20 September 2010

Successful Investment in Newcastle Coal Terminal

In August 2010, Infrastructure Capital Group on behalf of Energy Infrastructure Trust (EIT) invested a further $100 million in A Class Hunter Infrastructure Preference Securities (SHIPS). This investment is part of the total financing package raised by Newcastle Coal Infrastructure Group’s (NCIG) to fund the Stage 2 expansion of its coal export terminal.

The Stage 2 expansion successfully achieved financial close on 9 August 2010. NCIG raised a total of estimated A$3 billion in senior debt, subordinated debt and preferred equity, with strong interest and participation received from Australia and overseas investors and financial institutions. ICG was appointed by NCIG as the exclusive arranger of finance for subordinated debt and preferred equity in Australia and New Zealand.

Stage 1 of the terminal, with export capacity of 30Mtpa, commenced construction in 2008. Construction was completed in June 2010 and the terminal is currently in operation. The Stage 2 expansion of the terminal will boost capacity to 53Mtpa. Stage 2 construction is expected to complete by September 2012 and reach full capacity by March 2013.

EIT’s current investment in SHIP represents its second investment in NCIG. In January 2008, EIT and Diversified Infrastructure Trust (DIT) both invested $66 million and $50 million in SHIPS, respectively, to fund the Stage 1 construction of the terminal.

This investment increases EIT’s exposure to a quality core infrastructure asset that provides:

  • + immediate high cash yield;
  • + superior risk adjusted rate of return;
  • + predictable cash flow underwritten by long-term ship-or-pay agreement with significant coal producers;
  • + revenue model based tolling charges calculated on a cost recovery structure;
  • + access to critical export infrastructure for coal producers underpinned by strong and growing coal demand from key export markets in Asia; and
  • + alleviates current constraints on the Hunter Valley coal supply chain.

The SHIPS terms issued under Stage 2 expansion, including dividend rates, were significantly improved compared to the original SHIPS terms issued under Stage 1. ICG negotiated for the harmonisation of Stage 1 SHIPS terms to those issued under Stage 2. Both EIT and DIT benefited from this harmonisation of terms on their Stage 1 SHIPS investments.

Shareholders in NCIG include BHP Billiton (through Hunter Valley Energy Coal), Peabody Energy, Centennial Coal, Donaldson Coal, Yancoal and Whitehaven Coal.