Spark needed

August 28, 2009

Could the sale of Britain’s biggest electricity distribution network help re-energise infrastructure dealmaking?

The supposedly steady business of buying and running roads, ports, and power grids has had a torrid time. The credit crunch has undermined some big infrastructure players, made it tricky to finance deals, and revealed that demand for some services — like toll roads and airports — is flakier than expected. Asset sales have run aground, instead of commanding the big premiums they would have fetched in the frantic debt-fuelled auctions of yore.

Nonetheless, optimists say the world’s long-term infrastructure needs are enormous. They are also cheered by the record $100 billion or so of funds that Preqin says are currently being raised (albeit slowly). And there may be some chinks of light on the M&A front. As Greg Roumeliotis and I wrote earlier:

“EDF’s possible sale of British or French power networks worth billions of euros suggests infrastructure dealmaking is set to recover after a dismal year for the once-hot asset class.

“The French utility owns Britain’s biggest electricity distribution network and France’s power grid RTE. It has not begun any formal sales process for either, but bankers and investors say advisers are working toward possible sales.

“A successful deal could lift sentiment in the sector, spur similar disposals by rivals, and offer useful pointers on debt availability and bid premiums for infrastructure mergers and acquisitions (M&A).

“The EDF deal is going to be an interesting test case for the market which has been very difficult,” said Martin Nelson-Jones at Freshfields Bruckhaus Deringer in London.”

Read the full story here. See Preqin’s recent report on the sector here.

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