Australian port sold for $7.3 billion to consortium; China fund among backers

Mon Sep 19, 2016 12:52pm EDT
 
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By Cecile Lefort and Byron Kaye

SYDNEY (Reuters) - A consortium of global and domestic funds, backed by investors including China Investment Corp, agreed to buy Australia's busiest port for a higher-than-expected A$9.7 billion ($7.3 billion), a sign that tough equity markets are helping fuel appetite for infrastructure.

Australian leaders will also hope the deal shows they still welcome Chinese investment in infrastructure. The federal government last month blocked the sale of the country's biggest power network, Ausgrid, to state-owned State Grid Corp of China and Hong Kong-listed Cheung Kong Infrastructure Holdings on security concerns.

The price tag for Port of Melbourne fell short of the country's largest privatization deal on record, the A$10.8 billion sale of electricity grid company Transgrid to a global consortium in November 2015, but still ranks among its biggest.

It also smashes the target set by the government of Victoria state which previously said it hoped for A$5.8 billion for the container and multi-cargo port. In 2013, the two ports of larger city Sydney fetched A$5 billion.

Sovereign wealth funds and other asset managers are seeking long-term investment opportunities amid weaker returns from some equity markets and lower bond yields.

"Equity markets are starting to realise that they're going to live in an environment where returns are going to be lower for longer, and they're looking for secure investments," Victoria Treasurer Tim Pallas said in a telephone interview.

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Shipping containers and cranes are seen at a port holding yard in Melbourne in this June 2, 2010 file photo.   REUTERS/Mick Tsikas/Files