DealZone

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.

There seems to be an endless wave of bad news hitting the hedge fund industry at the moment -- gates and suspensions, record poor performance, the Bernard Madoff scandal and so forth -- but there are still one or two reasons to be positive.

According to a survey of institutional investors by alternative assets data group Preqin, conducted in January (and therefore after the alleged Madoff fraud came to light), only 8 percent said they were no longer confident about hedge funds and would reduce investments.

By contrast, 26 percent said they would be increasing their allocations this year.

London-based private equity research firm Preqin has been busy crunching numbers from historical sales of pension fund giant CalPERS’ private equity assets.

The California pension fund sold $2.1 billion of private equity assets in late 2007 in the secondary market — which trades private equity stakes between the pension funds and endowment funds that want to exit or buy.

CalPERS updated information on its Website earlier this week giving fund data up to June 30. The tables are detailed, and forensic work is needed to work out the funds exited or bought into. Preqin said in a press release today that the net asset value of funds sold equates to 9 percent of CalPERs overall portfolio, and calculates the remaining value of its private equity portfolio at $21.5 billion.