IFM, Abu Dhabi Group Wins $5.35 Billion Australia Port Deal

A group including Industry Funds Management and a unit of Abu Dhabi Investment Authority will pay A$5.07 billion ($5.35 billion) to lease two Australian ports, as the New South Wales state government seeks infrastructure funds.

The successful bidders will hold 99-year leases at Port Botany in southern Sydney and Port Kembla in Wollongong, NSW Treasurer Mike Baird told reporters in the state capital today. Proceeds, amounting to A$4.3 billion after paying off the ports’ debt, are 72 percent higher than the A$2.5 billion he told state parliament Oct. 17 he expected the state to receive.

NSW is selling the port leases to raise funds for infrastructure projects, Baird said in June. The state is planning a new motorway in Sydney, a rebuilding of the Darling Harbour precinct close to the city’s main business district, as well as hospitals, bridges and roads even as its credit outlook was lowered to negative by Standard & Poor’s last year.

“It’s an incredible vote of confidence and an endorsement in the health and future of New South Wales,” Baird said in Sydney today.

The successful bidding group, known as NSW Ports consortium, is led by Industry Funds Management, known as IFM, and includes local retirement funds AustralianSuper, QSuper, Cbus, HESTA, and HOSTPLUS. Tawreed Investments Ltd., a unit of Abu Dhabi Investment, has a 20 percent stake, Brett Himbury, IFM chief executive officer, said at a media conference in Sydney today.

Coal Mines

The group is confident it will get good returns in the long term, Himbury said.

“Most of the imports and exports for this state come through those two ports,” he said. “We’re very confident of the long-term outlook for New South Wales and the returns that that’s therefore likely to generate.”

Port Botany is the nation’s second-biggest container port after Melbourne and sits on Botany Bay. The Port Kembla terminal is about 72 kilometers (45 miles) south of Sydney and is the conduit for coal transported from mines in the south and west of the state, according to its website. NSW is home to about a third of Australia’s almost 23 million people.

The proceeds can be used to boost government infrastructure spending in the state, reducing the need to borrow for major projects, Baird said. Still, they’ll go to the state government’s balance sheet and won’t affect a budget deficit of A$776 million for the year ending June 30.

“It doesn’t solve our problems,” he said. “As revenue has disappeared, we’ve had to take decisions to align revenue and expenditure.”

A group led by Hastings Funds Management Ltd. and including Borealis Infrastructure Management Inc. and Ontario Teachers’ Pension Plan considered a bid for the 99-year leases, people with knowledge of the matter said in October. Ontario Teachers’ last month bought 70 percent of Leighton Holdings Ltd.’s telecommunications assets for about A$620 million.

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