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NZ investors in PIP Fund reap $1.1M on Melbourne refinancing

Tuesday 24th July 2012

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Retail investors in the Morrison & Co-managed Public Infrastructure Fund got a return of $1.1 million from the refinancing of Melbourne's convention centre, just two years after its initial investment.

The New Zealand Social Infrastructure Fund, which holds the second-biggest stake in the PIP Fund behind the New Zealand Superannuation Fund, paid unitholders 2.77 cents per share after Canadian fund manager Caisse de Depot et Placement du Quebec refinanced the Melbourne Convention and Exhibition Centre's subordinated debt, according to the NZSIF annual report.

The Melbourne investment accounts for about 22 percent of the PIP Fund's committed capital, and avoided the risk around the centre's revenue from a lock-in rental arrangement with the Victorian state government.

"During the financial period to 31 March 2012 the MCEC investment performed well with no revenue deductions for equity investors, which is an excellent outcome," chairman Kim Ellis said in his report. "Following the repayment of the subordinated debt the yield from MCEC is expected to increase, so the investment will generate strong ongoing cash flows."

NZSIF investors were in line for a further 1.04 cents per share distribution this month, and payments are set to increase as cash flow from the PIP Fund's new public-private partnership to build schools in Hobsonville comes on stream in July 2014.

The PIP Fund is contributing almost 98 percent of the project's equity funding and financial management, and is working with Hawkins Construction, ASC Architects and Programmed Facility Management.

"The PIP Fund has received assurances from Hawkins and their parent, McConnell Ltd, that the Hobsonville schools project will not be affected by the poorly performing Australian project," the report said, referring to Hawkins' delayed joint venture in building the Ararat Prison in Victoria, Australia.

NZSIF stumped up $2.3 million of the $10 million the PIP Fund put into the Hobsonville project.

The PIP Fund expects government infrastructure public-private partnerships to gain momentum, though it doesn't expect any other project to be finalised this year, the NZSIF report said. The fund sees opportunities coming up in the communications, defence, health, social housing and transport sectors.

The fund will steer clear of prison projects that include custodial services, and also toll road PPPs that have demand driven revenues, "as these types of projects carry greater investment risk."

In 2010, the PIP fund attracted $176.5 million in capital commitments, enabling more than $1.5 billion of infrastructure investments.

NZSIF's investment in the PIP Fund was valued at $10.5 million as at March 31, compared to $9.4 million a year earlier. It has further commitments of $31.3 million to the PIP Fund.

The retail fund reported a profit of $922,000 in the 12 months ended March 31, or a 7.7 percent return on gross shareholder funds, compared to a $46,000 surplus in the 15 months ending March 31, 2011.

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