CitySpring – BT

CitySpring eyes $370m in equity capital

But the trust would issue equity only ‘if it makes sense’, says its CEO

CITYSPRING Infrastructure Trust is seeking a mandate from its shareholders to raise a further $370 million in equity capital, but may not actually do so if market conditions remain poor, its chief executive Fai Au Yeung said on Feb 4.

‘At the prices today, we will not issue equity,’ said Mr Fai in an interview. ‘We want the mandate to issue equity, but we don’t have to issue equity if it’s not needed’.

The $370 million in proceeds would repay a bridge loan from DBS, which helped finance CitySpring’s $1.6 billion purchase of Australian energy asset Basslink last July.

At an EGM on Feb 19, the trust will seek shareholders’ approval to issue new equity to sponsor and controlling shareholder Temasek Holdings, as well as the trust’s own directors.

If the issuance is successful, CitySpring’s gearing – which it defines as the proportion of debt to total capital – would fall from about 94 per cent today to 62 per cent, said Mr Fai.

On a fully diluted basis, City-Spring’s distribution per unit would rise 16.7 per cent to seven cents for the year ended March 2008, up from the six cents projected in its IPO prospectus last January.

At recent closing prices of below 80 cents – down from $1.58 a year ago – this represents an annual yield of nearly 9 per cent.

The trust would issue equity only ‘if it makes sense’, Mr Fai said.

Debt remains very cheap in Asia, especially for high-quality infrastructure assets, he said; this is truer still for CitySpring, given its parentage and sponsorship from Temasek.

The management is still ‘very comfortable’ with current gearing levels, which gives the trust enough capacity to complete at least one more deal without equity issuance, Mr Fai said. As a trust, unlike a Reit, CitySpring has no regulatory limit on gearing.

But price is only one factor when considering equity issuance, which could help in other ways, said Mr Fai.

As a relatively small trust with a market value of below $400 million, certain investors cannot buy in, while poor liquidity means traders avoid CitySpring when markets are volatile, he said.

A rights issue could boost City-Spring’s market cap, shareholder base and trading volumes, thereby improving price performance, he said.

Despite increasing investor attention and funds getting poured into Asian infrastructure, good opportunities are still available, Mr Fai said.

While there are no more distressed sellers, unlike during the Asian financial crisis, there are still good-quality assets coming through, he said. And CitySpring’s managers have ‘been around infrastructure’ for 15 to 20 years, and ‘have relationships and a nose’ for good deals, he added.

With Basslink, for example, they identified the deal as early as December 2006, before CitySpring was even formed. At the time, the vendor, British utility National Grid, had completed a strategic review and concluded that Basslink was no longer a good fit as it wanted to focus on US and European assets.

CitySpring’s managers contacted the Tasmanian utility that buys power from Basslink, convincing them that it could be trusted with the assets and also add value.

It locked in financing via AAA-rated bonds – at between 3.6 and 5 per cent annual interest, plus cost of financial guarantee – and the DBS loan. Other bidders used syndicated bank loans, which fell out of favour in the subsequent sub-prime crisis, said Mr Fai.

‘We are performing much better than we projected at our IPO, and the poor price performance has been frustrating for management and shareholders, but not deserved’, he said.

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

CitySpring – SGX

Basslink acquisition to raise DPU by 16.7%

Long-term, predictable revenues from 25-year contract

Singapore, 20 September 2007 – Following the completion of its acquisition of 100% of Basslink on 31 August 2007, CitySpring Infrastructure Management Pte. Ltd. (“CSIM”), trustee-manager of CitySpring Infrastructure Trust (“CitySpring”), has announced that it expects the acquisition to raise distribution per unit (“DPU”) to 7 cents (on an annualised basis) for the period from the completion of equity fund raising (referred to below) until 31 March 2009¹. This is a 16.7% increase from the projected DPU of 6 cents for the current financial year ending 31 March 2008.

Basslink is an electricity interconnector between the island of Tasmania and mainland Australia. A high-quality and unique asset, it 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.

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

Mr Fai Au Yeung, CEO of CSIM, said: “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. 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 extract fully 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. Temasek supports the transaction and intends to participate in the equity issue. An extraordinary general meeting will be called to seek unitholders’ approval to ratify the acquisition and the related equity fund raising as soon as practicable.

CitySpring has posted on the SGXNet (at www.sgx.com) its presentation to analysts in relation to the Basslink acquisition.

¹ Based on a range of assumptions, including exchange rate, to be outlined in more detail in a circular to unitholders to convene the extraordinary general meeting referred to below.

Source : SGX