Australian infrastructure deals double to US$5.6b in the six months to Q3

This total value was from 20 big-ticket transactions.

According to a report from Dexus Research, deal flow in the Australian infrastructure market is gathering pace after a quiet year in 2023. The value of deals in the six months to Q3 2024 was around double the same period last year at US$5.6 billion. The number of deals was only marginally higher at 20, implying the size of deals is growing. 

“The increase in deal flow reflects improving conditions given a number of large-scale deals completed in Asia and Europe, interest cuts from several central banks, a period of stable cash rates in Australia and a sense that the global inflation cycle is under control. We anticipate an even more favourable market for infrastructure M&A opportunities once interest rates begin to fall with infrastructure investors likely to allocate back to core assets as the yield arbitrage widens,” the report added.

Here’s more from Dexus Research:

The Australian deal flow was comprised of significant transactions across the transport, energy and digital infrastructure space. 

In the transport sector, KKR and Skip Capital have executed an agreement to acquire 74.25% of Queensland Airports Limited (QAL) for an implied value of A$3bn. In addition, John Laing has agreed to acquire Aware Super’s 62.5% stake in the Sydney Light Rail PPP. This brings John Laing’s holding to 95% with the builder, Acciona, owning the remaining 5%. 

In the digital infrastructure space, Blackstone and the Canada Pension Plan Investment Board have agreed to acquire an 88% stake in Australian data centre company AirTrunk for an enterprise value of more than A$24bn. 

In the energy infrastructure space, Tokyoheadquartered J-Power has completed the A$1.03bn acquisition of Genex Power, making the Australian renewables developer a 100% subsidiary. In addition, the Australian Retirement Trust (ART) is set to acquire QIC’s 33% stake in Powerco via an affiliate transfer, circumventing the pre-emptive regime. PowerCo is a New Zealand-based distributor of electricity and natural gas, of which a 42% interest is managed by Dexus. 

Australian unlisted infrastructure funds returned a creditable 6.7% in the year to June 2024, outperforming listed infrastructure funds (-5.0%). Although returns have softened in recent quarters, the sector has shown greater resilience to the effects of interest rate rises compared to unlisted real estate sectors. This could be due to several reasons including the investment diversity, the length of operating agreements, CPI linkages and/or the frequency of external valuations.