Tuesday 12 August 2014 by Legacy

S&P upgrades Envestra on expected CKI takeover

Key points

  1. CKI achieved its stated offer target of 50% ownership of Envestra last Friday 8 August.
  2. As at 12 August, CKI owns 87.13% of Envestra’s ordinary shares
  3. With the likelihood of the takeover proceeding, S&P has upgraded the credit rating of Envestra

Following the announcement that Hong Kong infrastructure giant CKI now owns more than 50% of natural gas distributor Envestra, S&P has upgraded the company’s credit rating. S&P has noted the following contributing factors in its decision to upgrade Envestra’s credit rating:

  • The upgrade reflects its view that the CKI Group has a more conservative approach to managing the capital structure of the entities under its control than Envestra has a stand-alone entity.           
  • The stable outlook reflects S&P’s view of the certainty and stability of cash flow from Envestra's regulated distribution business.

Offering a yield to maturity of 5.30%p.a, the Envestra capital indexed bonds maturing in 2025 provide investors with inflation protection over a medium term horizon in a stable, gas-distribution monopoly. Please note that this yield to maturity assumes future CPI inflation levels of 2.5%p.a. Should CPI levels be higher than this level in the future, investors would achieve a higher yield than 5.30%. For example, at CPI levels of 3.00%p.a., an investment in the Envestra capital indexed bonds today would achieve a yield to maturity of 5.80%p.a.

Supply is currently very limited in the Envestra 2025 capital indexed bonds, so please speak to your FIIG representative to register interest in these bonds.

All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities.