Infrastructure roundup: Ilmarinen, 3i, GS, BAA, Edinburgh Airport, USS, M&G

FINLAND - The €27.1bn Finnish pension insurer Ilmarinen has contributed 10% to the acquisition of Finland's second-largest electricity distribution company.

The other partners in the €1.54bn buying consortium are 3i Infrastructure and 3i Group, which are collectively investing 45%, and GS Infrastructure Partners, which is investing 45%.

The consortium, LNI Acqusition, will acquire Vattenfall Oy (Networks Finland), which has 12% domestic market share, and a smaller asset, Heat Finland, from Finnish owner Vattenfall AB.

The consortium targeted the electricity business as a core infrastructure asset in a market with regulation similar to that in the UK, with inflation protection and reliable revenue streams.

It agreed to buy the heat business because it came with the more significant electricity generation operation.

A source close to the deal said Finland also offered an attractive location, with a reliable sovereign and an economy performing relatively well compared with other of its European counterparts.

"Not many of these assets change hands, so they were lucky to win it," the source said.

3i Infrastructure Fund, which invests primarily in pure infrastructure, but with a 15% exposure to PFI projects before this acquisition, is understood to have targeted third-party capital due to the size of the equity ticket.

The fund targets a return of 12%, 5% of it in yield, which it would find harder to generate with a greater exposure to PFI.

In other news, sources close to 3i did not deny that the firm is to bid for Edinburgh Airport from operator BAA in a joint venture with the Universities Superannuation Scheme (USS) and fund manager M&G. 

Both USS and M&G declined to comment on the rumours today, but a source with knowledge of the prospective bid said: "Bidding for infrastructure assets is what 3i does, and they wouldn't be doing their job if they didn't look at it."

The source added that the sale process would be "a long process with a gazillion hurdles" once the airport formally went on the block in January.