By Dan Stojanovich
Images at top L-R: Aerial view of site with artist’s impression of plant; Victorian water Minister, Tim Holding, inspecting a section of pipe; close up of completed plant – artist’s impression.
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futurebuilding
EDITION 1
The GFC put a few people and institutions to the test, including Australian infrastructure projects. Securing finance for Victoria’s new desalination plant to help ‘droughtproof’ Melbourne was a case study in how the funding could be achieved in a very negative climate by a well structured and argued business case. Receiving the ‘Financial Excellence’ award* at the Australian National Infrastructure Awards in March 2010 was due recognition for a lot of clever work done by the AquaSure Consortium and colleagues to get over the line. “The sheer size and complexity of this landmark transaction (close to $4 billion of debt and $800 million of equity) made it noteworthy,” said Chris Herbert, CEO of the AquaSure consortium that included Thiess and Degrémont, financial adviser Macquarie Capital, and the Department of Sustainability and Environment (DSE) Capital Projects division on behalf of the State of Victoria. “But the big unknown challenge was the extraordinarily difficult market conditions at the time.” The start of the transaction in September 2008 was less than fortuitously timed - coinciding with the collapse of Lehman Brothers and the ensuing big chill across international debt and equity markets. To raise the bar just a little higher, the first bid had to be submitted in March 2009 – pretty well the height of the GFC. Despite these unprecedented difficulties, consortium members worked collaboratively with the DSE and State Treasury officials to arrange a competitive financing package for not only one of the world’s largest desalination plants, but also the largest PPP financing and PPP debt package in the world since the start of the GFC in August 2007. To add extra context, there was also competition from significant projects in India and China for rapidly diminishing funds. No one knew where it was all headed. According to Jim Miller, executive director, head of infrastructure and utilities, Australia and NZ, Macquarie Capital Advisers Limited, “Financial markets significantly deteriorated as the bid progressed, with debt spreads and equity premiums increasing significantly and liquidity evaporating as every week went by”.
