Oh, Canada

Australian infrastructure party is getting crowded

Australia's infrastructure party is getting crowded. The $6-billion-plus battle for container terminals and rail freight operator Asciano has grown heated, drawing in backers from Canada, China and Qatar. No wonder: borrowing is cheap and demand for stable long-term investments outstrips supply. This bodes well for future state sell-offs down under.

In a world of super-low interest rates, the predictable returns from businesses such as power grids, roads, and airports grow even more attractive -and new deals become even easier to finance. Plus huge amounts of money are chasing a limited number of opportunities: Preqin says the world's dedicated infrastructure funds ended 2015 with $108 billion of unspent capital.

To that deal-making capacity add big slabs of debt, plus the many billions more that could be deployed by sovereign wealth funds and listed companies. All that translates into big prices: for example, decades-long rights to operate toll roads in America and Australia have sold for between 27 and 35 times EBITDA in the last couple of years.

Purists may say Asciano is not quite a core infrastructure asset - running rail freight and unloading containers does not produce cashflows as steady as, say, distributing electricity for a regulated rate of return. And it certainly is not worth toll-road style multiples. But the group is still much in demand, at the centre of a months-long bid battle between Canada's Brookfield and local rival Qube.

Reuters says Brookfield has now roped in the Qatar Investment Authority and Canada's PSP, alongside existing backers GIC of Singapore and BCIMC of British Columbia, for an imminent A$9.05 billion ($6.5 billion) all-cash bid. For its part, Qube is supported by Global Infrastructure Partners, the Canada Pension Plan and China's CIC. So some Canadian pensioners should win either way.

The robust interest might be partly because funds and banks were already primed for a series of privatisations in Australia, such as Ausgrid, a power network in New South Wales. Progress has actually proved slower than hoped, and hoped-for disposals in Queensland were torpedoed by a change in the state's government. Still, the frenzy over Asciano augurs well for deals still in the pipeline.