Cheung Kong Business Hires Bankers for Australian IPO Aug. 26 (Bloomberg) -- Billionaire Li Ka-shing's Cheung Kong Infrastructure Holdings Ltd. hired Deutsche Bank AG to sell at least A$1 billion ($760 million) of shares in its Australian energy business, people familiar with the plan said.
Cheung Kong Infrastructure, the biggest owner of tunnels and power plants in Hong Kong, may sell the energy distribution business as an investment trust this year, the people said, asking not to be identified. By creating a trust, the company will be able to earn fees for managing the businesses it owns.
Li, 77, may use the proceeds to buy more businesses in the country, which needs A$30 billion of investments in electricity and gas during the next 15 years to meet demand, according to the Energy Supply Association of Australia. Alinta Ltd., Western Australia's biggest natural gas retailer, today completed the sale of shares in a pipeline and power generation unit after its stock surged 45 percent this year.
``The total package is attractive,'' said Paul Xiradis, who helps manage the equivalent of $2.3 billion at Ausbil Dexia Ltd. in Sydney. ``The recurring revenue from infrastructure assets is something that investors look at.'' He said the value of the assets may increase if they are ``well managed.''
The S&P/ASX 200 Utilities Index, which tracks shares in eight Australian power and gas companies, has risen almost 16 percent the past year, outpacing a 9.8 percent gain by the nation's benchmark.
Cheung Kong Infrastructure said on Aug. 18 its overseas businesses helped boost first-half profit by 10 percent to HK$1.53 billion ($197 million). Earnings from the company's Australian unit rose 14 percent in the period, making up a third of the total.
Wendy Tong Barnes, a Hong Kong-based spokesman for Li's flagship Cheung Kong Holdings Ltd., declined to comment, as did Kate Abrahams, a spokeswoman for Deutsche Bank in Sydney.
Tariff Concern
Shares in Cheung Kong Infrastructure climbed 29 percent in the past year, outpacing a 16 percent gain for Hong Kong's benchmark HIS Index.
The company is awaiting a regulatory ruling on tariff cuts in Victoria, Australia's second-most populous state, before proceeding with the share sale, the people said.
In June, the Victorian Essential Services Commission said the five power distributors in the state must cut charges to customers by between 4 percent and 26 percent next year. A final ruling is due next month. The draft ruling ``seemed severe and could lead to negative rating action within the industry,'' according to Standard & Poor's.
Singapore Power Ltd., the state-owned electricity monopoly, in June said it's studying a public share sale of a minority stake in its Australian energy businesses.
Shares in Diversified Utility & Energy Trusts, a Sydney- based company that owns power and gas networks across Australia, climbed 16 percent since it started trading in August 2004. Macquarie Infrastructure Group, the world's largest developer of toll roads, surged more than 30 percent in the past 12 months.
Citigroup, Merrill
Citigroup Inc. and Merrill Lynch & Co. will help arrange the share sale, the people said. Judy Hitchen, a spokeswoman for Citigroup in Sydney, and Merrill's spokesman in the city Alex Gottshall, declined to comment.
Cheung Kong Infrastructure has acquired assets offshore to offset slowing growth in its domestic market. The company said in March it might give investors the chance to own shares in its Australian operations.
``Infrastructure assets are generally low risk assets which generate stable and predictable cash flows,'' said Clement Chong, an analyst at Moody's Investors Service in Sydney. ``This contrasts with general industrial companies which tend to face a higher degree of competition, and hence higher business risk.''
Cheung Kong Infrastructure has invested about A$4.8 billion in its Australian businesses, which are mostly in Victoria. In partnership with Li's Hongkong Electric Ltd., Cheung Kong Infrastructure owns power distributors CitiPower I Ltd., Powercor Australia Ltd. and ETSA Utilities. It also holds 18.6 percent of natural gas distributor Envestra Ltd. and 49 percent of AquaTower Pty, a water utility.
Cheung Kong Infrastructure and Hongkong Electric have about 1.7 million electricity customers in Victoria and South Australia.
Cheung Kong Infrastructure also has a 40 percent stake in a Sydney tunnel project in New South Wales, Australia's most populous state, and is the largest shareholder in the Sydney Cross City Tunnel project, according to its Web site.
``Cheung Kong's portfolio of investments in Australia has been a key driving force for the group and provided substantial returns,'' Chairman Victor Li said on Aug. 18.
