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Home | RARE Infrastructure Value Fund Market Commentary – June 2010

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RARE Infrastructure Value Fund Market Commentary – June 2010

July 19 2010

June continued the poor run for global equities, with developed markets back to September 2009 levels. All major markets were down in June with the exception of Hong Kong. Developed markets (MSCI World) down 3.7% and Emerging Markets (MSCI EM local) down0.7%.

Throughout June there was mixed economic news not giving a clear signal of either renewed growth or potential recession. Risk aversion prevailed for the last 2 weeks of June. On balance consensus on US growth is edging up however Eurozone is being revised down sharply on austerity announcements. Concerns remain over whether China can manage a soft landing for its economy.

Infra Regulation. On the 24 June Spanish government announced a freeze on electricity tariffs until a comprehensive revision of the whole system is complete. This has bipartism support in Spain. It has created uncertainty which will prevail until there is an announcement on outcomes.

Infra M&A
M&A activity in the sector continued during the month;

  • Brisa (Portuguese tollroad operator) announced the sale of its 16.35% interest in Brazilian tollroad operator, CCR expected proceeds are $1.2b Euros.
  • Copenhagen Airport agreed to dispose of its 7.65% indirect interest in Mexican airport operator AZUR. Map owns 30.8% of Copenhagen airport.
  • DUET (Australian utility) announced its intention to sell its 29% interest in US utility Duquesne (DQE). DUET only acquired the shareholding in DQE in July 2008.

Infra Funding
Companies in the sector continued to access debt finance at attractive rates as they have throughout the economic downturn:

  • Sydney Airports issued AUD175m fixed rate MTN due 2015 at 265bps above swap
  • 407ETR (Canadian Tollroad) sold CAD800m notes in 2 parts; CAD300m 5yr notes and CAD300m 10 year notes at 114bps and 158bps, over government benchmark respectively.

Other Infra News: Moody’s said the outlook for Europe Infrastructure industry is stable, reflecting some growth in transport volumes in Europe. DP World has postponed plans for a dual listing in London, citing technical difficulties in merging its home exchanges