Infrastructure funding requires trillions of dollars every year. Here’s how investment firms Morrison, Macquarie & KKR are making the most of it. Video / Carson Bluck
ANALYSIS
Ironically, left-wing greenie James Shaw might find his new gig, with one of NZ’s capitalist behemoths, gives him more power to effect environmental change than he ever had in Parliament.
The ex-Climate Change Minister and Green Party co-leader last night revealed he would be joining the Wellington-basedMorrison, which has some $38 billion in funds under management - making it easily the largest NZ-based private investment fund - eclipsed overall only by ACC’s investment fund (around $47b) and the NZ Super Fund ($73b).
James Shaw could be moving on to greener pastures. Photo / AP
Shaw is also joining the World Wildlife Fund’s NZ board of trustees, and will take a part-time advisory role with Greenbridge Capital Management, a boutique “people and plant” focused fund in the capital.
The firm now known simply as “Morrison” was founded in 1988 - the year after the ‘87 crash - by investment banking legend Lloyd Morrison, a key figure as an era of privatisation began.
Morrison focused on “patient investments” in infrastructure firms he saw benefiting from long-term trends - often as Morrison helped take assets like Wellington Airport, Trustpower and NZ Bus partly or wholly out of Crown or local authority ownership. He was posthumously added to the NZ Business Hall of Fame in 2015.
Morrison (known as HRL - after its founder’s initials - then Morrison & Co until a recent rebrand) has kept infrastructure and its founder’s long-term investment strategy at its core, but an early focus on meat-and-potatoes assets has been eclipsed over the years by a push into high tech.
Morrison is perhaps best known as manager of the NZX-listed Infratil (market cap: $9.2 billion). The chief executive of Infratil (currently Jason Boyes) is always also part of Morrison’s leadership.
Ditto for other key positions. Morrison has drawn hundreds of millions in management fees over the past few years, at times drawing the ire of investors including ACC - but the firm has said its “success fees” are tied to increased valuations, and that its returns have run well ahead of its NZX-listed peers.
One of its most successful plays was teaming with the NZ Super Fund to buy Shell NZ’s petrol stations and fuel distribution business - which it then rebranded as “Z”. Each chipped in $210m to fund the 2010 deal. Each reaped around $500m in profit from dividends, plus net profits when they sold their stakes after Z was floated on the NZX in 2015.
These days, the Morrison-managed Infratil’s largest asset is its half-stake in CDC Data Centres, which in recent years has spent around $400m to build two huge data centres in northwest Auckland. Given they are huge consumers of power and water, there will be a big focus on so-called “hyperscale” facilities as CDC, Amazon, Microsoft, Spark and others expand over the next few years.
Infratil paid $392m for a 48 per cent holding in CDC in 2016.
Over the years, the investment’s valuation has been constantly hiked as trends like cloud computing, the remote-work boom and now AI have fuelled demand for data centres. In January this year, it was bumped up again, this time to a range of A$3.7b to A$4.3b.
CDC's 14 megawatt Hobsonville 1 data centre in northwest Auckland, which has a twin in Silverdale. Photo / Chris Keall
Its second largest asset is One NZ (formerly Vodafone NZ) which has seen its valuation steadily increase since Infratil and Canada’s Brookfield bought it in 2019. Last year, Infratil bought out Brookfield, and increased its valuation by $1b to just over $3b at the same time.
And under Morrison’s management, Infratil continues to expand into tech and telecommunications - including its recent play to purchase a stake in Console Connect, a Hong Kong-based cable network operator in which the Chinese government holds an indirect stake.
Infratil also owns stakes in a clutch of renewable energy businesses, including US solar farm operator Long Road, and NZ solar and wind farm generator Manawa Energy. It has also recently been buying up medical imaging and radiography outfits across the Tasman, including Qscan, and maintains a 67 per cent stake in Wellington Airport (the firm, which took over the Crown’s stake as one of its first investments, once held two-thirds of shares).
Beyond Infratil, Morrison employs about 200 people (roughly the same as the NZ Super Fund). The privately-held firm said it had achieved net returns of more than 18 per cent per year since it was founded.
Helped by deals like Z and CDC, it has a bit of a “smartest guys in the room” reputation. Its longest-serving leader was Marko Bogoievski, the former Telecom CFO who was passed over for the leadership when Theresa Gattung departed.
Morrison partner and Infratil CEO Jason Boyes. Photo / Mark Mitchell
The firm manages tens of billions in funds for investors who aren’t always named, but include the likes of large Australian superannuation funds.
Since 2018, Morrison has also managed Utilities Trust of Australia (UTA), a global portfolio of high-quality assets principally in the transport, energy and water sectors in Australia and the United Kingdom. UTA has around A$8b under Morrison’s management.
One of Longroad Energy's solar farms in California. The Morrison-managed Infratil co-invested in the US renewable energy firm with the NZ Super Fund. Both have 37 per cent stakes, with Longroad management holding the balance of shares.
Morrison’s broad investment strategy reflects the approach taken at Infratil, with the firm focusing on infrastructure plays with a particular focus on carbon-neutral opportunities.
That’s where Shaw will come in.
An “operating partner” typically eyes new investments in privately-held companies, then works to increase their value if fund does buy in.
His Morrison role will be “focused on driving the next generation of investment opportunities that support global decarbonisation”, the firm says.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
