29/07/2010 - 00:00

Superannuation funds investing

29/07/2010 - 00:00


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Superannuation funds are playing a pivotal role in some of the most interesting infrastructure developments in WA.

THIS week’s editorial will be an election-free zone in light of the dismal performance of the major parties, which have become so risk-averse and poll-driven they seem to have forgotten how to craft worthwhile new policies.

Instead the focus will be on the role of the private sector in backing several innovative infrastructure projects around the state.

These examples show the ability of the market to identify investment opportunities, albeit often with a lag from when project proponents seek financial backing.

They also act as a counter to the periodic calls for superannuation funds to be required to invest a portion of their money in so-called nation-building infrastructure projects.

If Australian governments ever took that step, the result would most likely be a diversion of good money into marginal projects; things like the Darwin to Alice Springs railway, which held great attraction for politicians but is yet to stack up on any sort of commercial grounds.

Left to their own devices, major investment funds have chosen to invest in a diverse range of power and recycling projects in WA, collectively worth more than $1 billion.

Most of these projects had a long gestation period, and their proponents wore out a lot of shoe leather gaining financial backing.

But now they are under way, and in some cases looking for expansion opportunities.

They include: power company Perth Energy, which next month will officially open its new power station; innovative waste treatment business AnaeCo; the state’s largest wind farm under development in the Wheatbelt; and Biovision 2020, which operates the state’s largest waste treatment plant.

The opening of Perth Energy’s 120-megawatt gas-fired power station at Kwinana will be a credit to company founder and shareholder Ky Cao, who has been actively involved in the development of energy policy in WA for more than a decade since leaving Western Power.

Through Perth Energy and its sister company Western Energy, Mr Cao has also been active as a generator and retailer of electricity, with aspirations to become a major player.

Perth Energy has had several financial backers over the years. Its major backer now is New Zealand fund manager Infratil, which is the 81 per cent shareholder in Perth Energy.

Another little-known fund manager with a presence in Perth is the Palisade Regional Infrastructure Fund.

It has become the major backer of Bentley-based company AnaeCo, whose founder Thomas Rudas developed an innovative technology for treating municipal solid waste.

AnaeCo, under its current name and in its former guise as Organic Resource Technologies, has also been working for more than a decade to get its ideas into practice.

It has built a relatively small plant at Shenton Park and is pursuing plans for an expanded plant, with engineering group Monadelphous signed up as a joint venture construction partner and Palisade as the major financial backer.

Like many projects, AnaeCo’s expansion plans have been complicated by the difficulty in obtaining debt funding in the tight post-GFC market.

Palisade is aiming to overcome this by applying its own equity to the project.

A much larger project, with much larger backers, is the Collgar wind farm, being built near Merredin at a cost of $750 million.

The Collgar wind farm will consist of 111 wind turbine generators on a site located approximately 25 kilometres south-east of Merredin.

Global banking and investment group UBS, through its international infrastructure fund, and Australian superannuation fund Retail Employees Superannuation Trust, bought the project earlier this year from South African group Investec.

Like many institutional investors, UBS and REST see infrastructure assets such as Collgar as an ideal opportunity, with steady long-term returns matching their financial requirements.

Direct investment in infrastructure also diversifies their asset portfolios, which typically are weighted towards listed equities, fixed interest securities and property.

Perth-based superannuation fund Westscheme is another group that favours direct investment in selected assets.

It teamed up several years ago with European company SembSITA to develop Perth’s largest waste treatment and recycling facility, at a cost of $80 million, for the Mindarie Regional Council.

These are all examples of profit-driven investment managers responding to market opportunities, and delivering results that surpass what many governments manage to achieve.

All credit to them.



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