China Backs Out Of Funding Sydney Container Terminal

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Posted this 2019-05-16 1:56 PM ADT

Photo Credit: Tom Ayers, CBC

CBC's Tom Ayers is breaking news via Twitter about the proposed Sydney container terminal project. Ayers is reporting that Sydney Harbour Investment Partner's Albert Barbusci nows says that China "backed out of a funding proposed container terminal in Sydney" as of last year. However, Barbusci says a new company AVAIO Capital is now "on board".

Albert Barbusci of Sydney Harbour Investment Partners says China backed out of funding proposed container terminal in Sydney due to Aecon and Huawei issues last year. He says U.S. finance company Avaio is now on board and project is back on track. Still need a shipping line tho. pic.twitter.com/3CnvwZneHr
— Tom Ayers (@tomayers2262) May 16, 2019

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Wayne O'Toole Follow Me 2019-05-16 2:52 PM ADT Reply 2 0 Yeah right. How many "partners" have come and gone and we have been "shovel ready" for a decade. I say we need an investigation into any public dollars and misuse thereof. Lynn Hussey Follow Me 2019-05-17 9:37 AM ADT Reply 1 0 My thoughts exactly. It's '''almost''' comical how we start off on the high note over a new business then come crashing down. I believe nothing I hear anymore. Nothing.
Ken Walsh Follow Me 2019-05-17 10:21 AM ADT Reply 1 0 Classic bait and switch game. If China had really wanted Sydney as a port they would of broken down the doors years ago to get it. It had nothing to do with Huawei. Barbusci has nothing and the most troubling part is that CBRM council are not only protecting him under the cloak of "privacy'' when it comes to port talks but are full partners in outright deceiving CBRM taxpayers in doing so.
caleb gibbons Follow Me 2019-05-17 12:27 PM ADT Reply 1 0 Any forward motion with this proposal should be taken as a positive. On the scale contemplated, Novaporte would be employing > 1,000 Cape Bretoners and revitalizing rail routes long underutilized. As a greenfield (i.e. new) site, Sydney-based Novaporte will not be able to impart the same degree of leverage that a "proven" container port can when they are looking to expand capacity (i.e. 65% debt / 35% equity to as much as 75% debt / 25% equity). In the most conservative scenario, Novaporte might require call for 40% debt / 60% equity to get the C$600mm stage 1 financed (1MM TEU capacity). Using these numbers $360 million of equity and $240mm of relatively cheaper debt would be required. The full project across 3 stages will cost $1.5bln and have a 3.2mm TEU capacity. The advantages of Sydney based container are substantial; a deeper port, hence able to handle the larger vessels of 2019, a large footprint for build/expansion, and key placement on the Great Circle route (with Arctic routes under study, Maersk with the 1st pilots from 2018). AVAIO Capital is a net positive, but we temper our enthusiasm in terms of what has been unlocked. AVAIO was a recent spin out from Aecom (ticker ACM, an 87,000 employee $5.2bln mkt cap engineering firm). AVAIO has a target to be a $1bln infrastructure fund. Their only current investment is an LNG facility in Western Mexico (Mexico Pacific Limited), MPL. The cost to bring this 4 MTPA facility online in today's market is $1.6bln. IF AVAIO were fully funded at $1bln they might invest 10% in Novaporte (pure conjecture, but I am assuming 10% would be deemed a high enough concentration on 1 transaction, allowing them capacity for 10 investments, across sectors and geographies). US$100mm of equity could be levered to US$140 via debt (C$187mm), leaving C$413mm to be funded through other sources. The pedigree of the principals are strong. It is a start. #JCG19 Joe Ward Follow Me 2019-05-17 3:11 PM ADT Reply 0 0 Have you done any business with any of the AVAIO team in the Finance world? In the simplest terms, what has occurred is that AVAIO has indicated a desire to be an investor (perhaps ~$100 Million), as long as other investors (plus debt) are secured... and after a customer (shipping line) commits. I suspect they have no legal committment. Would that be an accurate summary? In the industry at this scale, if there is no commitment (only a willingness to consider investment if x, y, z precursor conditions are met), isn't this a fairly easy commitment to achieve? What should we take of a PRWEB-submitted press release going out on the first day of the Sydney Port days, after there having been local criticism about the port developers not being scheduled to provide any updates? Coincidence only? An active campaign to boost the project to other investors? Wouldn't proactive investors at their scale be actively pursuing collaborative investors on their own? caleb gibbons Follow Me 2019-05-17 8:28 PM ADT Reply 2 0 Joe, Your summary appears to be an accurate assessment. Without disclosure the size of AVAIO's eventual investment is conjecture of course, as noted. We need to start somewhere in the analysis of the project (educated guesses) to gauge both feasibility and time line. I have not had direct dealings with the principals. The AVAIO spin-out from Aecom was a fairly recent development. Aecom is a large, publicly listed, engineering company (87,000 employees vs. 52,000 for SNC Lavalin for reference). AVAIO appears to have a dozen of so key finance staff (partner/principal). A couple of them spent part of their career at Goldman Sach's and the hedge fund Och-Ziff. Many things have yet to fall into place with Novaporte. AVAIO have a stated goal of attracting investors to scale to $1bln in infrastructure AUM, but it does not appear they are close to that bogey yet. There is plenty of dry powder ($ ready to be put to work) in the PE space, trolling the globe for scalable infrastructure projects, in safe jurisdictions, that meet return bogeys (including our own domestic pension funds). The debt commitments for C$240mm stage 1 are not difficult to secure as most scale players would have these facilities in place at the time of engagement (size and pricing, given risk rating assumption are met). The C$360mm of equity investment is the critical bit (assuming 40/60 debt equity split). To your final point, I agree "club deals" are common is the space where management teams draw comfort from success on prior transactions. Regards, Caleb

Depth

Wayne O'Toole Follow Me 2019-05-16 2:52 PM ADT

Reply 2 0

Yeah right. How many "partners" have come and gone and we have been "shovel ready" for a decade. I say we need an investigation into any public dollars and misuse thereof.

