Sources Say Allianz and Partners Plan UK Fast-rail Bid

By and Quentin Webb | October 29, 2010

German insurer Allianz has tapped Britain’s largest private pension fund and one that invests the pensions of Canada’s Mounties to make a joint bid for Britain’s sole high-speed railway, sources said.

Final bids were due on Friday for the 186-mph (300km per hour) route from London to the Channel Tunnel, which is known as High Speed 1 and could fetch £2 billion ($3.2 billion).

The trio’s bid faces competition from three rival groups: a five-strong team including Goldman Sachs and Eurotunnel; a team allied with Morgan Stanley; and an alliance of two other big Canadian pension funds.

Allianz has formed a consortium with BT Pension Scheme and Canada’s Public Sector Pension Investment Board (PSP), which manages civil-service pensions, to submit a bid for High Speed 1, two sources familiar with the matter said.

A spokesman for PSP, which manages more than C$50 billion (US$48.8 billion) of assets, said it did not comment on “market rumors or speculation”.

An Allianz spokesman declined to comment. A spokeswoman for Hermes, manager of BT’s pension fund, had no immediate comment.

A spokesman for London and Continental Railways (LCR), High Speed 1’s parent company, confirmed binding bids were due on Friday but declined to comment further.

Morgan Stanley Infrastructure, 3i Infrastructure Plc and Abu Dhabi Investment Authority will submit a bid on Friday, as will Borealis and the Ontario Teachers’ Pension Plan, people close to both bidding groups said.

Borealis is the infrastructure investment arm of Ontario Municipal Employees Retirement System (OMERS). A spokesman for Eurotunnel and Goldman’s team said: “I can confirm the GB Speedrail consortium has today submitted a bid for High Speed 1.”

The so-called GB Speedrail group comprises Goldman Sachs Infrastructure Partners, Groupe Eurotunnel, fund manager M&G’s Infracapital arm, Britain’s Universities Superannuation Scheme (USS) and the infrastructure arm of France’s Caisse des Depots et Consignations (CDC).

Another early suitor, Li Ka-Shing’s Cheung Kong Infrastructure (CKI), has dropped plans to bid, two people familiar with the matter said. The Hong Kong billionaire spent $9 billion on UK electricity networks this year.

Market sources say Britain could attract offers worth around £2 billion for HS1.

The sale was initiated by Britain’s previous Labour government, but would mark the first privatization since a Conservative-Liberal Democrat coalition took power in May.

The coalition has vowed to reduce Britain’s debt pile and slash a budget deficit that will reach about £150 billion ($240.2 billion) this year.

The Adam Smith Institute, a right-wing think tank, has called for a wave of further asset sell-offs including water companies, ports, the Royal Mail, and broadcaster Channel 4. It says, excluding the state’s stakes in three banks, these sales could fetch £32 billion ($51.25 billion).

(Reporting by Greg Roumeliotis and Quentin Webb; editing by David Hulmes and Michael Shields)

By Greg Roumeliotis and Quentin Webb

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