Capital flood a curse and blessing: Infratil
Infratil says the strategic review of its Infratil Energy Australia (IEA) assets, including Lumo Energy, will be completed within a month.
Goldman Sachs has valued the IEA business at up to A$675 million ($726 million) if sold.
At the infrastructure holding company's annual general meeting in Auckland today, chief executive Marko Bogoievski said the results of the review were due in mid to late September.
While there was likely to be room in the Australian market "for one more transaction of this size", Bogoievski said there was no guarantee the review would result in a sale.
"If we end up holding it, we're actually perfectly happy to do that as well."
Bogoievski said the company was feeling good about the prospects for the year ahead, having delivered record earnings and cashflow in the full year to March.
He said the infrastructure market was being overwhelmed by new capital.
While that had helped push up the value of Infratil's existing holdings beyond its expectations, it meant it had to compete harder to find new acquisitions, he said.
"We've got to work a little bit harder to earn those same sort of returns we've had over the past 20 years."
The strong demand for private assets was not likely to change any time soon, "largely because the supply of capital is relentless", said Bogoievski.
However, most large investors such as pension funds were more interested in the less risky, core infrastructure such as utilities.
By contrast, Bogoievski said Infratil was more interested in higher-growth greenfields developments, which required more sophistication.
"We're sort of hunting where there are less competitors looking for the same assets," he said.
The company expected plenty of new opportunities to arise from local and central government divestment, including up to $100 billion in Australia over the next five years.
Bogoievski identified regulation as one of the major risks to be managed in the year ahead.
Infratil's single biggest holding, Trustpower, dragged down the company's performance last year, in part due to the Labour-Greens proposal to create a single buyer for electricity.
However, he said its multi-product retail offerings were helping to differentiate it from the rest of the market.
"If you get it right, generally speaking you end up with a customer who has a lower propensity for churn."
One shareholder at the meeting asked why the record annual result had not translated to a higher share price.
Chairman Mark Tume said the board discussed the issue at every meeting, and felt there was quite a large discount on where the market currently saw fair value.
He said the sharemarket had experienced a lot of new entrants recently, and despite the company's "fabulous result" with the sale of most of its Z Energy stake, Trustpower had taken a hit.
Infratil shares were recently trading at $2.42, down 0.4 per cent today, and by 1.2 per cent over the last 12 months.