Lynn Hussey Follow Me 2019-05-17 9:37 AM ADT

Reply 1 0

My thoughts exactly. It's '''almost''' comical how we start off on the high note over a new business then come crashing down. I believe nothing I hear anymore. Nothing.

Ken Walsh Follow Me 2019-05-17 10:21 AM ADT

Reply 1 0

Classic bait and switch game. If China had really wanted Sydney as a port they would of broken down the doors years ago to get it. It had nothing to do with Huawei. Barbusci has nothing and the most troubling part is that CBRM council are not only protecting him under the cloak of "privacy'' when it comes to port talks but are full partners in outright deceiving CBRM taxpayers in doing so.

caleb gibbons Follow Me 2019-05-17 12:27 PM ADT

Reply 1 0

Any forward motion with this proposal should be taken as a positive. On the scale contemplated, Novaporte would be employing > 1,000 Cape Bretoners and revitalizing rail routes long underutilized. As a greenfield (i.e. new) site, Sydney-based Novaporte will not be able to impart the same degree of leverage that a "proven" container port can when they are looking to expand capacity (i.e. 65% debt / 35% equity to as much as 75% debt / 25% equity). In the most conservative scenario, Novaporte might require call for 40% debt / 60% equity to get the C$600mm stage 1 financed (1MM TEU capacity). Using these numbers $360 million of equity and $240mm of relatively cheaper debt would be required. The full project across 3 stages will cost $1.5bln and have a 3.2mm TEU capacity. The advantages of Sydney based container are substantial; a deeper port, hence able to handle the larger vessels of 2019, a large footprint for build/expansion, and key placement on the Great Circle route (with Arctic routes under study, Maersk with the 1st pilots from 2018). AVAIO Capital is a net positive, but we temper our enthusiasm in terms of what has been unlocked. AVAIO was a recent spin out from Aecom (ticker ACM, an 87,000 employee $5.2bln mkt cap engineering firm). AVAIO has a target to be a $1bln infrastructure fund. Their only current investment is an LNG facility in Western Mexico (Mexico Pacific Limited), MPL. The cost to bring this 4 MTPA facility online in today's market is $1.6bln. IF AVAIO were fully funded at $1bln they might invest 10% in Novaporte (pure conjecture, but I am assuming 10% would be deemed a high enough concentration on 1 transaction, allowing them capacity for 10 investments, across sectors and geographies). US$100mm of equity could be levered to US$140 via debt (C$187mm), leaving C$413mm to be funded through other sources. The pedigree of the principals are strong. It is a start. #JCG19

Joe Ward Follow Me 2019-05-17 3:11 PM ADT

Reply 0 0

Have you done any business with any of the AVAIO team in the Finance world? In the simplest terms, what has occurred is that AVAIO has indicated a desire to be an investor (perhaps ~$100 Million), as long as other investors (plus debt) are secured... and after a customer (shipping line) commits. I suspect they have no legal committment. Would that be an accurate summary? In the industry at this scale, if there is no commitment (only a willingness to consider investment if x, y, z precursor conditions are met), isn't this a fairly easy commitment to achieve? What should we take of a PRWEB-submitted press release going out on the first day of the Sydney Port days, after there having been local criticism about the port developers not being scheduled to provide any updates? Coincidence only? An active campaign to boost the project to other investors? Wouldn't proactive investors at their scale be actively pursuing collaborative investors on their own?

caleb gibbons Follow Me 2019-05-17 8:28 PM ADT

Reply 2 0

Joe, Your summary appears to be an accurate assessment. Without disclosure the size of AVAIO's eventual investment is conjecture of course, as noted. We need to start somewhere in the analysis of the project (educated guesses) to gauge both feasibility and time line. I have not had direct dealings with the principals. The AVAIO spin-out from Aecom was a fairly recent development. Aecom is a large, publicly listed, engineering company (87,000 employees vs. 52,000 for SNC Lavalin for reference). AVAIO appears to have a dozen of so key finance staff (partner/principal). A couple of them spent part of their career at Goldman Sach's and the hedge fund Och-Ziff. Many things have yet to fall into place with Novaporte. AVAIO have a stated goal of attracting investors to scale to $1bln in infrastructure AUM, but it does not appear they are close to that bogey yet. There is plenty of dry powder ($ ready to be put to work) in the PE space, trolling the globe for scalable infrastructure projects, in safe jurisdictions, that meet return bogeys (including our own domestic pension funds). The debt commitments for C$240mm stage 1 are not difficult to secure as most scale players would have these facilities in place at the time of engagement (size and pricing, given risk rating assumption are met). The C$360mm of equity investment is the critical bit (assuming 40/60 debt equity split). To your final point, I agree "club deals" are common is the space where management teams draw comfort from success on prior transactions. Regards, Caleb

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China Backs Out Of Funding Sydney Container Terminal

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