The Hastings Diversified Utilities Fund (HDUF) has attracted strong support from institutions and brokers ahead of its initial public offer on November 8. The float will be worth $379 million
Its initial assets are the Moomba-to-Adelaide pipeline, the Pilbara pipeline in Western Australia and the South West Queensland pipeline system. At 1185km, the Moomba-to-Adelaide pipeline comprises just over half the total pipeline length owned by the company and is its single most valuable asset.
Hastings Funds Management, which is 51 per cent-owned by Westpac, bought the pipeline assets in April from Epic Energy for $663 million.
HDUF will target investments in gas transmission and distribution, electricity, hydro and wind power, according to Hastings director of infrastructure and HDUF chief operating officer Jim Hallam. He said HDUF would have little trouble acquiring more assets given the activity in the utility and energy markets in Australia and New Zealand – with more than $15 billion in assets changing hands in he past 12 months.
Analysts say there is strong demand for infrastructure stocks because of their predictable cash flows and high returns. Two months ago, DUET and partners Alinta Ltd. and Alcoa Inc. agreed to pay Epic Energy about A$1.86 billion for Western Australia’s largest natural gas pipeline.
Hastings director of infrastructure and HDUF chief operating officer Jim Hallam said the bookbuild was so successful that the fund’s cornerstone investor Westpac Banking Corp Ltd had reduced its allocation to nil.
Westpac, a major stakeholder in Hasting, was to have retained a cornerstone stake in the new fund worth $50 million. But it agreed to sell off its holding to help satisfy demand for the stock from institutions and brokers.
“The institutional and broker firm components of the offer were oversubscribed and we look forward to the same positive response when the offer opens,” Hallam said.
Issue price is $2.56 per security, representing a forecast distribution yield of 9.5 per cent.
The IPO will close on December 8, with the fund expected to list on December 21.
