Wellington Scoop

$630m in funds makes Infratil flush with investment options

BusinessDesk report by Paul McBeth
Listed infrastructure investor Infratil is option rich in ways to spend its money after overhauling its portfolio and says US renewable energy projects show a lot of promise.

The Wellington-based firm has $630 million of funds available having spent $560 million on new investments and a further $168 million on capital expenditure in the year ended March 31. After selling stakes in Z Energy, Lumo and iSite in 2016, Infratil found itself flush with funds and keen on investing in renewable energy, the retirement sector, social infrastructure such as housing, telecommunications infrastructure, and waste management.

In the latest financial year, some of that capital was redeployed with Infratil buying stakes in Canberra Data Centres, establishing US renewable energy firm Longroad Energy, carving out Trustpower’s wind energy business into a separately listed entity Tilt Renewables, and investing in ANU student accommodation.

Chief executive Marko Bogoievski yesterday told analysts at a briefing in Wellington that puts Infratil “at the front end” of most infrastructure investors and exposed to big upside capital gains.

“We have these multiple positive exposures to what we think are very favourable long-term trends that we can expose our capital to,” Bogoievski said. While that made it difficult for analysts when valuing the company, “holding that many options and real management capability outweighs the conglomerate discount,” he said.

Infratil’s Longroad investment was singled out as offering major opportunities for the company. Longroad was established with the New Zealand Superannuation Fund and has enlisted a team of managers with a track record in the US, having set up a similar venture in 2002 that developed 38 utility scale projects with 4,000-megawatt capacity, eventually selling 12 years later for more than US$2 billion. Infratil, NZ Super and the management team committed US$100 million to develop renewable projects, which Bogoievski said fully funded development opportunities.

“Our capital is prepared to position itself in development focus, but can and will construct and hold assets if we think there are better returns from that,” and Bogoievski said Infratil has a “positive bias” towards those opportunities.

“I’d keep an eye on this one, it could easily generate at least options for deploying capital much larger than what we’ve flagged earlier,” Bogoievski said.

The Canberra Data Centres business was tracking slightly behind expectations at the end of the financial year, however Bogoievski said the increased outsourcing by the federal government in Australia meant the unit will need to build a 20 MW facility in the second half of this year, and earnings should catch up as a result.

“This business is about what’s happening in the next two or three years – it will be in the portfolio for a very long time” and could branch out into new ventures including data centres and telecommunications infrastructure, he said.

Infratil exited its stake in listed retirement village operator Metlifecare just after the March 31 balance date, booking a $93.9 million gain on the sale. Bogoievski said Infratil wanted a bigger stake in the business, and had initially sought to buy the entire 40 percent stake from Retirement Villages New Zealand, but missed out because the vendor wanted a quick exit without needing shareholder approval.

“We were influential, it just wasn’t enough equity for us to devote that amount of resource,” Bogoievski said. “We reached the conclusion that we couldn’t see getting control of that business that made sense to us, relative to all other opportunities in our portfolio.”

The portfolio overhaul didn’t weigh on Infratil’s operations, with underlying earnings before interest, tax, depreciation, amortisation and fair value movements in financial instruments rose 12 percent to $519.5 million in the 12 months ended March 31, beating guidance for ebitdaf of between $485 million and $505 million. The result got a late boost from favourable Australian weather that lifted the contributions from Trustpower’s Australian hydro assets and Tilt’s Australian windfarms.

The shares last traded at $3 and have declined 11 percent in the past 12 months while the benchmark S&P/NZX 50 Index gained 5.6 percent.

Also from BusinessDesk: Infratil increases earnings from Wellington Airport


  1. Dr Sea Rotmann, 20. May 2017, 4:04

    Isn’t it interesting that none of that money is earmarked for the doomed runway extension?

  2. Michael, 21. May 2017, 12:40

    Isn’t it interesting that as a strategic asset the airport provides Infratil with the opportunity to buy up land around the airport and transform the area in its own image?
    Infratil-WIAL has the luxury of being a company not subject to public scrutiny while retaining the powers of a crown territorial authority.
    Am I the only one who sees the inherent danger in this?

  3. Mike, 21. May 2017, 20:19

    Surprising that there’s no mention of Infratil’s spectacular lack of success in tendering for bus services under the government’s new PTOM regime. Despite being the incumbent in most of Wellington and the Hutt Valley, South and West Auckland, it hasn’t won a single contract – hence the old blue or silver diesel buses from Auckland starting to appear on Wellington’s streets as the trolleybuses disappear.

    Watch out for the “For Sale” sign outside the remnants of NZ Bus…

  4. Tony Jansen, 23. May 2017, 12:28

    Yes isn’t it wonderful how the GWRC enabled low ball tenders for the bus contracts thereby sentencing Wellingtonians to a low future of polluting diesel buses and low wages for the poor bus drivers. Meanwhile Infratil’s much vaunted dual powertrains are nowhere in sight and now seem to be largely fictional. Yet we are proceeding with the dismantling of the trolley bus infrastructure. What do we get instead? More loud polluting diesel buses. And Wellington is meant to be a green city and the model for other domestic cities to emulate? We have a “Green” regional council that is destroying our regional “green” transport plan and playing neo liberal hard ball with our money.