney Olympics centrepiece. Mr Fitzpatrick, who founded the pioneering Hastings Funds Management business before selling it to Westpac, led a buyout of ICG from ANZ in 2009.

The negotiations come as ICG chairman and shareholder Andrew Pickering leads a roadshow to investors to raise up to $1bn for two funds that focus on mid-market infrastructure assets such as airports, ports and renewable and conventional electricity generation.

“These negotiations will have no impact on our capital-raising plans,” Mr Pickering said of the stadium talks.

The stadium is held in a $450 million Diversified Utilities Fund that also includes a stake in the Port Hedland International Airport that was bought for $165m in partnership with AMP last year, as well as South Australia’s Flinders Ports and Newcastle Coal Infrastructure Group.

Mr Pickering said ICG had doubled earnings from ANZ Stadium over nine years by lifting the number of events to more than 40 a year, including the rugby league grand final and State of Origin matches, big name concerts by AC/DC, Taylor Swift and the Foo Fighters and other one-offs such as monster truck shows. However, the Sydney Swans AFL team has abandoned a long-term deal to play three matches a year at the 87,000-seat venue a year early, a development Mr Pickering said had created an “opportunity’’ to find new events.

“It certainly makes your infrastructure life a little more interesting, discussing whether the Foo Fighters are doing one ¬concert or two,’’ he said. ICG is also part of the consortium that won the right to develop and operate a new AFL stadium in Perth that is expected to be operating by 2018.

ICG wants to capitalise on red-hot investor demand for infrastructure assets with a raising that would increase its funds under management by two-thirds and give it more firepower to bid for assets as well as funding development projects.

Mr Pickering, a former lawyer who cut his teeth at Queensland Treasury and China Light and Power before joining ICG, said there was better value to be found in assets between $100m and $1bn than the headlining multi-billion-dollar port and power privatisations that typically attracted big international and local superannuation and sovereign wealth funds.

Deals like the sale of Ports Botany and Kembla to IFM Investors, Crown Castle communications towers to Macquarie Group and Iona Gas storage to Queensland Investment Corporation have gone for multiples of 22 to 25 times earnings before interest, tax, depreciation and amortisation. But over the same period the ANZ Terminals, Port Hedland Airport and the Hallet 4 and Macarthur Wind farms have gone for prices representing 11-14 times EBITDA.

“Those bigger funds, whether it is AustralianSuper or ADIA etc … every deal where they have a chance to deploy $500m or more, they have to look at it because they are only going to win one in every four or five,’’ ICG managing partner Tom Laidlaw said. “And equally they are not interested in chasing something for $100m because they will end up with 300 assets in their infrastructure portfolio and it gets too hard to manage.’’

Mr Pickering said the funds were also seeing an increasing pipeline of investments coming through development projects such as waste to energy plants that ICG could fund in exchange for equity. “If we have got the internal resources to help with financing and with deal analysis and throw in the benefit of some early stage development capital we can secure the rights to invest in the project on a proprietary basis,’’ Pickering says.