AMP Capital on track to acquire a stack interest in the Macarthur Wind Farm.

AMP Capital has agreed to acquire a 50 per cent interest in Macarthur Wind Farm, the largest wind farm in the southern hemisphere, from Malakoff. The acquisition is on behalf of investors in the AMP Capital Community Infrastructure Fund (CommIF) and the AMP Capital Core Infrastructure Fund (CIF).

Macarthur Wind Farm, located in south western Victoria, comprises 140 wind turbines capable of generating 420 MW of energy – enough to power the equivalent of 181,000 Australian homes every year.  The site spans approximately 5,500 hectares of agricultural land outside the Macarthur township.

Energy generated from the wind farm, which started operating in 2013, is fully contracted to AGL under a fixed price contract until 2038. AGL operates Australia’s largest electricity generation portfolio and is one of the largest ASX-listed investors in renewable energy.

AMP Capital Community Infrastructure Fund Manager Charles Savage said: “We’re extremely pleased to have secured this asset for our investors.  Macarthur Wind Farm is a unique and high-quality asset that meets CommIF’s objective to produce long-term, stable returns while delivering a positive social impact now and into the future.

“The transaction marks CommIF’s first investment in the renewable energy sector. It has an attractive risk profile that provides fixed revenues that are not exposed to price or volume risk.  We remain excited by the pipeline of further opportunities in social and community infrastructure projects across Australia and New Zealand in 2020.”

CommIF invests in high-yield, brownfield, social infrastructure assets in Australia and New Zealand in sectors such as education, health, corrections, community housing, water and recreational facilities.  The fund provides investors with the opportunity for stable, long-term returns. The acquisition will increase the number of assets held by CommIF to 15, with a total enterprise value of circa A$4.6 billion.

AMP Capital CIF Fund Manager John Julian said: “Macarthur Wind Farm is a terrific addition to the CIF portfolio. The fund aims to provide retail investors with both sustainable income and capital growth over the long term – the acquisition is well-aligned to this objective.”

CIF provides retail investors access to both listed and unlisted infrastructure assets, typically only available to large institutional investors. The fund provides diversified exposure to multiple sectors, OECD regions and asset types including airports, transport infrastructure, water, gas, and electricity.

The transaction is valued at approximately A$880 million.  Financial close of the deal is expected to complete by the end of the first quarter of 2020. AMP Capital was advised by MUFG Bank, PwC, King & Wood Mallesons, Aurecon, and Frontier.

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Tim Keegan

Infrastructure is growing in popularity among retail investors including self-managed super fund (SMSF) trustees as evidenced by the approximately 300 people who attended yesterday’s AMP Capital webinar on the asset class.

The webinar, hosted by AMP Capital Core Infrastructure Fund Manager John Julian and AMP Capital Head of SMSF and Self-Directed Wealth Tim Keegan, covered the key characteristics of the asset class and what it can offer SMSF investors in particular.

Mr Keegan said: “Each year, we’re seeing more retail investors and financial advisers wanting to know more about infrastructure. AMP Capital has found that as investors become more educated on infrastructure’s role in a diversified portfolio, flows into infrastructure managed funds are rising. SMSF trustees in particular want access to investments they can’t do themselves and infrastructure falls into that category, particularly for those looking for a defensive play. At today’s webinar, participants were particularly interested in the different ways to access infrastructure, investment performance, the impact of rising interest rates on infrastructure assets and gearing.”

Mr Julian noted: “Infrastructure offers a range of investment characteristics that can be particularly attractive in the low interest rate and volatile market conditions we have seen in recent times. Our clients tell us they like its attractive, consistent returns and yield; defensive characteristics; and diversification benefits. Infrastructure is also becoming more accessible to retail investors. In the past, high qualityunlisted infrastructure assets were usually only available to large institutional investors but now mums and dads can own their own piece of Melbourne Airport or UK rolling stock company Angel Trains.”

Following the webinar, AMP Capital identified its top five reasons why retail investors should consider infrastructure.

1) Attractive, consistent returns

Infrastructure offers the potential for attractive, consistent returns through market cycles. This is because infrastructure assets are often essential to the day-to-day operation of our society such as the provision of water or electricity and gas. Due to the nature of the essential services they provide, these types of assets are often less influenced by economic factors than many other businesses. In addition, infrastructure assets often enjoy the protection of monopolies, or operate in markets where the barriers to entry are high, meaning they are often free from the competitive pressures faced by many more traditional companies.

2) It can help investors meet their income goals

Infrastructure assets can provide consistent, long-term income yields because their revenues are often underpinned by regulation or by long-term contracts with highly creditworthy counterparties (which can often include governments). Consequently, infrastructure assets may offer a high level of security with regards their future revenues. Infrastructure asset revenues are also often linked to inflation, which can help investors protect against erosion of the value of their investment by inflation over time.

3) It’s a defensive play

Infrastructure generally, and unlisted infrastructure particularly, can play an important role for long-term investors due to the stability it can provide within a diversified investment portfolio and the visibility of the income streams it generates. In a low interest rate environment where the outlook for total return appears compressed, asset classes that exhibit defensive characteristics with an attractive and stable income profile are obvious candidates for a long-term investment strategy.

4) The world needs more and updated infrastructure

Infrastructure is an investment thematic that will continue to play out because the need for infrastructure is a never-ending cycle. Growing populations need to be supported by additional infrastructure while ageing infrastructure needs to be periodically upgraded or replaced. Investment in infrastructure helps stimulate sustainable, long-term economic growth, which then creates a further need for infrastructure. Ultimately,infrastructure promotes higher living standards as it fosters economic growth and creates jobs. A McKinsey report estimates that US$57 trillion of global investment in infrastructure will be required by 2030.

5) Active management of infrastructure assets

AMP Capital has an active asset management philosophy when it comes to the management of the unlisted infrastructure assets it invests in. AMP Capital employs asset managers who have had extensive senior level industry experience. In addition, AMP Capital seeks to ensure that the overall stake under its control is sufficient to allow for significant influence over the future direction of the business. This would typically involve representation on the boards of the businesses. AMP Capital has a high level of involvement in these businesses, with a view to driving returns and managing risk for the benefit of investors.

SMSF trustees can invest in the AMP Capital Core Infrastructure Fund through the AMP Capital SMSF Suite with a minimum investment of $10,000. The AMP Capital Core Infrastructure Fund offers retail investors access to unlisted infrastructure assets usually only available to large institutional investors. It invests in a diversified global portfolio of unlisted infrastructure assets and listed infrastructure securities.

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