Hermes Infrastructure and the Canada Pension Plan Investment Board (CPPIB) have jointly acquired a 30% stake in a UK port operator, with the former adding to its recent rail asset purchase.
The infrastructure fund, part of Hermes Investment Management, has partnered with a Canadian outfit for the second time in a month after it purchased rail operator Eurostar in a £585.1m (€807m) joint venture with Caisse de dépôt et placement du Québec (CDPQ).
It has now jointly agreed with CPPIB to take a £1.6bn stake (30%) in Associated British Ports (ABP), a UK port operator controlling 21 separate facilities in the UK.
Hermes’ owner, the £40.2bn BT Pension Scheme, seeded the infrastructure fund alongside the £10bn Santander UK Group Pension Scheme, and local government pension schemes (LGPS) for Dorset (£2.1bn), Cornwall (£1.4bn) and Barking and Dagenham (£654m).
Peter Hofbauer, head of Hermes Infrastructure, said the manager had been looking to take a stake in ABP since 2013.
“We always viewed the UK landlord port model as attractive for investors,” Hofbauer said.
In the UK, the port landlord manages the port and owns the land around it.
Hofbauer said ABP’s earnings derived mainly from leasing the land and fulfilling its statutory duties, which means the volatility of earnings tends to be lower than for other international port assets that have volume risk.
“Not only do you have a real estate element to the business, and the statutory element, a lot of customers also take on volume risk through guaranteed revenues, which, when added up, means a lot of the company’s earnings are guaranteed,” he said.
Santander director of pensions Antony Barker said the bank’s pension fund allocated £50m, through a segregated mandate with Hermes, to what he described as a “very good core asset”.
“ABP supports 84,000 jobs and so contributes billions to the UK economy,” he said.
“More importantly, the company weathered the recent years of economic volatility and the downturn very well. With all the uncertainty over markets, there’s a lot to be said for having a safe haven, or 21.”
CPPIB, which now has more than £7.6bn invested in the UK, said ABP provided a unique opportunity for exposure to port assets with steady operational performance.
Managing director and global head of infrastructure Cressida Hogg added: “This investment is an important addition to our global infrastructure portfolio and fits well with CPPIB’s long-term investment mandate.”
Hermes and CPPIB take the 30% stake off GS Infrastructure Partners and Infracapital, the infrastructure arm of M&G Investments.
Remaining shareholders include Borealis Infrastructure and the Government of Singapore Investment Corporation (GIC).
Hofbauer said the asset fit into the fund’s core asset allocation strategy, which focuses on low risk, low volatility, inflation protection and a cash yield.
The Eurostar deal announced earlier this month formed part of the value-added allocation given its exposure to GDP movements.
