Macquarie closes $10.3B infrastructure funds

May 3, 2007

LONDON, England (Reuters) -- Australia's Macquarie Bank has closed two new infrastructure funds that will invest in assets in Europe and North America after raising $10.3 billion from pension funds and other investors.

The two funds have already committed $4.5 billion in 13 assets, including a toll road in Virginia and Telefonica's radio network Airwave, Macquarie said on Wednesday.

Macquarie European Infrastructure Fund II will invest in eight to 15 infrastructure assets with $6.3 billion, while Macquarie Infrastructure Partners has $4 billion for investments in North America.

Financial institutions are haggling for infrastructure assets such as water companies and toll roads, which provide stable cashflow that can be used for debt issuance and financial engineering models such as securities.

The lower returns demanded of infrastructure funds than of traditional private equity, which needs to sell assets on at a much higher price than it paid for them, also allow such funds to generally outbid buyout firms in auctions.

Private equity house 3i Group recently set up and floated an infrastructure fund, and investment banks including Goldman Sachs and Merrill Lynch have also set up such entities.

Australia-based Macquarie has been investing worldwide.

In Europe, the bank in October agreed to buy Thames Water, which supplies water and sewage services in London, for 8 billion pounds including debt assumed. In March, it agreed to buy British car parks firm NCP for 790 million pounds.

The bank has also recently bought assets such as broadcast masts.

Macquarie, which already owns a high proportion of the UK's transmission masts through its Arqiva business, agreed last month to buy the UK broadcast and mobile phone mast business of National Grid Plc for 2.5 billion pounds in cash.

It is also buying emergency radio network Airwave from Spain's Telefonica for 1.9 billion pounds.