Should it sit on the loot garnered from high prices, invest in more energy projects, or diversify to spread the risk profile?

For anyone in Australia the focus of this debate about having surplus wealth is a fast-growing gas and electricity business called Alinta.

Once a government-owned utility which did little more than distribute gas to households in and around Perth, Alinta has become an investment favourite thanks to its excellent management team.

Over the past few years, Alinta has acquired assets around Australia, branched out into electricity production via a terrific little deal with Alcoa on a series of co-generation plants, and enjoyed a booming share price.

Its latest deal involves the creation of a special infrastructure fund which has a few old-timers curious, but not worried – or at least not yet.

Alinta’s fund, according to what has been reported so far, was knocked down in a stampede of applications with institutional investors and long-term shareholders being scaled down, and receiving a lot less than they asked for.

Rather than raising the original target of $688 million, it looks like getting $711 million.

The aim of the fund, so far, is simple. It will become the owner of several pipelines and power stations acquired last year from the troubled Duke group – which had suffered badly by over-paying when it originally bought the assets.

And that brings The Slug to his theme. Alinta’s vision for the assets is clever. It proposes to only own 20% of the fund, preferring to peel off a few layers of fees – a classic demonstration of the virtual company which has been talked about for the past decade.

Ownership, and therefore the bulk of the risk, lies with investors in the fund.

Now comes the critical question. What will Alinta do with its pile of cash, and where will the new infrastructure fund direct its investments?

Energy prices are sky-high, perhaps at an all-time high. Is this a good time to be buying energy assets?

Well, if energy prices and asset values are too high, what about a bit of diversification into something else, such as water?

Fine idea, at least that’s what Alinta seems to be saying. Rather than chase scarce, and high-priced energy assets in its backyard of Australia, it proposes to look for other asset classes in other countries.

Risk is a word that jumps off that plan. A few decades ago, most of the world’s big oil companies thought they could invest in minerals – the reason being that diversification made sense. They all failed.

The Slug hopes he is proven wrong, but when an energy utility starts talking about investment in water he gets a funny feeling that he’s heard this argument about diversification before.

When it’s water in a country on the other side of the world, he gets a very concerned feeling – which all comes back to that original theme of what to do with a bag of money. Invest wisely in things you know well, or just have a great time trying out a few new ideas, and expanding like crazy because until now everything has gone so well.