Li Ka-Shing and Goldman vie for rapid rail route

LONDON/AMSTERDAM Tue Aug 17, 2010 7:54pm BST

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LONDON/AMSTERDAM (Reuters) - Li Ka-Shing has emerged as one of the suitors for Britain's only high-speed rail line, just weeks after the Hong Kong tycoon struck a $9 billion (5.8 billion pound) deal to buy the UK's biggest electricity distribution network.

With indicative bids due on Tuesday, Li's Cheung Kong Infrastructure (CKI) faced at least three rival groups: a five-strong bidding group that included Goldman Sachs and Eurotunnel, a team allied with Morgan Stanley, and a pair of big Canadian pension funds.

The fierce competition for High Speed 1, which has a 30-year concession to run the railway linking London and the Channel Tunnel, is a boon for the government, which is selling the 109-kilometre (68-mile) line to help cut its budget deficit.

Three people familiar with the matter said CKI was among the groups interested in the line. CKI is 85 percent-owned by Hutchison Whampoa Ltd, which Li chairs. CKI did not immediately respond to an emailed request for comment outside Hong Kong business hours.

On July 30, the Hong Kong billionaire struck a $9 billion deal, using CKI and other vehicles, to buy Britain's biggest electricity distribution network from French power giant EDF.

HS1 also operates London's St. Pancras International station and three others on the route, offering bidders the chance to make unregulated returns through car parking, advertising and leasing shop space.

High Speed 1 expects revenue of 263 million pounds and earnings before interest, taxes, depreciation and amortisation (EBITDA) of 135 million pounds for the year through March 2011, according to a teaser sale document.

People familiar with the matter have previously told Reuters HS1 could fetch 1.5 billion pounds.

EUROTUNNEL GROUP GROWS

Among the rival bidders, Goldman Sachs and Groupe Eurotunnel have expanded their team, dubbed GB Speedrail, a consortium spokesman said on Tuesday.

The group, already consisting of Eurotunnel, Goldman Sachs Infrastructure Partners and M&G's Infracapital, has been joined by two financial backers, Britain's Universities Superannuation Scheme (USS) and the infrastructure arm of France's Caisse des Depots et Consignations (CDC), he said.

USS, which looks after the retirement plans of British academics, is the country's second-biggest funded pension scheme. It had 28 billion pounds of assets under management at the end of 2009.

CDC Infrastructure, established this year, holds minority investments in new and existing infrastructure projects, including a new high-speed link between Tours and Bordeaux. It seeks to achieve a 1.5 billion euro portfolio within five years.

People familiar with the matter have previously identified two other bidding groups likely to submit indicative offers.

One is made up of Morgan Stanley Infrastructure, 3i Infrastructure Plc and Abu Dhabi Investment Authority. The second is a Canadian partnership that has allied Borealis, the infrastructure investment arm of Ontario Municipal Employees Retirement System, with the Ontario Teachers' Pension Plan.

A spokesman for London & Continental Railways, the state-owned parent of HS1, confirmed Tuesday's deadline but declined to comment in detail on bidders.

"We are waiting to see what bids have been received," he said. "It's certainly going well and there has been interest."

UBS is advising London & Continental Railways on the sale. Citigroup is advising the Department for Transport.

(Additional reporting by Cecilia Valente in London; Editing by Jon Loades-Carter, Hans Peters and Steve Orlofsky)

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