Aus & NZ: Infra funds consider Jemena water business

23 October 2018 - 12:00 am UTC

Another fairly modest water asset is on the block in Australia with Jemena’s AquaNet about to go to market.

Flagstaff is on the ticket as advisors to sell the niche water recycling business thought to be worth between AUD 50m-100m (USD 35m-70.6m), Inframation understands.

This valuation is based on company earnings (EBITDA) of circa AUD 6m (USD 3.9m), a source familiar with the matter said.

Energy giant Jemena, owned by China’s State Grid and Singapore Power, are hoping to kick off the sale in early November, but had flagged it to potential buyers several months ago.

AquaNet’s primary operation centres around a long-term agreement with Sydney Water to build and operate the Rosehill recycled water plant, located in western Sydney, which has been operating since 2011.

Its network consists of 20km of recycled water pipelines, two pumping stations and two reservoirs. AquaNet’s Rosehill plant also links to a water recycling plant at Fairfield, owned by Veolia Water and Sydney Water’s water recycling plant in Liverpool.

The recycled water project supplies more than 7bn litres annually to industrial and commercial water users in Western Sydney. Customer contracts include Rosehill Gardens Racecourse, Marubeni Australia Power Services and Shell Refining.

AquaNet also has contracts with several local councils but has limited scope for growth, the source added.

Normally, it would be regarded as too small for mid-sized funds that are keen on water assets. However, the acute lack of opportunity in the Australian water sector means the auction could attract more attention than usual. 

Funds including AMP Capital and Infrastructure Capital Group are understood to be looking at the business.

One fund manager placed the valuation figure closer to the AUD 50m mark, referring to AquaNet as a “tiny” business, and probably too small [for a lot of funds] to bother with a closer look.

But he added: “never say never…pipelines don’t come up that often”.

It could also be more of a private equity play than one for mainstream infrastructure funds, according to an advisory source briefed on the deal. However, it has got internal operations and maintenance (O&M) capabilities and so boasts a low risk profile.

ICG Diversified Infrastructure Fund invested in the Springvale Water Treatment Plant alongside Veolia, which is due to be competed in 2019.

It is not clear why Jemena are planning to sell the asset, but the pipeline is thought to be considered a non-core asset, according to the advisory source.

Jemena declined to comment.

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