RARE Infrastructure Value Fund Market Commentary – December 2009
December saw strong performance from global markets with Japan (+12.9) the stand out and the US (+1.9) & HK (+0.3) the laggards. Both developed & emerging markets continued to advance in parallel and extend their +3.2 November gains.
Top news stories in a global context included the Copenhagen summit, Abu Dhabi’s bail out of Dubai, the Tiger Woods saga, UK tax increases, Citigroup capital raising to repay TARP monies, banker bonuses – size and how they’re to be paid/taxed, Harvard’s toxic interest rate swaps and Greece’s credit downgrade.
Infra Regulation. Fraport (airport) announced an agreement with airlines for a 12.5% prices increase over two years. Aeroports de Paris (AdP) proposed a tariff freeze for 2010 in return for lucrative changes to its regulatory model. Ofgem released its final UK electric distribution networks determination with a 4% (post tax real return on assets) and forecast that companies could earn up to 11% return on (regulated) equity. FERC (US energy regulator) launched an investigation into a number of gas transmission pipelines that appear to be over-recovering costs to the detriment of customers. A draft version of the US rail re-regulation was circulated and appears more industry friendly than first thought.
Infra M&A. the Australian Future Fund was rumoured to have purchased 15.6% of Southern Water (UK) from Challenger Infra and has confirmed it is in talks to join the bid for Transurban (tollroad). A Brisa (tollroad) consortium won the Portuguese high speed rail (HSR) project and bidding on the French €10b HSR project closed (with the government to guarantee 80% of the project debt). Macquarie Infra Group distributed documents for their pending EGM vote on a split of the assets.
Infra Funding. Capital markets are open with debt issuance for the month including: BAA (airports) £235m, Auckland Airport NZ$125m, Cintra (tollroads) €400m, Atlantia (tollroads) ¥20b (€149m) and Spark (utility) A$225m. In IPO news, Hochtief pulled the IPO of its Concessions arm and QLD announced an IPO of 60-70% of Queensland Rail (set for Q1’10).
Other Infra News. RiverCity’s (tollroad) Clem7 tunnel is due to open early. Spain’s Public Works has confirmed its commitment to spend ~€250b on transport infrastructure in the period 2005-20. Passengers throughput at key airports improved in November (YoY%); Heathrow +1.1, Gatwick +4.5, Paris -1.3, Frankfurt -0.2, Sydney +7.8. Sydney port volumes were also strong, +7.9 in November YoY.
