CitySpring – BT

CitySpring sees its DPU rising 16.7% with Basslink acquisition

Long-term regular revenues expected to give 7 cents DPU in next financial year ending March 2009

THE acquisition of Basslink in Australia is expected to raise CitySpring Infrastructure Trust’s distribution per unit (DPU) to 7 cents on an annualised basis for the next financial year ending March 2009, CitySpring Infrastructure Management (CSIM), the trustee-manager of CitySpring, said yesterday.

This is a 16.7 per cent increase from the projected DPU of 6 cents for the current financial year ending March 2008.

The acquisition of Basslink, which is an electricity interconnector between the island of Tasmania and mainland Australia, was completed at the end of August.

Calling it a ‘high-quality and unique asset’, CSIM said Basslink is expected to provide long-term, regular and predictable revenues derived from a 25-year contract with Hydro Tasmania, the electricity generating company wholly owned by the state of Tasmania.

Since commercial operations began in April 2006, Basslink has achieved an average availability of 99.5 per cent. Revenue from Basslink is largely based on availability of the interconnector and other guaranteed payments, and is not dependent on the utilisation rate.

Said Fai Au Yeung, CEO of CSIM: ‘We are pleased with the progress we have made with this acquisition. This is a significantly yield- accretive transaction and perfectly fits our investment mandate of acquiring projects with long-term predictable cashflows.’

Mr Fai said part of Basslink’s revenues are indexed to increase with inflation. ‘In addition, there is upside from possible telecommunications revenue associated with the commercialisation of the fibre optic cable incorporated in Basslink as well as from an enhancement of the asset life through additional capex. We intend to explore these opportunities to fully extract the value of this asset.’

Funding for the Basslink acquisition has been obtained through the issue of bonds and bridge financing. The Australian-dollar non-recourse bonds, guaranteed by MBIA Insurance Corporation, are rated AAA and Aaa by Standard & Poor’s and Moody’s respectively. An equity bridge facility for S$370 million has been also been obtained as part of the financing package.

CitySpring intends to repay the bridge financing with funds raised from an equity issue.

Parent group Temasek Holdings supports the transaction and intends to participate in the equity issue, CSIM said.

An extraordinary general meeting will be called to seek unitholders’ approval to ratify the acquisition and the related equity fund raising