Macquarie fund buys Hua Nan road stake
Macquarie International Infrastructure Fund (MIIF) has bought an 81 per cent stake in Guangdong-based Hua Nan Expressway for four billion yuan.
Hua Nan Expressway is a fully operational, 31km, dual-carriage urban toll road with six to eight lanes running through Guangzhou.
The investment, the fund's first in toll roads, will be financed by 1.4 billion yuan in cash from the sale of its non-Asian assets, such as stakes in Brussels Airport and German oil operator Tanquid, as well as debt facilities of 3.6 billion yuan.
Managed by the Sydney-based Macquarie Bank group and listed in Singapore, MIIF focuses on infrastructure investments.
Macquarie said in its presentation posted on the Singapore stock exchange website that the expressway has had a compound annual toll and traffic volume growth rate of 13 per cent since 2004. Its earnings before interest, depreciation and amortisation margin was 84 per cent last year.
MIIF said investments in existing expressways were an efficient way to gain returns, while developing new roads was a time-consuming and costly process, given the substantial government approvals required.
It has budgeted 30 million yuan for 'asset upgrading', a process that will begin in January and last two years.
MIIF estimated that revenue from the expressway will be 458.6 million yuan this year, a 6.8 per cent decline from last year due to a new competing toll road, Xinguang Expressway.