Macquarie invests in southern China toll road(2)

Macquarie International Infrastructure Fund has acquired an 81 percent interest in a motorway in China’s Guangzhou city for $532 million.

Macquarie International Infrastructure Fund, the Australian bank’s flagship Asian, listed infrastructure fund, has acquired a controlling interest in Hua Nan Expressway, a 31 kilometre dual-carriage urban toll road in Guangzhou. The fund is paying RMB 3.957 billion ($532 million; €363 million).

Macquarie has acquired a 90 percent equity interest in South China Highway Development from two vendors who will retain a 10 percent interest in the latter. South China Highway owns a 90 percent interest in Nan Hua Expressway.

The acquisition comprises RMB 1.686 billion of equity and RMB 2.27 billion of senior debt. The fund is using proceeds from the sale of non-Asian assets and existing committed debt facilities of approximately $485 million, according to a statement.

The historical multiple for the transaction is approximately 11.6 times EBITDA for twelve months to 31 December 2006, and approximately 12.6 times for 12 months to 31 December 2007, the statement added.

Hua Nan Expressway is a fully operational road of 6 to 8 lanes that runs through the centre of Guangzhou. The city has a diversified mix of manufacturing, industrial, commercial and high tech industries. With a metropolitan population of over 8 million, Guangzhou is the third most populous city in China.

Gavin Kerr, managing director of MIIF said: “Hua Nana Expressway is a strong and stable road business, producing significant operating cash flow. Opened in two separate phases, [it] has posted growth in tolled traffic volume of 13 percent per annum since 2004.” Tolling rights expire in 2026.

The latest investment will make up 18.7 percent of MIIF investment portfolio and result in 35.8 percent of the fund’s portfolio being located in Asia, the bank said.